In a Nutshell: If the world of day trading, with its numerous strategies and thousands of trades per year, seems complex just imagine how challenging tax time can be. And unexpected tax bills can result in some traders having to access lines of credit when they may prefer not to. TradeLog offers software designed specifically for active traders and investors. It helps traders navigate the often opaque rules the IRS has established around trading. This means TradeLog users can prepare and file taxes with confidence — knowing they are remaining IRS-compliant while also maximizing refunds. For traders who want even more assistance, TradeLog offers its turnkey service, Trader Tax Solutions.
Certain sentiments are nearly universal within the human experience — the fortifying joy that comes from laughter, the warm feelings that love can generate; and the dread that accompanies preparing and filing taxes.
Some people support increasing taxes for the benefit of society while others espouse a more laissez-faire approach to the government levying taxes on individuals and businesses.
But no matter what your stance is on taxation, virtually nobody looks forward to doing taxes.
Many people put a lot of work into preparing and filing their taxes only to be hit with a tax bill instead of a refund. Individuals have even been forced to access lines of credit to pay high tax bills. It is worth noting that using a credit card to pay a tax bill isn’t necessarily a bad thing — many people do this and pay the credit card off immediately but reap the benefits of gaining some extra credit card rewards.
Preparing taxes can be challenging enough for people with jobs with predetermined salaries. For those who actively trade securities on the stock market, where gains and losses can vacillate wildly from day to day and multiple brokers are involved, doing taxes can be a nightmare.
TradeLog offers a handy solution with its software designed specifically for active traders. The platform allows traders to more easily handle the challenges that can arise from wash sales, compliance, and, of course, maximizing refunds.
Creating a Platform to Benefit Traders at Tax Time
According to President and CEO Tim Terzian, TradeLog was originally created as an Excel spreadsheet in an effort to store and track trade history from multiple brokers in one convenient file. However, the spreadsheet method became too complex and time-consuming to use as trade volumes grew.
This led to the development of an automated computer program that would replace the spreadsheet. The program would be able to import and track trade history in a way that would allow investors and active traders to establish performance benchmarks, identify and track trading trends and plan trading strategies to maximize profit.
When some tax code changes came along, it became clear that TradeLog would be a valuable tool for preparing tax forms unique to active traders – those who use multiple brokerages, in particular.
Many brokers provide their clients with trade summary statements on a monthly, quarterly or yearly basis, but they may not account for all adjustments required by the IRS, and when people are using multiple brokers, keeping track of all the activity can be challenging when tax time rolls around.
With TradeLog, all these separate accounts containing trading activity can be downloaded into one convenient location where they can then be matched and adjusted in compliance with current IRS guidelines for traders.
Once the software was up and running, it began attracting the attention of active traders as well as brokers in the industry. In 2017, the TradeLog software platform was acquired by Cogenta Computing, Inc. Cogenta President Timothy Terzian, made it clear that TradeLog’s mission is “to continue development of the software in a way that provides traders with the most benefit when they file their taxes.”
TradeLog now partners with over 40 leading industry brokers and tax professionals and serves tens of thousands of active subscribers, according to the company.
Maximizing Refunds While Remaining IRS Compliant
TradeLog is beneficial for active traders and investors because the software was created by a trader for traders.
“Your accurate trade accounting starts with a complete trade history,” according to the TradeLog website. “No more sifting through statements and papers, no more spreadsheets. With TradeLog, keep ALL your trade history, for ALL your broker accounts, in ONE tax year file.”
This means TradeLog clients can record stocks, bonds, mutual funds, options, ETFs, futures, and forex activity, and import data from more than 40 brokers. Users can set up any number of brokerage accounts in one tax year file and track all types of accounts — cash basis, IRA, and MTM.
If the world of day trading and investment strategies seems like a complex web of data, preparing taxes for the year can be even more challenging. But TradeLog helps users feel confident that they are remaining IRS-compliant.
“Broker 1099-B reports follow IRS rules for broker reporting — but taxpayers have different reporting requirements,” according to the company. “TradeLog uses actual trade history to generate the IRS ready reporting active traders and investors need for tax filing.”
Another challenge active traders can face when it comes to declaring losses and gains is the IRS Wash Sale Rule. A wash sale is when a security is sold at a loss and purchased again within a short period of time before or after the loss, according to TradeLog.
“Say that a trader owns 500 shares of a security which he paid $5,000 for. He sells the shares today for a total proceeds amount of $4,000, resulting in a $1,000 loss,” according to TradeLog. “Tomorrow he plans to repurchase the 500 shares — very likely the price will not be drastically different than today’s price. The end result: he will still own the 500 shares, but will have generated a $1,000 capital loss.”
Skilled traders can create wash sales such as this to harvest taxable losses that will offset gains and allow these traders to avoid capital gains taxes. The IRS established the wash sale rule to prevent traders from reducing their capital gains through this tactic.
“Popular tax programs were never designed to handle the complexities of the IRS wash sale rules,” according to TradeLog. “TradeLog was created specifically for active traders and investors to handle complex wash sale rules for taxpayers, which is quite different than the wash sale rules for brokerages.”
Trader Tax Solutions is a Turnkey Service That Handles the Details on Behalf of Clients
For those who want an added level of support and confidence when preparing and filing taxes themselves, TradeLog offers a new turnkey service, Trader Tax Solutions, that takes some of the pressure off of traders and allows them to keep their focus on the markets, not tax issues.
“Trader Tax Solutions will review and match your trade history using IRS First-In-First-Out rules (FIFO),” according to the company. “Necessary adjustments are made for corporate actions and exercised/assigned options.”
The company will also calculate all required wash sale adjustments across multiple broker accounts.
“We then reconcile the reporting with your broker-provided Form 1099-B and year-end statements. When completed, we provide you with IRS-ready Form 8949 reporting for use with Schedule D for your tax return, as well as other required reporting for your type of trading,” according to Trader Tax Solutions.
The service’s purpose is to empower investors to file capital gains or losses with the IRS in a worry-free manner.
“For traders and investors who choose not to do their own trader tax reporting, but don’t require the full services of a trader tax CPA firm, Trader Tax Solutions can fill their needs,” according to Terzian.
“Today our commitment to helping traders is stronger than ever, and we continue to offer affordable services nationwide that make their lives, and trading, easier and more profitable,” according to the website.
Active traders attest to the effectiveness of Trader Tax Solutions.
“As a full-time trader I have thousands of trades each year. Although I have experience with preparing my Schedule D with the IRS, there is still too much pain involved,” according to M. Stack in San Francisco. “The MTM rules can also be confusing. This year I worked with (Trader Tax Solutions) and plan to use them again. The two hours I purchased saved me countless hours of manual work. Therefore, I found the service to be an excellent value.”
Delivering More Flexibility to Clients
TradeLog is continually evaluating its product and listening to feedback from traders and brokers. The company is currently working on ways to provide more flexibility to its clients, according to the company.
The software provider has also responded to user feedback and has made the product more user friendly. This not only makes the user interface more intuitive, but it makes TradeLog more conducive for use in mobile applications.
Editorial Note: Opinions expressed here are the author’s alone, not those of any bank, credit card issuer, airline or hotel chain, and have not been reviewed, approved or otherwise endorsed by any of these entities.