"The problem was itemizing the trades correctly on my 2004 tax return." exactly what did you do wrong. what you said is too vague to be usefull.
Sounds like the sales weren't matched up with the buys? For active traders, this could be a big problem. I trade thru a few million in total, un-netted out, stock and ops each year and I'm small time. An amazing tax bill would be the result. Taxes are a huge pain in the ass for active traders...
yeah can you give more explanation, I'm not sure why it should be such a hassle. Using something like tradelog should make trading taxes pretty simple.
Every year, I always do my own taxes ever since I started filing returns many many years ago. Why? Because Im stubborn. Just like to do these things on my own. It does take a while. . . Where was the screw-up? Schedule D. There is so much room for error in doing Schedule D on your own, it needs no explanation. I pride myself on being able to tear through it and getting it right. However, it wasnt right this time. There were a lot of trades on that Schedule D... Next time, I will use the Tradelog software instead of going at Schedule D on my own...
Ok, here is more detail. When you open and close a position, the brokerage makes a record of it, of course. However, the brokerage doesnt report the exact details of the trade to the IRS. You have to report it on Schedule D. There are different ways to attacking the Schedule D. You could keep a detailed log of every trade every day as someone suggested. However, most people find themselves at the end of the year with print-outs reliving all the trades they made that year one by one. This is the tedious and difficult way and room for a lot of error especially if you made north of 100 different trades. Some folks make multiple trades each day and might find themselves with much much more then that. I know myself and I cant keep an accurate detailed log each day. Im going to check out TradeLog.
Quite the pump for Tradelog don't ya think? And...did you ever really get a tax attorney, or just spend your time pumping tradelog? Gainskeeper is good as well. So is the spreadsheet I built in 60 minutes. Nice thread....should read For Sale, signed Tradelog. So I'll ask what has already been asked but that which WILL not be answered... What exactly did you screw up for an $87,000 tax bill?
Make an Excel spreadsheet that has the same columns as a Schedule D. It takes a whopping 5 minutes to enter the trades daily. I have not found a canned software that feeds properly from any brokerage 1099's/statements to a Schedule D. I got bagged once by The IRS for the same thing, it took me about 8 hours to re-create the year's trades of my 1099, and they were happy, NO penalty. Futures make life sooooo much easier! surdo
Sit down and try to tackle Schedule D on your own after you just performed hundreds of trades over the course of a year. This may be a simple process for some and I congratulate you on being able to program an Excel spreadsheet. I also congratulate those who have the ability to keep a running accurate up-to-date log. However, for the simpleton like myself, its not that easy. Im certain there are others who have found themselves in the same position at the end of the year with these pages of print-out. I knew when I posted this up there would be several perfectionists who seem to get the Schedule D correct 100% of the time. Yes, I did get an attorney. Staring at a tax bill is just like staring at a Summons and Complaint. Actually, its worse. You seem to have less rights in these matters then you do at a real courtroom. You cant ignore or run from the IRS. You have to take them seriously and consult with an attorney. Do not handle them on your own.
HOODOOMAN..............your idea is a great one..........i been at this game for years and never thought of something so simple....THANKS