Accounting for securities is complex with cost-basis reporting and wash sale adjustments. Otherwise, accounting is fairly easy for traders with futures, forex and expenses.
Read our Jan. 23, 2015 blog How will you handle wash sale losses on securities this tax season?, and Trader Tax Center pages Accounting Solutions for Traders, and IRS Cost-Basis Reporting and Form 8949.
Accounting Services for Trading Gains and Losses
If you actively trade equities and equity options and or securities in more than one account, unless you use proper software and or a professional service on all your individual taxable and IRA accounts, you will probably handle wash sales wrong and under-report or over-report your taxable income. In these cases, you can’t rely on 1099-B reporting because brokers use a different set of tax compliance rules than taxpayers in calculating and reporting wash sale losses.
Software for wash sales
When you consider a securities trade accounting software and Web-based solution, ask the vendor if they calculate wash sales based on Section 1091 and if not, you may want to skip that solution. TurboTax ads say they make taxes simple and they imply you can just import your 1099-B. You’ll spend a lot of time finding their small fine print about having to make Section 1091 adjustments on your own.
Don’t tackle this minefield on your own, get professional help
Every case is different and our CPAs will look for ways to work with what you provide us, and in some cases, we can make manual adjustments. For example, if you don’t have open wash sales at year-end, we may be able to find ways to generate proper tax forms using 1099-Bs, broker tax reports, and software solutions that you provide to us.
We offer a full professional accounting service using software that complies with Section 1091. We download your securities trades into our software and generate Form 8949 and or Form 4797 in a manner that is compliant with Section 1091 wash sale rules for taxpayers. We reconcile these tax forms with broker-issued 1099-Bs, which have different rules for calculating and reporting wash sales. We also prepare Form 6781 for Section 1256 contracts and prepare the necessary tax forms for reporting forex transactions. You can give these tax forms to your tax preparer or our CPAs for our tax compliance service. In many cases for securities accounting, we use Tradelog software – the program we’ve added value to since 2001 – and you don’t need to purchase a software license, unless you want to operate that software on your own, too.
Accounting Services for Expenses
Simplify your expense accounting using GTT Tracker. It’s is excellent for tracking expenses and time. We can help you set up GTT Tracker or another accounting solution and review the results at year-end for tax planning and preparation.
GTT Tracker prepares a full accounting and it properly documents your trading expenses and other business expenses, too. It’s a single-entry accounting system that is extremely effective and easy to use. The software allows you to download bank account and credit card transactions and follow IRS rules for compliance and documentation on a daily basis. Don’t be stuck trying to remember who you had dinner with and what the business purpose was at year-end. The IRS is tough on these issues in exams.
We look forward to working with you soon.
Managing Members Robert A. Green, CPA and Darren L. Neuschwander, CPA