Well the biggest problem I've run into at tax time is with the wash sale rule, ever since the 1099B started reporting BASIS about twelve years ago or so, as I recall. Before that, I would just keep track of trades on a spreadsheet, which, yes, was and is a pain, and then just give the numbers to the accountant. Now the 1099B reports all these "disallowed" wash sales, and my CPA has had to start including some addendum that notes that I elected trader status and that the wash sale rule doesn't apply to me.
For example today I bot 100 AMZN at 3129
100 @ 3111
200 @ 3091
Then I sold all 400 @ 3106.
Unwinding it for the IRS, on a LIFO basis, that means I lost 23 pts on one trade, -2300
lost 5 pts on another trade, -500
but made 15 points on the third trade, +3000
For an over all profit of $200.
Yet, pursuant to the wash sale rule, the IRS disallows the -2800 loss as I rebought (or will rebuy) AMZN again within 30 days (I buy and sell AMZN almost daily), and recognizes only the 3000 profit! unless I have elected trader status and provide my own basis figures for my tax return end of each year. It also gets complicated because I retain long term shares of AMZN and many other stocks that I trade.
I am not a strict day trader. I hold long term and then I trade additional shares on top of what I never sell. And if I get stuck in a trade, I average in and switch to position (swing, or
medium term) trading. I am not one of those traders who insists on being "cash only" at the end of each day.
I dunno I just leave it to him to minimize the tax. Just as you "leave it to the professionals" I leave tax matters to my CPA. I just make sure he's understanding that I am a trader otherwise my tax bill would be massive and greater than what I book in trades a year, in that the IRS would be holding its hand out for every profitable segment of a trade and shaking its head about every loss portion.
I do very well at trading, but mostly I suppose I trade for the thrill of it.
Which is another thing that these bozos can't comprehend. If I wanted to make something up I'd just make myself an "Alpha Double Plus" (if you've read Brave New World) while I was at it, and claim to book tens of thousands each day. These are real trades, and sometimes I book a lot sometimes I get stuck and barely book fifty dollars. But I buy on dips and average in if necessary, and ride it out if necessary to make sure I never book a loss. I haven't been stuck beyond some days in some time. Today I would have been stuck holding until at least tomorrow if AMZN hadn't popped back to 3106 before it collapsed again.
What's funny is that generally when I eke out a profit on a trade and pat myself on the back for averaging in and saving my skin within hours, within a few days the stock is back so high that I would have done better to just hold. But as a trader I try not to look back.
Okay my wife has been dancing around the hotel suite and is starting to get upset that I am tied to this MacBook Pro. Relationship time.
Have a good day!
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