Newplay1

TAXES on online trading? Reporting to IRS for buy/sell?
Hey guys I have been using Ameritrade to buy/sell stocks online for about 2 yrs now. Do people who use online trading pay taxes on profits and losts?

Here is a quick example:

Lets say I bought Apple Inc. for $3,000 and sold it for $4,000. A week later I buy Sony for $4,000 and sold for $3,000 (lost of 1k). Do I need to report that and pay taxes even if I had no gains/losts?

I got a letter from IRS with all the stocks I have sold in year 2006 but doesn't show how much I Bought for. So in the IRS letter they made me look like I am some sort of genius in trading. They want me to pay additional $2,000 in taxes for year 2006 for online trading.

Zippee

You have to declare all profits and losses on your tax return even if they cancel each other out. Part of the calulation is how long you held the stock if it's a gain.

doopstr

Correct, it is your responsibility to track when you purchased the stock that you sold. All the IRS gets from the broker is the sold date. If you sell a stock you better put it on your 1040.

refbuz

Online trading is no different than trading in a regular brokerage account. You should have gotten a 1099 from your online brokerage firm.

The IRS assumes a cost basis of $0.00 for anything that you sold. It is up to you to provide your original cost basis You may want to look into filing an amended 2006 return to adjust for your cost basis and reduce your tax bill.