Tradelog & 8949?

Discussion in 'Retail Brokers' started by jackpearson, Mar 24, 2012.

  1. Does Tradelog add a line on the 8949 that isn't a trade but a line that throws in a number to make your 8949 match your 1099-B?

    If so, isn't that wrong?

    If you know your trade history is accurate, how can adding a fudge line do anything but trigger an audit?

    If tradelog doesn't do that, please let me know. I was reading something about that & maybe I have the wrong software package.
  2. TradeLog difference line

    Yes, TradeLog currently displays a "difference adjustment" amount as a separate line item on Form 8949, in order to reconcile with 1099-Bs. We expect the IRS to use their computer-matching program to reconcile Form 8949 filings with 1099-Bs, and if the two don't match, we expect the IRS to send tax notices to taxpayers. In an effort to avoid tax notices and related problems, we currently think the reconciliation adjustment with explanation is a good idea.

    We debated the pros and cons of this line item at GreenTraderTax as we helped TradeLog with Form 8949 to deal with botched 1099-Bs and apples versus oranges issues. 1099-Bs have different requirements than tax returns so material differences are expected, especially as the cost-basis reporting rules phase in for brokers. For example, brokers report potential wash sales based on identical positions, whereas taxpayers report actual wash sales based on substantially identical positions, which means between stocks and options, too.

    We don't like the idea of filing a tax return with a material reconciliation or "plug" number. That's why we suggest filing extensions to have more time to investigate the form 8949 differences. More time to request and hopefully get corrected 1099-Bs, and hopefully the IRS will provide more guidance about this wide-scale tax reporting problem, too.

    If the form 8949 differences are narrowed, we may suggest to TradeLog - and we talked about this already - that they not display a difference line item. _ Line items on tax returns should be real transactions not plug numbers. TradeLog reports the correct trading gains and losses. The difference amounts reported on 8949 are only to reconcile with gross proceeds or cost basis, not gain or loss.

    Learn more on our Cost-Basis Reporting resource page.
    Cost-Basis Reporting, Form 8949 and Botched 1099-Bs
  3. According to my accountant it's not required to send 8949 when filing electronically. So at the time of filing 8949 is not even in the picture.
  4. Incorrect. You can't even enter trades directly on Schedule D. Perhaps, what your accountant means is that you can e-file your return, and paper file the form 8949 attachments along with a Form 8453. We do that every year, since an e-filing for individuals does not allow a PDF attachment.
  5. Even so I hope you agree with me that the traders do not take responsibility for the records in 1099B provided by a broker. They are only responsible for their own records on the form 8949. Therefore they should not be required to explain the records on 1099B form. So in order to reconcile them in case of mismatches tax notices should be sent to the both parties, a trader as well as a broker. I hope you agree with me that this is how reconciliation works in the financial industry ( I mean always 2 parties are involved in the reconciliation process) . My point is that only a trader can't explain the differences between 1099B and 8949 and the reconciliation would be totally impractical for the IRS itself. And no software is going to help them either because both records may be correct even though different.

    Because reconciliation is impossible it means for me that either 1099B transactions are irrelevant or 8949 is irrelevant.
  6. if one is audited, is it better to have a correct 8949 & incorrect 1099-B's from the brokers, OR, to have an 8949 that was fudged to match incorrect 1099-B's.
  7. Correct. I believe only 8949 can be audited by the IRS but I doubt it can be reconciled.
  8. Jreality


    In the case of a broker failing to cost-basis adjust replacement shares bought in 2011 that SHOULD BE adjusted (due to a wash sale from lots orignally purchased in 2010 but closed in 2011 as a loss), I wonder if it would make sense for me to add an adjustment to part B (uncovered) rather than part A (Covered). That way there is no "automatic flag" raised. I'm thinking of adding a line such as "Special Wash Sale Adjustment (see attached explanation)" and then fully explaining that the adjustment is due to the fact that the broker failed to adjust the cost basis of covered replacement shares, and that I was entitlted to that adjustment as explained in Pub. 550 (or whatever pub explains it)

    My broker says they are working with Penson to correct the error, but I can't be 100% certain Penson will cooperate. However, if I am FORCED to reconcile on my own, I would rather reconcile with a special adjustment on Part B rather than Part A since I <i><b>"don't want no stinkin' auto-red-flags to be triggered" </b></i> :)