TRADERS
GUIDES: GREENTRADERTAX TRADE ACCOUNTING GUIDE

GreenTraderTax Guide: Accounting for trading gains and losses.

Guide Highlights

Accounting for trading gains and losses is complex and very difficult for most traders. Most traders who qualify for "trader tax status" have more than 1,000 trades per year; some have tens or even hundreds of thousands.

For securities and some currencies traders, figuring out your trade accounting can be a nightmare and cost you too much valuable time and money. Commodities and futures (Section 1256) traders have it easy; their brokers send them a Form 1099-B showing "Aggregate Profit or Loss" and they can simply enter that number to their Form 6781.

Securities and currencies traders still don't get enough help from their brokers. IRS Form 1099s sent by your broker at tax time do not include securities or currencies trading gains and losses; instead, they only include proceeds on securities (and most have nothing for currencies traders). Some brokerage firms provide traders with reports of trading gains and losses, but most of these reports have unmatched trades or don't account for mark-to-market accounting or wash sales.

This Guide provides securities and currencies traders with a simple trader accounting solution. Use our "GreenTraderTax Inventory Approach™" or "GreenTraderTax Performance Record Approach™" worksheets with our guidance to calculate an annual net gain or loss amount per brokerage account.

Many traders use their own worksheets or consumer finance software programs during the tax year, which is useful for knowing their profit and loss. Many of these traders have trouble generating accurate tax return numbers that reconcile to their Form 1099s, and they don't make correct adjustments for mark-to-market accounting or Section 481(a) adjustments. Our Guide provides help to these traders. Don't chance reporting a gain that is higher then the correct amount and overpaying your taxes. Use our worksheets to double check your own trade accounting systems. Even commodities traders can use our "GreenTraderTax Performance Record Approach™" worksheets to double check their brokerage firm Form 1099-Bs (a wise idea in this era of brokerage firm job cuts and constantly changing IT systems).

Note our "cash method" worksheets mentioned above do not automatically account for wash sale adjustments; you must manually make those adjustments. A better solution for wash sales and trade accounting in general is a top trade accounting software program.

Investment managers use the performance record approach for required reporting of performance records - otherwise known as track records.

The best accounting solution for securities traders is TradeLog for GreenTraderTax. TradeLog^® completely automates your stock, options and futures trades, and tax accounting. Save days of work and professional fees by using the program to import all your trades (prior and current years). The program generates IRS-compliant Schedule D (cash method with wash sale reporting) and Form 4797 (mark-to-market method with Section 481 reporting) which you can attach to your tax return. Click here to visit our TradeLog^® for GreenTraderTax page to learn more.

If you have questions about your trade accounting, e-mail us at info@greencompany.com or call us.