Daytrading and Taxes

Discussion in 'Taxes and Accounting' started by kowboy, Feb 2, 2002.

  1. kowboy


    The question may be simple to some of you out there, but I would appreciate some input.

    I daytrade and start the year with all cash and end up the year with all cash and no stock positions.

    I would seem to me that logically, I could fill out schedule D as follows: Ending cash less starting cash minus interest and dividends equals short term profit for the year. Where interest and dividends would be reported separately.

    Unfortunately the last two years my CPA required me to fill out reams of paperwork listing each and every transaction.

    Is there a way around this?

    Thanks for taking the time to respond to this.
  2. mgkrebs


    I have used this product the last two years and it works as advertised. It takes electronic statements, either daily or monthly, from various different brokers, and generates the reports, info, etc. necessary for the preparation of Schedule D.

    I ran a report for each month and entered the results on 12 lines of Schedule D, using "January trades-see attached" as name of security, total amount paid for cost, total amount received. I would have used a summary for the whole year, but Turbotax would not take a number that large. Stapled the actual reports onto the back of the return.

    I don't know if it's necessary to show every single trade, but since I filed as a trader and deducted expenses on Schedule C, The sheer number of trades in the reports will make it impossible for the IRS to question trader status.
  3. iiphos


    just attach your monthly statements from your broker. on the sch d say "see attached statements" and fill in the cumulative totals for proceeds and costs for the year. just make sure that the amounts match the 1099 you also get from your broker. there is no need to fill in each trade individually because they are all short-term cap gains and you have the broker statements. much quicker and easier.
  4. Seller


    I also hate the need to do a sched D for stocks since it is absolutely not needed or required for futures. For the past 3 years I have done as my brother has done for the past 10 years. I simply make a one line entry that says "Various Trades". Post the gains and be done with it. In atypical month I make 600 trades .... a schedule D would be insane.
  5. Printed mine out in VERY small type last year, but may just do the "VARIOUS TRADES, available on request" thing this year.
  6. Geez, what a joke. These people make their clients do an inordinate amount of work and all they do is put the totals on the appropriate lines of the return (hopefully).

    My suggestion is to get someone else to do your return or do it yourself, either manually (which you're pretty much doing now anyway) or via a s/w package like TurboTax, Tax Cut, etc.
  7. p314p


    I think 99% of traders out there dont calculate wash sales when reporting on schedule D. Additionally, the IRS does not care if you have 2000 trades in the taxable year. Above all else, they want to see continuity. This means making trades almost every day or at least many trades every month. Also, they will most likely rule against you if you have another job. I called the IRS for the info herein, and dont like it any more those who read it. The stats state that about 98% of those who claim either trader or MTM status are doing so illegally. Nearly no taxpayer wins the argument in tax court since the IRS reserves the right to interpret subjectively what exactly constitutes trader or MTM status.
  8. Saint196


    This is my first year trading and what a surprise I had reading IRS Pub. 550. I have just finished my spreadsheet covering 292 stock and options trades so far this year. Some days I have bought/sold the same stock 5 times. I have traded call options 2/3 times a day.

    My questions: Do I have to go back and recalculate the basis for all these trades based on the Wash Sale rule? Does the Wash Sale rule apply to call/put options?

    My comment: If you don't read 550 carefully, the wording makes one believe that losses cannot be deducted. Typical IRS.

    :( Comments and help from anyone out there, please.
  9. If you stop or don't trade a particular option or stock for 30 days the totals you arrive at will be correct as far as the income are concerned.

    The wash sale really only comes into play at year end for most traders. You need to make sure if you have a loss in a position that you don't trade it for 30 days, otherwise the loss gets added to the basis of your new position and carries forward. It is a pain.
  10. nkhoi

    nkhoi Moderator

    send them all copies and ask them figure it out for you, I heard they are trying to be nicer in dealing with ppl.
    #10     Nov 27, 2003