What is the easiest way to file a tax return for a high volume day trader?

Bob111 · Jun 6, 2011

Quote from newguy05:

1) get the cd version of turbotax
2) if your broker is listed (most of them) it auto imports all the trades and cost basis, you done.
3)if not listed export the trades as a quicken txf file from your broker and import it to turbotax yourself. if your broker isn't listed and doesn't support txf export drop them they suck.
4)don't forget futures if you traded them under section 1256 contracts, they don't need to be listed just net cost basis and proceeds. turbo tax will figure out the 60/40 split for you

this is the easy part, now try to do taxes as a landlord with multiple investment properties what a nightmare.

I don't use retail tax accountants. I find most of them to be either semi retarded or just don't give a shit and do the bare minimum to cover their ass. After all it's a low job so the quality of people you get working them is expected, and i am not rich enough to hire the good ones from the private wealth mgr firms.

also it's good to be familiar with the us tax code, it's 4hrs my life a year, can live with that

the worse advise one can get is the wrong one.. and i see a lot of them in this thread.
unfortunately turbotax(or any other retail tax soft) won't let you file in one line,if either basis or proceeds are >10M

piezoe · Jun 7, 2011

Quote from emg:

... because nobody knows what is the state and federal tax laws except tax lawyer and cpa

And sadly, U.S. tax code is so convoluted that no one, not even IRS employees, can possibly understand it all.

Bob111 · Jun 7, 2011

Quote from piezoe:

And sadly, U.S. tax code is so convoluted that no one, not even IRS employees, can possibly understand it all.

true statement. many times when i tired to talk to IRS regarding very specific questions i run into same advise :talk to your accountant or lawyer. just like that.

AMA · Jun 7, 2011

Quote from the1:

Not true. I am a tax professional as well as a trader. What I do in a situation where there is a massive amount of trades is report the total proceeds and basis from short-term and the proceeds and basis from long-term on schedule D and mail in a copy of the broker's statement. There are programs that will prepare your schedule D-1 for you but it's not necessary. I've been doing this for many years and not once has the IRS contacted me about how I'm reporting it. As long as your total proceeds and basis match what the broker reports you're good. If they don't match you're gonna get a letter and possibly a correspondence audit (CP2000).

+1

Easy to do. And, as long as you're not cheating, if the IRS does want/need something, just deal with 'em. They're not out to wipe you out, they just want their $share$. The trading records at the brokerage company ain't goin' anywhere and aren't gonna change either, so it's just a matter of documentation to the IRS.

In addition, I vaguely recall reading something about how brokerage firms are putting into place software that will consolidate all of this info for IRS purposes. Easy to use, etc. Probably a result of mass tax confusion by the public after getting wiped out in 2008.

Another approach for the home gamer is to not only make money(duh), but to shift resources over to a Roth IRA account and migrate activity there for the longer term. No tax issues w/Roth, and after five years, tax free money...'course, if you're not yet in your 50's or older, you might want to adjust how much trading goes on in your taxable account vs. the Roth.

Bob111 · Jun 8, 2011

i file like the1 described for many years. in addition, starts from 2011 both numbers-basis and proceeds will be on the 1099B, along with wash sales. no need to go thru every trade. they(IRS) will have all the numbers right on front of them. from our brokers and us. as long as they match-you good to go.

http://www.irs.gov/pub/irs-dft/f1099b--dft.pdf

operator · Dec 5, 2011

Quote from the1:

Not true. I am a tax professional as well as a trader. What I do in a situation where there is a massive amount of trades is report the total proceeds and basis from short-term and the proceeds and basis from long-term on schedule D and mail in a copy of the broker's statement. There are programs that will prepare your schedule D-1 for you but it's not necessary. I've been doing this for many years and not once has the IRS contacted me about how I'm reporting it. As long as your total proceeds and basis match what the broker reports you're good. If they don't match you're gonna get a letter and possibly a correspondence audit (CP2000).

What about the Wash Sale Rule? I guess you do not bother accounting for it?

Bob111 · Dec 5, 2011

Quote from operator:

What about the Wash Sale Rule? I guess you do not bother accounting for it?

yep...typically(at least in IB) broker calculate what qualify as a wash sale and what's not..it's all on brokers worksheet to Sch D
so why bother? it's all done already. just grab total PnL,subtract it from gross proceeds to get basis cost and it's all done.

check out new 1099B- fro 2011 it will be a must for all brokers to report it

www.irs.gov/pub/irs-pdf/f1099b.pdf

box 5. google search is still free. use it

operator · Dec 16, 2011

Quote from operator:

What about the Wash Sale Rule? I guess you do not bother accounting for it?

My main question is what do traders do at the end of the year. My guess is that they liquidate all open positions by Dec 31st. But the trader can not trade any of those stocks for at least 31 days. I guess find NEW stocks for Jan.?

"Clearing the Tax Effects for a Year
If you make hundreds or thousands of trades each year, the record keeping required for compliance with the wash sale rule can become extremely difficult. You may get to the end of the year not knowing whether you have disallowed losses or, if so, the magnitude of the disallowed loss. If you have a sizeable disallowed loss, you can end up paying tax on an amount that exceeds your economic income for that year. There's a way to eliminate that possibility: take a winter vacation from trading. Or at least from trading the stocks you trade during most of the year.

When you make a wash sale, the disallowed loss gets added to the basis of the replacement stock. If you sell the replacement stock within the same year â and wait at least 31 days before buying that stock again â you wipe the slate clean. You can report all your gains and losses as if the wash sale rule didn't apply"

http://fairmark.com/capgain/wash/wstrader.htm

Free Thinker · Dec 16, 2011

Quote from operator:

My main question is what do traders do at the end of the year. My guess is that they liquidate all open positions by Dec 31st. But the trader can not trade any of those stocks for at least 31 days.

incorrect. wash sales only affect losses.if your trades are profitable there are no restrictions on trading those stocks.

sledgeyum · Dec 16, 2011

Gainskeeper in tda does all the calculating for you.

Quote from operator:

My main question is what do traders do at the end of the year. My guess is that they liquidate all open positions by Dec 31st. But the trader can not trade any of those stocks for at least 31 days. I guess find NEW stocks for Jan.?

"Clearing the Tax Effects for a Year
If you make hundreds or thousands of trades each year, the record keeping required for compliance with the wash sale rule can become extremely difficult. You may get to the end of the year not knowing whether you have disallowed losses or, if so, the magnitude of the disallowed loss. If you have a sizeable disallowed loss, you can end up paying tax on an amount that exceeds your economic income for that year. There's a way to eliminate that possibility: take a winter vacation from trading. Or at least from trading the stocks you trade during most of the year.

When you make a wash sale, the disallowed loss gets added to the basis of the replacement stock. If you sell the replacement stock within the same year â and wait at least 31 days before buying that stock again â you wipe the slate clean. You can report all your gains and losses as if the wash sale rule didn't apply"

http://fairmark.com/capgain/wash/wstrader.htm