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My friend traded 1000s dollars of stocks using scottrade but over the past 2 or 3 years her taxes weren't properly done by the people who did them. So the IRS sent her a notice that she owed 22,000 taxes on 80ish thousand income, in reality she only profited with 3,500 since she opened her scottrade account. Me and her went to the IRS and they gave her forms and told her what she needs to do.
Does anyone here have experience having to document for the IRS earnings. She could probably do it herself, but there is always uncertainty. Does the average CPA know how to handle something like this?
Going with a CPA is always better than trying it yourself, unless you really know what the heck you're doing. And $22,000 doesn't sound like chump change. Either your friend really did make a lot of money or someone royally screwed up. If it's that easy, your friend could have done her own taxes to begin with. Consult with a CPA and have a professional work on it.
My friend traded 1000s dollars of stocks using scottrade but over the past 2 or 3 years her taxes weren't properly done by the people who did them. So the IRS sent her a notice that she owed 22,000 taxes on 80ish thousand income, in reality she only profited with 3,500 since she opened her scottrade account. Me and her went to the IRS and they gave her forms and told her what she needs to do.
Does anyone here have experience having to document for the IRS earnings. She could probably do it herself, but there is always uncertainty. Does the average CPA know how to handle something like this?
My Schedule D last year was 25 pages. I did it by hand. I doubt a CPA could fill it out, or could one of my relatives. Hopefully, I die, the day after I submit my return, so they only have to deal with a few weeks of trade confirmations.
If your friend's return was a dozen or two stocks, it should have been easy to fill out their Schedule D themselves. And if you follow the directions carefully, it is not hard to do. Mine is very time consuming. It takes over 24 hours to fill mine out.
I'd rather fill my own out and if the IRS has a question they can call ME.
I've filled mine out every year and make sure numbers add up to the very penny. Bad math can cause an audit.
$22,000 tax on $80,000 of one year gains does not sound out of line.
((((( in reality she only profited with 3,500 since she opened her scottrade account )))))
You are supposed to submit a schedule D every year.
Are you saying they made $80,000 in one year and alot of losses is subsequent years?
And that makes their overall gains to be under $4000?
If so, then their subsequent year losses are about $75,000.
They can use $3000 of those per year. So pending any future capital gains, your friend has over 24 years of capital loss carry forwards since you can only use $3000 per year.
Whose most qualified to do taxes on stock income?
In my opinion it is ME for my return.
Probably less than 10% of all CPAs know anything about the impact of IRS regulations on small investors. The standard tests that CPA must pass are not geared to expect current high level knowledge of the tax code or trading practice.
If you are not comfortable using TurboTax to do Schedule D calculations you ought to hire a specialized firm that has tax accountants / attorneys trained in dealing with active traders. In towns like Chicago & New York these are pretty common but in other places you might need to do some calling around..
Schedule D is simple math, subtraction and adding. It's the tedious nature of hand writing 20-25 pages, with 25 lines per page, and each line containing 6 columns of data.
It sound like whoever did the taxes did not factor inthe cost basis in the stock, Most stock brk (and it required now) that they statement from scott trade to show the cost, sale, gain/loss, Few years ago all scott would report is the sale of the stock, since they did not track the cost basis, IRS would look to you Schd D for that info.
No doubt IRS adjusted her taxes because the gross proceeds from her 1099 forms could not be reconciled with her tax return. Given that mistake (stupid on her part) she needs a CPA. If she can discipline herself to reconcile the IRS forms with her filings, she can use TurboTax. I doubt she can.
Schedule D is pretty simple. I would hope that a CPA knows about it....
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