Void. You're welcome. I hope I made it clear. The rules have become so unnecessarily complicated. President Reagan, in the early 80's, set out to simplify the tax code. This "simplification" has increased the complexity at least ten fold.

Bob

Bob,

Thank you for your attention and comments.
Much appreciated.

Regards.

My comments, in no particular order of importance are:

1. Reference to the manner in which someone else’s prior tax examination was conducted, is totally irrelevant and of no significance whatsoever. Furthermore, it is also irrelevant and insignificant in terms of how that individual’s future IRS examinations are conducted. Accordingly, in the rest of this posting I’ll stick to the rules.

2. It is true that Brokers are required to report to the IRS only the sales prices of stocks. Option sales are not reportable to the IRS by the Broker. Nevertheless, taxpayers must still report their options trades in the taxable year the position is closed out.

3. Unfortunately, the details of each sale must be separately reported for each transaction as it is closed. Except for regulated futures contracts and other “Section 1256 Assets”, sales are reportable on Schedule D, or an acceptable substitute.

4. Although Brokers do not report options trades to the IRS, my experience has been that most Brokers provide this information to their customers. Because the Brokerage business is so competitive, the number of brokers providing this information is continuously increasing. Also, just about every Broker places a caveat on this information by advising their customers that the schedules represent the best and most accurate information available. They do not accept responsibility for accuracy.

5. When a Broker prepared schedule is attached to Schedule D, it is necessary to enter the short term net transactions, and long-term net transactions separately on a Schedule D line with the description “Schedule Attached”.

6. Except when the schedules submitted by the Broker are totally accurate, for those familiar with Excel, I find this to be the best way to go. Thus, my “Schedule Attached” is frequently an Excel spreadsheet, in the content and general format of Schedule D. Excel users are able to take advantages of the many typing shortcuts available to limit the time needed to comply with this reporting function.

7. Finally, there is the matter of electronically filed (e-filed) returns. The Treasury Department has released Form 8453, specifically to accommodate this situation. The way it works is that the same “Schedule Attached” information is submitted with the e-filed return. Then, within three day of “acceptance” of the e-filing, the Form 8453 and supporting Schedule D sheets are mailed to the IRS at the address printed on the 8453. That address is currently in Austin, Texas.

Good luck to everyone.

Bob

Sorry about not responding sooner. I will try to get a response posted either this afternoon or tomorrow.

Bob

Thank you both Greg and Preston.

Thanks for the gainskeeper suggestion.
i am really surprised/shocked at this situation of
not requiring the brokerage firms provide the options
trading related accounting info to IRS and to the
customers. Spread sheet idea is good but the idea
of us tracking all this stuff is discouraging.

Preston, thank you for sharing your experience with IRS.

I thought "borankin" is an accountant and hoping that
he shares his perspective on this.

I got a full-scale audit one year. It had been a terrible year, i had lost a lot of money. The IRS sent me a notice saying they wanted to see ever trade, with cost basis,profit and lost and all that BS. There were thousands of trades. After about a year, i got in touch with a real-live human being, an auditor supervisor, and said, "look, I don't want to spend the time it takes to write all this on a schedule-C (or whatever it is) any more then you want to read it.Can't we just "botoom line" this if i furnish sufficient proof that it is correct?".he agreed that that would be acceptable, and ackowledeg that in most cases they would usually accept that, so that's how I do it, and I have rarely been asked for additional info.

I, too, do my own taxes, and find that my option trading is fairly easy to do, though my method is a bit more complicated than what wbpreston does. I find it easy to make an excel spreadsheet each year with entry and exit dates and prices, as well as commissions & exchange fees for each trade as they occur. Then use that to fill out the schedule D info on turbotax or whatever. Note though that my trading volume is sadly still small, as I don't yet have this whole trading thing figured as well as I'd like, so this method would at some point become too labor intensive for those who trade frequently. For that reason, I'm intrigued by what wbpreston had to say.

There is another solution which might work for you if you'd rather have info for each trade separately: For a fee, there is a company or product called gainskeeper which will keep track of trades for you throughout the year, and from which you can download the data directly into turbotax.

Greg

preston,

thanks for your reply.

looks like it's a simple short term capital gain/loss
situation as long as the option trading activity is
short term in nature, which is generally the case.

again, i appreciate your input.

Thanks.

I do my own taxes. Accountants make it complicated. I just report the net of my trading as a short term gain or loss, and get that information by looking at year-end account balances, and adjusting for capital withdrawls or deposits. It takes about half an hour altogether. When I had an accountant do it, it took six months and cost me about $1,500. I have never had the IRS ask for more information, but if they did, I could substantiate everything i report, at least in terms of how it nets out. I do not do anything that could put me in a position of being laible for criminal tax-evasian charges.

Hello,

i read the booklet from OCC (i think) called
"Characteristics and Risks of Standardised Options".
It clearly says that I must be aware of the tax
implications of options trading. It suggests that
I consult a tax accountant that is knowledgeable
with options trading activities. Normally, you get
help with the tax paper work from brokerage
firms for stock trading activity.
Someone mentioned that options trading related
financial information is not sent to IRS from
the brokerage firms. They also do not provide you
with consolidated paper work to help you with
the tax filing needs.


My tax accountant said that he is not knowledgeable
with options trading related tax work.

I want to have this in place before I start
trading options. So, I am looking for some direction here. What do I need to know or do
about this? Thanks.