2014 is here, which means it is time to start thinking about filing 2013 taxes - not the most exciting task, we know.
The good news is there are no major changes to IRS requirements this year! But there are some updates to IRS forms and instructions as well as other important information you should know. In this post we have put together a collection of information active traders need to know, as well as links to many resources available to help active traders with tax reporting.
Reporting requirements for 2013 are very much similar to 2012. The 1099-B reporting requirements for brokers are essentially the same - still problematic but at least we shouldn’t see any new problems (until next year). However, the IRS has made a few adjustments for taxpayer reporting:
Form 8949 is now used for reporting estates and trusts (Form 1041 returns).
Exception 2 in the Form 8949 instructions explains the qualifications as follows:
Those qualifying for this exception must still generate the 8949 reporting but only need to enter the totals on Schedule D and write “Available upon request” for the details. Keep in mind that the IRS may request the details - you must still generate your 8949 reporting and save it in your tax records. This exception just helps save you from the extra effort of sending that extra paper to the IRS!
The IRS added two new lines to the Schedule D for 2013, 1a and 8a. These lines allow some taxpayers to simply enter the aggregate totals from their 1099-B without completing Form 8949. However, don’t get too excited because the qualifications for this exception are very specific and most traders and investors don’t meet them.
In order to qualify for Exception 3 for Form 8949 reporting you must:
In other words, if your broker reported any wash sale adjustments on the 1099-b, you don’t qualify. If the broker did not report wash sales, but there are additional wash sale adjustments you must make based on taxpayer requirements, then you don’t qualify. Rarely would any active trader meet these qualifications!
The IRS has added some helpful direction in the Form 8949 instructions for those who are e-filing (their direction corresponds with what we strongly encouraged last year). If you are planning to e-file, there are two options that allow you to avoid the hassle of trying to import each line from the 8949 into the e-filing software.
In either of these options you simply enter the totals from Form 8949 for the Schedule D in the e-file software, then the detailed records are provided in the PDF or the mailed form. Many of our clients have found that trying to import 8949 details into popular tax software programs is very difficult. Most e-filing software solutions have limitations on the number of records, and some have serious problems importing those records. Why go through that hassle when you have two other options!
Take note: Not all popular online e-file solutions allow you to upload and attach a PDF. If this is an option you prefer then you may want to check with your e-file solution provider and encourage them to support this method the IRS recommends!
Each year thousands of active traders use TradeLog to generate accurate IRS-ready tax reporting. Here is what you need to know about TradeLog software for 2013 reporting:
Until version 13 is available your reports will show a DRAFT watermark. This version will include updates for IRS forms as well as other updates for improved accuracy and performance.
TradeLog data files are tax year specific, meaning your 2013 file is for the 2013 tax year. It is important that you follow the instructions in our user guide each year in order to have accurate data - and accurate tax reporting! Especially note these instructions:
If you need help or have questions about trader tax reporting check out our new definitive guides on trader tax subjects, as well as online tax topics which help you understand reporting requirements for active traders.
If you need professional help we recommend our trader accounting service partners who can provide solutions to fit your need - from full trader tax CPA services to trade accounting bookkeeping.
Few people enjoy filing taxes, especially complex trader tax reporting. But with some good planning and the help of resources like those from TradeLog, you can make tax time a little less stressful. Stay tuned to future developments from TradeLog, we’ll send updates via email and on our social networks. And don’t forget to share this post with your trading friends.
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.