Stock Trading and Other Things

Is it normal for stock brokers to report your revenue instead of profit to the IRS?

For instance, if you sell a stock for $5 then your revenue is $5. But if you paid $3 to buy the stock, then you only really made $2.

My stock broker just reported the revenue, and not the profit. They're reporting I earned $70,000 when I really only made like $3,000 because they didn't discount the money I paid to buy the stock. Is this normal?

Also, how much is it going to cost to hire an accountant to go over all of this?

Public Comments

1. Yes this is completely normal, i wouldn't worry about it, you should also submit your annual profit & loss report along with this information.

2. Yes but further on the statement is the bought and sold price plus commissions
All that data is entered on your return with only the profit being taxed

3. Yes, it's completely normal to report only the proceeds from a sale because, at least under the current system, it's up to you, not the broker, to track your tax basis in stocks and securities that you own.

That may change. The IRS has just proposed requiring brokers and dealers to engage in "basis reporting," i.e., they would have to send an information form every time you purchase a stock, so as to make it easier for the IRS to track whether you are reporting gains and losses properly. The industry is opposed to it--more work for them.

4. It's not only normal, it's required to be reported that way. YOU are required to keep accurate cost records for your stocks and use that information to figure your gain or loss on Schedule D.

Tracking it is not all that difficult if you stay on top of it. I use an Excel spreadsheet and record everything as it happens so that at tax time it just takes me a few minutes to transfer the numbers over to my tax return, print a copy of the spreadsheet (formatted similarly to Schedule D-1) attach a copy and I'm done.

If you were to walk into an accountant's office with disorganized records of several thousand trades it could cost you more than your gains to get it all sorted out. One more reason to stay on top of it.

5. You would be foolish with your money if you asked a preparer to fill out the schedule D. Preparers hate doing this for you and will charge you by the number of transactions you had.

Just get a schedule D-1 and fill it in yourself. Many brokers will show in the annual detail what you paid for the stock if you bought it through them.