Tax Talk

[ChadK]

@mukundaa asked:

Quote

 

i was wondering why you dissolved llc.

the problem which i see is commissions are not tax deductable but they are big part of p/l

also what software do you use for tax ?

 

 

One of the major benefits of Trader Tax Status is that you can deduct business expenses.  For a trader, this can include internet service, margin interest, software, and trading information services, among many other things too.  For me, I wrote off the cost of OptionNetExplorer, OptionVue, and services such as SteadyOptions.  In the beginning years, I went from trading service to trading service (subscribing to several at once), the large expense of the Sheridan Mentoring program, lots and lots of different software.  It was very beneficial to get the 28% tax back.  As time progressed, I stopped using many of these services, and my expenses dropped considerably, so the benefit (getting back ~28% of the cost) didn't outweigh the cost (the remaining 72% out of my pocket).  It just was no longer worth the extra hassle of filing out business taxes.  Everyone's situation will be different.

 

Commissions are not tax deductible, but they are priced in to your PnL, so effectively it is tax deductible.  If you had a gain of $100, and your commissions were $20, you'd only show $80 as your net gain, and only pay taxes on $80.  If you had a $100 loss, and also paid $20 in taxes, then you get to subtract $120 from other gains.

 

For taxes, more specifically, for trade accounting, I really like TradeLog.  It's not cheap, and is an annual subscription, but in my opinion, it's worth it as it's accurate, matches trades very well, and is pretty easy to use.

 

Once done with TradeLog, I use TurboTax to complete my personal taxes (and previously used TurboTax Business for the LLC).

[Optrader]

Thanks Chad

i will explore tradelog this year to see if they can include comissions in sales etc 

i use turbotax and they do good job of importing but i guess comissions are missed.

i may save 30% on comissions by including them.

 

thanks

[greenspan76]

6 hours ago, mukundaa said:

Thanks Chad

i will explore tradelog this year to see if they can include comissions in sales etc 

i use turbotax and they do good job of importing but i guess comissions are missed.

i may save 30% on comissions by including them.

 

thanks

There is legislation in the US that requires brokers to report your cost basis to you. The numbers they report for both Proceeds and Cost Basis include commissions. All that info is on your 1099-B. If you use IB, they create an 8949 Worksheet showing each individual transaction - I don't know if that's required or if other brokers do it. Now, if you're not a US resident, this may not apply, but just wanted to point out for those that are: the info reported by your broker doesn't show commissions separately, but commissions are included in the figures reported as Proceeds and Cost Basis.

[anand331]

Anyone tried using TradeLog with IB? I just got a trial software but it is failing to import from IB. I am using brokerconnect method to import but get an error from IB server saying something like it cannot be run at this time (I have tried various times with same result). Of course I went in accountMgmt->settings->thirdparty and setup Tradelog to be enabled and am using the token and query ID. TradeLog support is impossible to reach via phone. Left message and created a support ticket yestrday and waiting for them to respond.

Anyone else faced similar issue? 

[Yowster]

31 minutes ago, anand331 said:

Anyone tried using TradeLog with IB? I just got a trial software but it is failing to import from IB. I am using brokerconnect method to import but get an error from IB server saying something like it cannot be run at this time (I have tried various times with same result). Of course I went in accountMgmt->settings->thirdparty and setup Tradelog to be enabled and am using the token and query ID. TradeLog support is impossible to reach via phone. Left message and created a support ticket yestrday and waiting for them to respond.

Anyone else faced similar issue? 

@anand331I'm not sure if this is directly related to your question, but thought I'd convey how I handle IB and taxes (I'm in the USA).   I used to download trades into GainsKeeper for generation of all tax forms - but payments to Gainskeeper were based on downloaded transactions, and this added up quickly because a spread trade of 10 contracts may be up to 20 transactions if the costs of individual options was slightly different.   Nowadays, cost basis information has to be reported to IRS via the 1099, so it turns out that using something like GainesKeeper is now overkill and no longer needed.   I simply enter the 1099 data from IB into my tax software, along with the 1256 for trades involving VIX and index options, and note that individual trade details are available if needed.   This worked well for me last tax year and I plan to do the same this year.   Very simple and no longer need to have hundreds of pages of individual trades submitted with my tax return.

[anand331]

1 minute ago, Yowster said:

@anand331I'm not sure if this is directly related to your question, but thought I'd convey how I handle IB and taxes (I'm in the USA).   I used to download trades into GainsKeeper for generation of all tax forms - but payments to Gainskeeper were based on downloaded transactions, and this added up quickly because a spread trade of 10 contracts may be up to 20 transactions if the costs of individual options was slightly different.   Nowadays, cost basis information has to be reported to IRS via the 1099, so it turns out that using something like GainesKeeper is now overkill and no longer needed.   I simply enter the 1099 data from IB into my tax software, along with the 1256 for trades involving VIX and index options, and note that individual trade details are available if needed.   This worked well for me last tax year and I plan to do the same this year.   Very simple and no longer need to have hundreds of pages of individual trades submitted with my tax return.

Thanks @Yowster. To make sure I understand correctly, you don't report individual trades (form 8949) with your returns? Instead you report the gains from proceeds and cost basis as supplied with your 1099? Do you separate gains/losses between stocks and options?

[Yowster]

9 minutes ago, anand331 said:

Thanks @Yowster. To make sure I understand correctly, you don't report individual trades (form 8949) with your returns? Instead you report the gains from proceeds and cost basis as supplied with your 1099? Do you separate gains/losses between stocks and options?

@anand331 That is correct, I just include a note/comment that individual trade details are available if needed.  Now that brokers are required to track/report cost basis information, I think it saves the IRS time as well by not having all the individual trades as part of returns.   You have the data if you need it for an audit or whatever.   Also, the separation is by short-term and long-term (not stocks and options) and there are separate 1099's for short-term and long-term.

[greenspan76]

I'll echo what @Yowster said. I can't remember what year it was when brokers started being required to report cost basis, but before that I would just put "Various ST Trades" or "Various LT trades" and the totals of each on Form 8949. I never submitted individual trades or a worksheet showing them. From 2011 through 2017 (meaning the return I just submitted for last tax year), I put "Various ST Trades - Cost Basis Reported", "Various ST Trades - Cost Basis Not Reported", "Various LT Trades - Cost Basis Reported", etc. with the totals for each category and no individual trades or a worksheet. I started submitting the Form 8949 worksheet (that IB issues) electronically with my return at some point when there was an error in IB's reporting on some stocks I owned that paid "dividends" that were actually return of capital because I created my own Form 8949 worksheet and referenced the errors on IB's worksheet, and I've continued submitting the Form 8949 worksheet electronically with my return since then.

Edited February 21, 2018 by greenspan76

[akito]

1 minute ago, Yowster said:

@anand331 That is correct, I just include a note/comment that individual trade details are available if needed.  Now that brokers are required to track/report cost basis information, I think it saves the IRS time as well by not having all the individual trades as part of returns.   You have the data if you need it for an audit or whatever.   Also, the separation is by short-term and long-term (not stocks and options) and there are separate 1099's for short-term and long-term.

Interesting. Where exactly do you include the note/comment? I've filed taxes with a few different tax software and I don't remember having seen any notes/comment fields. (there were a lot of fields though, so I definitely could have missed/forgot it)

[Yowster]

2 minutes ago, akito said:

Interesting. Where exactly do you include the note/comment? I've filed taxes with a few different tax software and I don't remember having seen any notes/comment fields. (there were a lot of fields though, so I definitely could have missed/forgot it)

@akitoHonestly, I forget exactly where, and I won't do this year's taxes until late March.    Maybe it was a single 8949 entry with zeros and a security name of "detailed trades available upon request".

[greenspan76]

@akito Last time I checked, TaxAct and TurboTax both gave the option to enter totals and attach a document showing the individual trades. Not sure about other software, but those will ask you when you go to enter your capital gains info and then you just put the totals and it will populate your Form 8949 with your broker's name, then a line underneath saying "See Attached Statement". Then at the end before you file, it asks if you have a file to attach and you attach your Form 8949 worksheet from your broker. I actually just looked back at my 2016 and 2017 taxes and that's how I did it using TaxAct.

[anand331]

Thanks @greenspan76, @Yowster. This is very helpful. So how do you report losses deferred due to wash sale? So the gains reported are (proceeds - cost basis) + losses deferred due to wash sales or the cost basis already accounts for the deferred losses?

[Yowster]

5 minutes ago, anand331 said:

Thanks @greenspan76, @Yowster. This is very helpful. So how do you report losses deferred due to wash sale? So the gains reported are (proceeds - cost basis) + losses deferred due to wash sales or the cost basis already accounts for the deferred losses?

@anand331When you enter the 1099 data as it appears from IB, the washed sale number gets factored in automatically.  

[anand331]

Just now, Yowster said:

@anand331When you enter the 1099 data as it appears from IB, the washed sale number gets factored in automatically.  

Excellent. Thanks @Yowster. I will do it this way (unless my cpa says she's already doing it this way lol).

[PGAmbrosio]

@Yowster @greenspan76 It sounds like Tradelog might be more of a luxury than necessity now?  Just wanted to get your thoughts as I am trading options regularly now and would like to do things right from the start rather than play catch-up at tax time.

[greenspan76]

4 minutes ago, PGAmbrosio said:

@Yowster @greenspan76 It sounds like Tradelog might be more of a luxury than necessity now?  Just wanted to get your thoughts as I am trading options regularly now and would like to do things right from the start rather than play catch-up at tax time.

In my opinion, it is a luxury unless you have lot of crossover trades (trading the same/similar positions in different accounts) between taxable and non-taxable accounts or between multiple accounts (especially if they're with different brokers). In that case, it might actually be a near-necessity in order to save hours of manually going through and matching up trades that crossover. I've never had to spend more than a couple hours per year on that sort of thing, but if it took me 10+ hours, I'd probably just pay for Tradelog or similar software. For reference, last year was a bit low for me historically, but I made about 1200 short-term trades + a handful of long-term trades in my taxable accounts and maybe half of that in my non-taxable accounts. Probably less than 200 of those were crossover trades and it took me less than 2 hours to check and double-check everything.

[Yowster]

@PGAmbrosio I agree with @greenspan76 comments

[Ram]

I am new to this and so please bear with me. I am currently using taxact.  Once I start trading with a broker (say IB) at the end  of the year will IB provide me with a 1099 that I simply enter in taxact? Will IB calculate all the profit/losses on all trades and give me a net 1099? Is it as simple as that or do I have to do the calculations during tax time to determine the short term and long term gains? Thanks much.. 

[Yowster]

41 minutes ago, Ram said:

I am new to this and so please bear with me. I am currently using taxact.  Once I start trading with a broker (say IB) at the end  of the year will IB provide me with a 1099 that I simply enter in taxact? Will IB calculate all the profit/losses on all trades and give me a net 1099? Is it as simple as that or do I have to do the calculations during tax time to determine the short term and long term gains? Thanks much.. 

@RamIB will provide a 1099 with totals that you can enter directly into tax software.  They will also provide worksheet with each trade listed that you can attach to your tax form if you want to.

[Ram]

Thanks @Yowster

[cuegis]

I think form 8949 ( is that the correct number?) is the best, and easiest way to get to a final P/L number. There is a final page with the "totals".

I remember the days when this did not exist, and you only had a 1099's which, if you were an active trader, or mostly did multi-legged trades, with adjustments, could be hundreds of pages of "proceeds received from sale of trade", without including the price that was paid for each item that was sold.

But 8949 made life infinitely easier, by including all of the columns with the relevant info.

So, just using the one page, with the final summary, and either saying something along the lines of "all trades cost, and proceeds received, available on request".

Or, just taking the final P/L numbers to fill in the return, and stapling, or somehow including all of the trades, would be the best way to go.

I just don't know how to include hundreds of pages with "electronic" filing.

Then there is the "wash sale" issue.

It is my understanding that if you call yourself a "full time" "professional" trader, then the "wash sale" rule does not apply.

I would think that even if you are doing a moderate amount of "multi leg" trades (ex.  several hundred legs per month, and trading on most days), then it would be very hard for anyone to argue that you are a "full time" trader.

[Yowster]

1 hour ago, cuegis said:

I think form 8949 ( is that the correct number?) is the best, and easiest way to get to a final P/L number. There is a final page with the "totals".

I remember the days when this did not exist, and you only had a 1099's which, if you were an active trader, or mostly did multi-legged trades, with adjustments, could be hundreds of pages of "proceeds received from sale of trade", without including the price that was paid for each item that was sold.

But 8949 made life infinitely easier, by including all of the columns with the relevant info.

So, just using the one page, with the final summary, and either saying something along the lines of "all trades cost, and proceeds received, available on request".

Or, just taking the final P/L numbers to fill in the return, and stapling, or somehow including all of the trades, would be the best way to go.

I just don't know how to include hundreds of pages with "electronic" filing.

Then there is the "wash sale" issue.

It is my understanding that if you call yourself a "full time" "professional" trader, then the "wash sale" rule does not apply.

I would think that even if you are doing a moderate amount of "multi leg" trades (ex.  several hundred legs per month, and trading on most days), then it would be very hard for anyone to argue that you are a "full time" trader.

@cuegisThe 8949 is simply all the individual trade details that are summarized in the 1099.   Now that brokers have to report all the cost basis data to the IRS, the 1099 totals are sufficient (and you have the 8949 details to back up those totals if need be).   IB does always seem to have a bunch of trades that fall into the wash sale category, but the wash sale number is in the 1099 so you just include that and everything works out.   You can't ignore the wash sale number, in IB's case its not necessarily selling and buying back the same options - they seem to use it in cases where you have multiple contracts and some have different prices than others (in my case for 2017 on IB's 1099 my trades actually showed a loss until I included the wash sale number, which came up with the profit number I was expecting to see).

 

So, I agree with you that you only need the totals - but its the totals on the 1099 that summarize all the 8949 trade details in one place.

Edited March 13, 2018 by Yowster

[cuegis]

1 hour ago, Yowster said:

@cuegisThe 8949 is simply all the individual trade details that are summarized in the 1099.   Now that brokers have to report all the cost basis data to the IRS, the 1099 totals are sufficient (and you have the 8949 details to back up those totals if need be).   IB does always seem to have a bunch of trades that fall into the wash sale category, but the wash sale number is in the 1099 so you just include that and everything works out.   You can't ignore the wash sale number, in IB's case its not necessarily selling and buying back the same options - they seem to use it in cases where you have multiple contracts and some have different prices than others (in my case for 2017 on IB's 1099 my trades actually showed a loss until I included the wash sale number, which came up with the profit number I was expecting to see).

 

So, I agree with you that you only need the totals - but its the totals on the 1099 that summarize all the 8949 trade details in one place.

Yes, you are right. The 1099 finally provides an accurate summary, as opposed to all of the years before they had to include "cost basis".

That was a nightmare for people like us who have an enormous amount of transactions.

But, the final summary totals on the 8949, should match exactly what is now on the 1099's.

I guess the 8949 is just the backup info, in the event the IRS ever wanted to see all of the trades, which I doubt they would ever ask for.

 

I remember one year, before they were required to include "cost basis", and they only sent 1099's that included "proceeds from the sale of xyz".

I filed late, with an extension one year, and I got a call from the IRS telling me that I have something like $5 million in proceeds from the sale of all of my trades for the year on my 1099.

And, if I do not file it myself in the next 30 days ( which would obviously include the cost basis), then they would file my return for me, and I would be obligated to pay the appropriate tax on $5 million proceeds.

I had to go through every single trade for the year over the next day or 2 ( and there were a LOT of them), to wind up with a "cost basis", that I could verify , of $4,900,000, showing a "real" income of $100,000.

Edited March 13, 2018 by cuegis

[Yowster]

1 minute ago, cuegis said:

Yes, you are right. The 1099 finally provides an accurate summary, as opposed to all of the years before they had to include "cost basis".

That was a nightmare for people like us who have an enormous amount of transactions.

But, the final summary totals on the 8949, should match exactly what is now on the 1099's.

I guess the 8949 is just the backup info, in the event the IRS ever wanted to see all of the trades, which I doubt they would ever ask for.

@cuegisYes, exactly.   The only thing you have to include (its also a separate section on the 1099) is the 1256 contract stuff if you did any trades with index options (VIX, RUT, etc).

[cuegis]

4 minutes ago, Yowster said:

@cuegisYes, exactly.   The only thing you have to include (its also a separate section on the 1099) is the 1256 contract stuff if you did any trades with index options (VIX, RUT, etc).

Do they treat index options differently than any other "futures" option? Like Gold, Crude, etc?

[anand331]

@cuegis from what I understand all futures options also come under 1256 contracts. I don't trade futures or options on them, just recalling from what I have read about them.

[ChadK]

20 minutes ago, anand331 said:

@cuegis from what I understand all futures options also come under 1256 contracts. I don't trade futures or options on them, just recalling from what I have read about them.

 

Here's where things "diverge" a bit.  Some brokers have different viewpoints of what constitutes a 1256 contract.  Several of the option vehicles we use at SO are 1256, or "could be" 1256, depending upon who's doing the defining.  A small sampling from my 2017 trading, which may also be things you traded:  VIX, VXX, GLD, SLV, FXE, USO, OIH (and of course RUT and SPX).  I have 1099's from both TDAmeritrade and Apex (Tradier, TastyTrade), and each of them may or may not have included all of those contracts listed previously.  (They usually have RUT and SPX, but the others are questionable.)  You can blindly just use your 1099's and accept what it says, but you could be leaving tax money on the table.

 

For those of you not familiar with 1256, the short summary is that all gains and losses are treated as 40% short-term gains, and 60% long-term gains, regardless of the holding period.  Since most of our trades are well under 1 year long, this is a significant savings in the tax bill.  For those in the 28% marginal tax bracket, this means your 1256 effective tax rate is 20.2% instead of 28%.  (More savings in you're in a higher tax bracket.)  For more information, Google "1256 contracts".

[anand331]

1 minute ago, ChadK said:

 

Here's where things "diverge" a bit.  Some brokers have different viewpoints of what constitutes a 1256 contract.  Several of the option vehicles we use at SO are 1256, or "could be" 1256, depending upon who's doing the defining.  A small sampling from my 2017 trading, which may also be things you traded:  VIX, VXX, GLD, SLV, FXE, USO, OIH (and of course RUT and SPX).  I have 1099's from both TDAmeritrade and Apex (Tradier, TastyTrade), and each of them may or may not have included all of those contracts listed previously.  (They usually have RUT and SPX, but the others are questionable.)  You can blindly just use your 1099's and accept what it says, but you could be leaving tax money on the table.

 

For those of you not familiar with 1256, the short summary is that all gains and losses are treated as 40% short-term gains, and 60% long-term gains, regardless of the holding period.  Since most of our trades are well under 1 year long, this is a significant savings in the tax bill.  For those in the 28% marginal tax bracket, this means your 1256 effective tax rate is 20.2% instead of 28%.  (More savings in you're in a higher tax bracket.)  For more information, Google "1256 contracts".

@ChadK, from my understanding only the options on diversified "indexes" qualify for 1256 (only talking about equities not futures). So I think options on ETFs (SPY, GLD, SLV, USO, VXX) are ineligible. As a matter of fact Interactive does not include these as part of 1256 contracts. VIX, RUT, SPX are included in 1256. Not challenging what you are saying, but just mentioning my experience from Interactive and from what I have read.

[cuegis]

3 minutes ago, ChadK said:

 

Here's where things "diverge" a bit.  Some brokers have different viewpoints of what constitutes a 1256 contract.  Several of the option vehicles we use at SO are 1256, or "could be" 1256, depending upon who's doing the defining.  A small sampling from my 2017 trading, which may also be things you traded:  VIX, VXX, GLD, SLV, FXE, USO, OIH (and of course RUT and SPX).  I have 1099's from both TDAmeritrade and Apex (Tradier, TastyTrade), and each of them may or may not have included all of those contracts listed previously.  (They usually have RUT and SPX, but the others are questionable.)  You can blindly just use your 1099's and accept what it says, but you could be leaving tax money on the table.

 

For those of you not familiar with 1256, the short summary is that all gains and losses are treated as 40% short-term gains, and 60% long-term gains, regardless of the holding period.  Since most of our trades are well under 1 year long, this is a significant savings in the tax bill.  For those in the 28% marginal tax bracket, this means your 1256 effective tax rate is 20.2% instead of 28%.  (More savings in you're in a higher tax bracket.)  For more information, Google "1256 contracts".

All of the underlyings that you mentioned, like GLD or SLV, fall under the "stocks" category. Also USO.

I was referring to the actual commodities futures and futures options, like GC, or SI, or CL.

Those definitely are in the 1256 category of 60/40, with no limits on holding period.

I am not sure about where the VXX/VIX products land.

[greenspan76]

Yeah, I don't have time to look it up right now, but I believe the IRS uses the term "broad-based" index to define the non-futures that are eligible for Section 1256 treatment. But to answer your question @cuegis, as long as it is an option on a "broad-based" index, then it is treated the same as futures and futures options. Edit: meant to include that ETF's do not qualify as 1256 contracts in the IRS's default point of view, so if anyone is listing those on his returns, watch out for an upcoming audit in your future. Not to say you wouldn't win if it went to tax court, but just be aware that it could pose problems.

Edited March 13, 2018 by greenspan76

[cuegis]

14 minutes ago, greenspan76 said:

Yeah, I don't have time to look it up right now, but I believe the IRS uses the term "broad-based" index to define the non-futures that are eligible for Section 1256 treatment. But to answer your question @cuegis, as long as it is an option on a "broad-based" index, then it is treated the same as futures and futures options. Edit: meant to include that ETF's do not qualify as 1256 contracts in the IRS's default point of view, so if anyone is listing those on his returns, watch out for an upcoming audit in your future. Not to say you wouldn't win if it went to tax court, but just be aware that it could pose problems.

You are right. I was pretty certain that ETF's (and options)  were treated the same as stocks.

[ChadK]

From the IRS Form 6781 instructions (https://www.irs.gov/pub/irs-pdf/f6781.pdf):

Section 1256 Contract

A section 1256 contract is any:

• Regulated futures contract,
• Foreign currency contract,
• Nonequity option,
• Dealer equity option, or
• Dealer securities futures contract.

As mentioned, different people, different institutions, different trader tax preparers, have different viewpoints on the definition.

One can argue that FXE is a Foreign currency contract.

One can argue that VIX, VXX, GLD, SLV, USO and OIH are nonequity options.

 

I'm not forcing any one definition down anyone's throat, but am trying to make others aware.  I've been submitting my taxes for over 10 years this way, with zero audits.  Your mileage may vary.  Consult your (trader) tax professional  (I previously did...I hired Green Trader Tax.  Most other tax professionals aren't very knowledgeable in this area.

 

[ChadK]

Also, please note that I said OPTIONS on these vehicles.  The actual ETFs are to be treated like buying and selling stock.

[greenspan76]

34 minutes ago, ChadK said:

From the IRS Form 6781 instructions (https://www.irs.gov/pub/irs-pdf/f6781.pdf):

Section 1256 Contract

A section 1256 contract is any:

• Regulated futures contract,
• Foreign currency contract,
• Nonequity option,
• Dealer equity option, or
• Dealer securities futures contract.

As mentioned, different people, different institutions, different trader tax preparers, have different viewpoints on the definition.

One can argue that FXE is a Foreign currency contract.

One can argue that VIX, VXX, GLD, SLV, USO and OIH are nonequity options.

 

I'm not forcing any one definition down anyone's throat, but am trying to make others aware.  I've been submitting my taxes for over 10 years this way, with zero audits.  Your mileage may vary.  Consult your (trader) tax professional  (I previously did...I hired Green Trader Tax.  Most other tax professionals aren't very knowledgeable in this area.

 

Fair enough. Perhaps I should have paid more attention to the specific tickers you listed, as I don't think I disagree with your assessment on those. However, I wouldn't agree that SPY, for example is a non-equity option (even though it is based upon a broad-based index) because it doesn't meet the definition of nonequity. 

Edited March 13, 2018 by greenspan76
clarity

[greenspan76]

I edited my above post a couple times, so if anyone read it in-between the first and final edit, it may have been misleading because 1) I kept overlooking the options instead of direct ETF; and 2)  I included ETNs by mistake in my example.

[anand331]

After some further digging up, @ChadK is correct in his ideas. Options on SLV, GLD, VXX and in general any ETNs seem to be eligible for 1256 treatment so long as they don't represent a single stock or a narrow index. Here's a link to an article that seems to support this:

http://www.twenty-first.com/articles/how_are_your_etf_options_taxed.htm

Thanks @ChadK for pointing this out. The question now is that is there any way to have Interactive Brokers generate 1256 contracts to include these ETF options? I will do some more digging and let you know what I find.

[ChadK]

18 hours ago, anand331 said:

The question now is that is there any way to have Interactive Brokers generate 1256 contracts to include these ETF options? 

 

I think you'll find the answer is no.  That's why I have used TradeLog for years.  (http://www.tradelogsoftware.com/)  Started when broker's 1099 reporting was all messed up and have now continued seeing how the 1256 stuff isn't quite right either.  I import all trades, from all of my brokers, into TradeLog, it properly figures out any wash sales, even across brokers, and properly puts trades into 1256 category.  I then make PDFs or printouts and include those figures, not the 1099-B figures.  I also include a note saying that the 1099-B's are incorrect.  The good news is that the sum of reported gains (1256 and non-1256) match up between my broker and me.  So I'm not hiding any sales...I'm just reclassifying some of the trades as 1256.  As mentioned, I've done this for 10 years now without an audit.  The majority of my gains are RUT and SPX options, and there's no question that those are 1256.  So, if they do ever decide to audit me on GLD, SLV, OIH, etc, then the impact will be minimal if they overturn my 1256 logic.

[anand331]

Thanks @ChadK. Right now thankfully I am not making many (1256 eligible) trades other than SPX, RUT but I agree that IB will not do anything to change their reporting.

[Stone]

I am living in Canada. I use IB traded a lot of Options last year. Are there any Tax Software in Canada can import the T5008 Trading Summary?

[cuegis]

23 minutes ago, Stone said:

I am living in Canada. I use IB traded a lot of Options last year. Are there any Tax Software in Canada can import the T5008 Trading Summary?

Do you really think you need additional software for the tax data from IB?

I have been using only the reports, provided by IB,  for so many years now.

I just give them to my accountant, and it has everything they need.

Is it s "Canada Issue" that makes you feel you need to import the data to other software?

[Stone]

I usually do DIY tax return for my family. It should be a common need for people living in Canada who trade many Options in US market, to import the Trading Summary to Tax Software. Doing it manually is really not efficient. I wonder if the accountant do it manually or use some special software.

[cuegis]

20 minutes ago, Stone said:

I usually do DIY tax return for my family. It should be a common need for people living in Canada who trade many Options in US market, to import the Trading Summary to Tax Software. Doing it manually is really not efficient. I wonder if the accountant do it manually or use some special software.

Don't they just take all of the "totals", and use that?

The whole world of accounting for traders changed when the IRS started requiring all brokerages to include "cost basis" on 1099's.

Up until then, all 1099's had was "proceeds from the sale of..."

So, an active trader, even a retail one, would have a number like $15 million.

The IRS would then use that number as the "profit" that you made for the year.

It was up to you to go through every single trade you made for the year, to add up what you actually paid ("cost basis") for everything you did.

And, with thousands of trades, that was one enormous pain in the ***.

You would add it all up , and then find that you actually paid $14,900,000, which then showed that you "netted" $100,000 for the year...not $15 million.

Now, everything is done perfectly by the brokerage.

[anand331]

On 2/21/2018 at 1:52 PM, anand331 said:

Excellent. Thanks @Yowster. I will do it this way (unless my cpa says she's already doing it this way lol).

Hi @Yowster, I just checked one of my accounts at IB and the proceeds and the cost basis as reported on 1099 do not account for wash sale. However, the 8949 form does account for it when coming up with gain or loss. Is it your experience as well? I know it is more of an accountant question, but if I have wash sale losses denied for 2017 for certain option trades and if I don't ever trade the option on that underlying in 2018, would that wash sale loss be gone forever?

Edited April 4, 2018 by anand331

[cwelsh]

On 2/21/2018 at 12:12 PM, anand331 said:

Thanks @Yowster. To make sure I understand correctly, you don't report individual trades (form 8949) with your returns? Instead you report the gains from proceeds and cost basis as supplied with your 1099? Do you separate gains/losses between stocks and options?

First I am NOT an accountant and so take any of this at your own risk - but I have had huge issues getting my trade information into my taxes using Turbo Tax, H&R Block, and a few others.  Because of this, for the last two years, I've taken Yowster's approach and just entered the info from my 1099s and not worried about all of the individual trades on form 8949.

 

On form 8949, I just write "see attached trade documentation" then print out my entire trading logs from TDAmeritarde and IB and just attach them to the back of the return.  So far no issues, but since the IRS audits something like 0.5% of personal returns that might not mean anything.

[anand331]

1 minute ago, cwelsh said:

First I am NOT an accountant and so take any of this at your own risk - but I have had huge issues getting my trade information into my taxes using Turbo Tax, H&R Block, and a few others.  Because of this, for the last two years, I've taken Yowster's approach and just entered the info from my 1099s and not worried about all of the individual trades on form 8949.

 

On form 8949, I just write "see attached trade documentation" then print out my entire trading logs from TDAmeritarde and IB and just attach them to the back of the return.  So far no issues, but since the IRS audits something like 0.5% of personal returns that might not mean anything.

Thanks @cwelsh. When you say trading log from IB, what particular report do you submit? Also, the 1099 form shows the the amount of wash sales. I assume you offset your cost basis by the wash sales?

[cwelsh]

1 minute ago, anand331 said:

Thanks @cwelsh. When you say trading log from IB, what particular report do you submit? Also, the 1099 form shows the the amount of wash sales. I assume you offset your cost basis by the wash sales?

If I have wash sales (rare), I actually DO enter those on the form - I didn't have any last year.  On IB I download the 'Activity Statement" for the year and send that in.

[anand331]

Just now, cwelsh said:

If I have wash sales (rare), I actually DO enter those on the form - I didn't have any last year.  On IB I download the 'Activity Statement" for the year and send that in.

Thanks again. Several of SteadyOptions trades show up as wash sales for me (I am guessing because of weekly strangles). I think this is the standard IB tax report and there are no preferences that you can control.

[greenspan76]

4 hours ago, anand331 said:

Hi @Yowster, I just checked one of my accounts at IB and the proceeds and the cost basis as reported on 1099 do not account for wash sale. However, the 8949 form does account for it when coming up with gain or loss. Is it your experience as well? I know it is more of an accountant question, but if I have wash sale losses denied for 2017 for certain option trades and if I don't ever trade the option on that underlying in 2018, would that wash sale loss be gone forever?

Are you saying your 1099 totals don't match the Form 8949 worksheet totals? If so, you need to talk to IB because there is a problem. If they do match, I don't really understand how the wash sales are not being accounted for. On your 1099-B, lines 1d, 1e, and 1g should match the totals from your Form 8949 worksheet from IB, which are also labeled the same (1d, 1e, and 1g)

[anand331]

1 minute ago, greenspan76 said:

Are you saying your 1099 totals don't match the Form 8949 worksheet totals? If so, you need to talk to IB because there is a problem. If they do match, I don't really understand how the wash sales are not being accounted for. On your 1099-B, lines 1d, 1e, and 1g should match the totals from your Form 8949 worksheet from IB, which are also labeled the same (1d, 1e, and 1g)

Sorry for the confusion @greenspan76. The numbers match exactly. I thought someone mentioned earlier that the cost basis, 1e already subtracted 1g but it does not.

[greenspan76]

1 minute ago, anand331 said:

Sorry for the confusion @greenspan76. The numbers match exactly. I thought someone mentioned earlier that the cost basis, 1e already subtracted 1g but it does not.

Actually, I thought it used to be done that way, but I haven't looked back to verify, so its possible I said that. If so, sorry for the confusion.