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What Every Trader Needs to Know About Taxes

Published: January 30, 2013
Tagged: Trader Taxes, 1099-B, Wash Sales, Form 8949

There are many misconceptions that exist about tax reporting for traders and investors. Here are the top two myths, and the facts you need to know...


Myth: My 1099-B is all I need for my capital gains taxes.

Fact: In most cases the 1099-B is not accurate for tax reporting. The IRS has different rules for broker reporting than for taxpayer reporting. This is why your broker 1099-B includes a statement reminding you of your accountability for accurate tax reporting.

Here are some example situations where the 1099-B is not accurate enough for taxpayer reporting:

TradeLog software generates accurate, IRS ready tax reporting based on rules for taxpayers, not brokers. In addition, TradeLog includes functions for reconciling with the 1099-B and for making needed adjustments on IRS Form 8949. Click here to learn more about TradeLog.

Myth: Popular tax programs can handle Schedule D Form 8949 reporting for active traders and investors.

Fact: Most tax software programs like TurboTax® usually rely on inaccurate broker 1099-B data for generating Schedule D Form 8949. Popular tax programs were made for the average taxpayer. Active traders and investors must comply with some of the most complex tax reporting requirements. The IRS therefore recommends that traders and investors keep accurate records of their trade history for tax purposes (See the IRS Schedule D Instructions page D-2).

TradeLog software does not rely on 1099-B data, instead, TradeLog keeps a log of actual trade history which is then used to generate accurate tax reporting. The good news is: most TradeLog generated tax reports can be used along with programs like TaxACT® and TurboTax® for completing your income tax return. Click here to learn more about TradeLog.

Want to learn more about Trader Taxes? Visit the online Trader Tax Topics by clicking here!

Please note: This information is provided only as a general guide and is not to be taken as official IRS instructions. Cogenta Computing, Inc. does not make investment recommendations nor provide financial, tax or legal advice. You are solely responsible for your investment and tax reporting decisions. Please consult your tax advisor or accountant to discuss your specific situation.