IRS Audits & Notifications

Discussion in 'Professional Trading' started by DisciplinedHedg, Dec 26, 2002.

  1. Was wondering what types of audits or notices other traders have encountered with the IRS?

    Maybe we can share and learn from them to be better prepared come tax time.

    Haven't had a problem which actually makes me more paranoid that something could be right around the corner. I've been filing mark to market, using Schedule C, form 4790, and making office deductions for the past 3 years. So far so good.
  2. Dustin


    I was audited this year due to a mistake by an old broker. My father had tried daytrading in 1999, and I was an authorized trader on the account. Well, the morons reported all of the trades in my name, and in 2000 were shut down by the SEC (for many reasons).

    I was able to obtain the records from the clearing company, and the auditor just let me report the trades as mine. I ended up getting back $1200 for the trouble. I told the auditor to come back any time :D

    As a side note, I got first hand experience of how stupid auditors can be. Mind you my auditor has been in the business for nearly 20 years. When I told her that I would have a problem obtaining the trade data since they went out of business she said: "Well you are resourceful...can't you just go look at the price in the Wall Street Journal on that day?"
  3. Has anyone ever read or does anyone know about whether or not turning in your tax return at the beginning of the year makes it less likely to be audited than turning in the return around April 15th? Or vice versa?
  4. I read somewhere just the opposite, that if you request a 4-month extension using 4868 and file in August your chances are slightly lower. Reason: by that time the IRS has already selected most of the returns for audit for that year.

    Who really knows.