Advice with taxes please?

Discussion in 'Taxes and Accounting' started by Gabbana25, Aug 11, 2011.

  1. Hi All,

    Back in 2009 I attempted to actively trade and based on the number of sales I had, the total amount it showed as what I received was like $35,000 or something since I sold positions actively with mostly small losses or gains, but I did it frequently, so all those small amounts added up. But, in the end I lost a couple grand and never made a capital gain. But now, I got a letter from the IRS saying I owe them a good amount of money since I didn't accurately report the "income" which came from the times I was trading and sold the stock. The summation from them was based on the dollar amount of each stock I held, and it added up to the large number. I am confused, since I know there are active traders who "receive" tens of thousands of dollars a day in stock sales (Let's say they buy and sell in a day 5 positions worth $5k each, thus getting them $25k at the end of the day, for example). At the end of the year at this pace, the amount of "sale proceeds" would be huge. Thus, what would I do now besides appealing to the IRS and telling them it was from stock positions which I sold throughout the year, but lost money on? Thanks!
  2. пиздец блять....

    come to Russia,our IRS still have no clue wtf a trading is..

  3. It sounds like you didn't file Form 1040 Schedule D or you filled out the Schedule D incorrectly.

    Get the instructions for Schedule D and read them. Get your 2009 1099B and trade records and then fill out the Schedule D properly and file an amended return.

    If you can't figure out how to properly fill out Schedule D you will have to pay an accountant or tax preparer to fill it out for you.
  4. piezoe


    Don't worry at all about the letter you got from the IRS. And Jeb999 has exactly the right advice for you. But you'll have to respond in a timely manner or they will, in steps, make thing more difficult for you.

    The problem is that up until very recently, maybe it goes into effect this year, brokers did not report cost basis to the IRS, but only proceeds from sales. Therefore unless you filed schedule D, the IRS just assumes that you had a zero cost basis and all the proceeds from sales are 100% profit. Of course that's ridiculous.

    If you had a lot of trades, filling out your Sched. D might be a real time consumer if you do it the way the instructions say to do it., particularly if you had a lot of wash sales. There is software that can help, or you may have to take your broker's statements to an accountant and let them figure it out.

    The good news is the IRS will likely owe you a little money once your stock transactions get properly reported, because small net losses up to a certain limit can be deducted from your regular income.

    But get on it right away. You can only ignore the IRS so long before you get very personalized attention from them! :D
  5. Picorian


    Yeah, you'll need to file a Schedule D. Your Broker should be able to provide you one, as well as any other tax documents (ie. Income from dividends etc) you may need. With the broker's documents it should be easy to appeal to the IRS.
  6. Hi,

    Thank you all so much for your help! I didn't fill out a Schedule D, so now it makes sense why there is all the confusion with the IRS. When I saw how much I "owed" (since it appeared it was all profit from my sales), I nearly had a heart attack lol. But, I will get on it ASAP and I will send my Schedule D paperwork to the IRS. Thanks again everyone!
  7. Bob111


    yep..up to 2010 IRS only got total proceeds number from your broker.the basis and PnL must be reported by you. 1099 B for 2011 and up will have both numbers
    so if you report it incorrectly or not file at all the IRS automatically assume that the proceeds number they got are your capital gains(since you did not provide basis cost).
    file everything and be very very nice to them in the letter or on the phone. never argue or even raise your voice when on the phone.