Do You Really Need to Report Every Single Trade on Your Tax Return?

If you trade stocks or options, you might think that your tax preparation will be complex or expensive. But taxes for active traders is easy. Check it out.

Disclaimer: The information presented on this website is only a basic introduction the preparation and reporting of stock and options trading on your tax return. We strongly recommend that you hire a professional to help you. The information provided here does not replace the IRS instructions for filing taxes. Incorrect filings could lead to large tax bills and penalties. Please hire a CPA or an EA to prepare and file your tax returns.

Reporting active trading on your tax return – one trade at a time?

At first glance, it seems that the IRS requires active trading taxpayers to list each trade separately on their tax forms. This creates a ridiculous time-cost situation for the taxpayer who trades actively.

Some traders handle this problem by purchasing and utilizing software to help them list our their trading history in an exportable format. Then they provide those files to specialist CPAs and EAs – who often charge a premium rate. I recently saw a tax return from a client who switched over to our service that had a $1200 bill on it. It was a simple tax return but the preparer listed every single trade separately.

active trading taxes

So do you really have to list every single trade?

No you do not.

The IRS gives relief from this rule to active traders in numerous ways.  In my opinion, the extra software and the over-priced tax preparation fees are made obsolete by the modern reporting requirements.

In a lot of cases, the IRS allows you to list the total each “type” of transaction rather than each one separately as long as you attach a copy of your 1099B and send it in with your tax return. For e-filed tax returns, you can attach the statement and send it electronically with your tax return in PDF format.

You can do this as long as your broker’s statement lists out the same information that required on the tax return – which is almost always the case now-a-days. The main thing is “cost basis”. If it’s reported on the 1099B and already reported to the IRS by your broker, then you’re probably good. You also must not have any special adjustments or codes to report on the transactions – which is also not that common.

This totally solves the problem.

But don’t just take my word for it, check out the instructions here on Schedule D (opens in a new tab) to make sure you qualify.

Note that if you are an active trader with multiple brokerage statements, the types of transactions for each statement must be listed separately for each type of transaction and each type of statement.

Active traders can take advantage of these procedures and save hundreds of dollars and hours of headache when it comes time to prepare their taxes.

If you wish to hire us to prepare your active trading taxes online, click here for our prices and to contact us.

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