TRADERS
GUIDES: ACCOUNTING

GTT Guide: Accounting for trading gains and losses.

Note - This year more than ever is a good time to switch to GTT TradeLog.
New this year, the IRS is insisting on proper line-by-line trade reporting on Schedule D (and Form 4797) and our GTT TradeLog program may be the best solution around for this IRS compliance. We can download your trades (line by line) from your brokerage firm's Web site into our GTT TradeLog program and then import the accurate tax accounting results into our tax preparation software (or you can do the same with TurboTax). We can then e-file your tax return with line-by-line reporting. Or we can print the GTT TradeLog reports and attach them to a paper-filed tax return. Learn more about this new IRS compliance requirement for 2005 tax return filings and why GTT TradeLog is the best solution on our Web blog.

As pointed out on our blog, you should attach our GTT accounting worksheets to your tax return as a last resort. Several of our clients and GTT CPAs also like to use our accounting worksheets to double check their tax accounting software; to be sure it's right. Others use our accounting worksheets for performance records and reporting to others.

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 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 "GTT Inventory Approach™" or "GTT 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 (such as Quicken or Money) 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 "GTT 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 our GTT TradeLog trade accounting software program. Our program does automatically make your wash sale loss adjustments and much more. Click here to learn more. We have price points this year to accommodate the budgets of all traders and investors.

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