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i was told a brokerage house would only report a taxable event to IRS without details about the transactions, so how does one go about file taxes on profits? is it entirely upon myself that i would gather buying/selling price plus whatever cost there is associated with the transactions such as commission to present to IRS?
Yep, it's up to you to report these things on your Schedule D for each trade: Description (e.g. 100 XYZ), Date Acquired, Date Sold, Total Sales Price, Total Cost Basis. Commissions are accounted for in the cost basis and sales price, they're not itemized.
If you don't report your cost basis, all the IRS knows is your total sales number and you'll be taxed as if it's all profit.
In general if you don't specify, the brokerage will take the taxes out for you, but apparently you have arranged for them not to do that, which many people never even think to ask (as I didn't, when I first started).
Then by the end of January of the following year, you will be sent a statement from the brokerage of your account as of December 31st of the past year - just as you would get from your employer, your mortgage company, or for various other transactions that have taken place in the previous year. Normally you do not have to keep track of it all yourself; when the brokerage notifies the IRS, they also send you your copy of any tax liability. I turn those forms over to my accountant, who then prepares my taxes using them. That's how it works for me.
In general if you don't specify, the brokerage will take the taxes out for you, but apparently you have arranged for them not to do that, which many people never even think to ask (as I didn't, when I first started).
No, that's not correct. The brokerage doesn't normally withhold tax from your investments unless, for example, you don't supply your S.S number, or don't fill out your W-9, or the IRS has notified the broker that you owe tax and tells the brokerage to withhold it...something like that.
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Normally you do not have to keep track of it all yourself; when the brokerage notifies the IRS, they also send you your copy of any tax liability.
Well, normally, they send you a copy of your transactions, dividend & interest income, etc., not your tax liability. The tax liability still needs to be figured out by you, your software or your accountant.
i was told a brokerage house would only report a taxable event to IRS without details about the transactions, so how does one go about file taxes on profits? is it entirely upon myself that i would gather buying/selling price plus whatever cost there is associated with the transactions such as commission to present to IRS?
when you did buy stocks you do get an amount to pay to the broker-with taxes, commissions-then if you have had the stock over a year tax rates are different. You can go to the stock site, and put in the date year to get
what you did pay. when you sell you get a form which goes to the IRS
you can minus the comission, but do need to know what you did pay
and when you did buy the stock. I think if you get an audit, then they want to see this. So it is up to you, and if a loss, you can minus that also. And if you are so lucky to sell at big profits, you do need to do an estimate tax to the IRS. say you make a big profit, that is for you to do. Anyway why not, if you have a profit, you are lucky.
Last edited by maggiekate; 07-30-2008 at 07:54 PM..
No, that's not correct. The brokerage doesn't normally withhold tax from your investments unless, for example, you don't supply your S.S number, or don't fill out your W-9, or the IRS has notified the broker that you owe tax and tells the brokerage to withhold it...something like that.
Oh, yes they can! When I first started with Merrill 6 years ago, among the paperwork they handed me to fill out was a form authorizing them to withhold taxes on my account! As soon as I discovered what they were doing, I rescinded that in a big hurry! It didn't become effective till the next tax year.
Of course I got the money back when my taxes were prepared, but now I have control over when the IRS gets its slice of my profits - not Merrill!
just hypothetically, say i forgot the exact day i bought a stock but do remember the week the transaction took place, later i discovered that say on the Monday of that week the average price, which the method of deducing is another question i have, is the highest of the week, and then somehow i seem to remember better and recall Monday is the day i bought
just hypothetically, say i forgot the exact day i bought a stock but do remember the week the transaction took place, later i discovered that say on the Monday of that week the average price, which the method of deducing is another question i have, is the highest of the week, and then somehow i seem to remember better and recall Monday is the day i bought
is that something IRS would object?
How many times are you really planning to modify your tax return? It's not that difficult to keep track of your transactions in Quicken, Microsoft Money, or a Excel spreadsheet. The IRS doesn't play around and neither should you (with your taxes). Maybe you should hire an accountant.
Oh, yes they can! When I first started with Merrill 6 years ago, among the paperwork they handed me to fill out was a form authorizing them to withhold taxes on my account!
Sure, but that's the reverse of what you said before. You said brokers normally withhold tax unless you specify otherwise. The truth is that brokers DON'T normally withhold tax unless you specify otherwise--which you now admit you did.
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Originally Posted by brassbin
just hypothetically, say i forgot the exact day i bought a stock but do remember the week the transaction took place, later i discovered that say on the Monday of that week the average price, which the method of deducing is another question i have, is the highest of the week, and then somehow i seem to remember better and recall Monday is the day i bought
Eh, not sure I understand the question, but your broker should have records of all your transactions, so you shouldn't have to guess at dates, amounts, etc.
hmm..., my broker told me they don't provide details of transactions on that year end form, at the same time i do hear from others, in addition to this forum, that such information is furnished...?
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