Tax Center

This page is provided for general information purposes only. Be sure to contact a qualified tax resource for a specific question regarding your particular tax situation. Trading Direct does not provide tax advice. The topics covered on this page include:

  1. Tax Software data download
  2. General Tax Information, the 1099 & 1040 Schedule D
  3. Cost Basis Tracking Rule & Lot Selection
  4. Schedule D Help- IRS Publication 550, & other IRS resources
  5. Wash Sales
  6. Substitute Payments (for Dividends Received on Margined Positions)
  7. Mark to the Market Election (for Active Traders)
  8. IRA Contribution Information
  9. Normal and Early IRA Distributions

 

1. Tax Software data download

1099 Form Electronic Data Import Through Tax Software

For tax year 2019, you will receive two 1099's.  The first shall be from Pershing LLC (Trading Direct's former clearing agent, in use through July 2019).  The second from Trading Direct's new clearing agent, Axos Clearing LLC.  Going forward, for 2020 and beyond, you will only receive one 1099 from Axos Clearing.

1099 form data may be electronically imported from Axos Clearing, through Turbo Tax. Instructions for locating the import link, and how to import data within the tax software, is shown below.

TurboTax:
Desktop Software (using the Premier version or higher):
Navigate to "Federal Taxes"..."Wages & Income"... "1099-MISC", "Interest and Dividends", or "Investment Income 1099-B".
After choosing to "import from bank or brokerage account", the software will ask for the name of the institution from which to import the 1099 data.
Start typing and then select "Axos Clearing". From here, it will ask for your 8 digit account number and Document ID (located on the top-right of page 1 of the 1099 form).
Follow remainder of the on-screen instructions.

Premier online version (turbotaxonline.intuit.com):
Navigate to "Wages & Income", then "Your Income". From here, for either "Interest or 1099-INT", "Dividends on 1099-DIV", or "Stocks, Mutual Funds, Bonds, Other", and click on Start.
When it asks to enter in the bank name or sign-in url of the financial institution, start typing, and then select "Axos Clearing".
It will ask for your 8 digit account number and Document ID (located on the top-right of page 1 of the 1099 form).
Follow the remainder of the on-screen instructions.


Notes:
• 2019 1099 from Pershing: Unfortunately, the 2019 1099 from Pershing cannot be directly imported through tax software.   As an alternative to importing data, you may consider using the "Summary" method for each category on the 1099-B, whereby the proceeds and cost basis totals are inputted into the software (and subsequently onto Form 8949), for each category: Short Term (or Long Term) gains & losses, for boxes A-F.*
• H&R Block: 1099s from Axos Clearing can only be imported through TurboTax; H&R Block is not compatible.
• *Disclaimer: Trading Direct does not provide tax advice.  Please consult TurboTax or a tax advisor for further details about using the Summary method.

2. General Tax Information: 1099 and 1040 Schedule B, D

  • Most individual domestic taxpayers are required to report capital gains/losses, dividends and interest to the IRS when filing their taxes.
  • 1099: Trading Direct's clearing agent, Axos Clearing, will generate the consolidated 1099 form after year-end. It shows dividends, interest, and sales of securities. It will also show associated cost basis for most securities bought after 2010. Most investors will receive the form by mid February. 
  • Schedule B,D: Here are the forms normally submitted to the IRS (by an investor), in addition to the standard 1040:
    1040 Schedule B (http://www.irs.gov/pub/irs-pdf/f1040sab.pdf), is used to report interest and dividends.
    1040 Schedule D (
    http://www.irs.gov/pub/irs-pdf/f1040sd.pdf), is used to report gain/losses on sales of assets.

3. Cost Basis Tracking Rule & Lot Selection

  • IRS regulations require broker-dealers to report cost basis on the Form 1099B for equities acquired after January 1, 2011. Our Clearing Agent, Axos Clearing LLC's tax lot system will use First In First Out (FIFO) as the default closing method for stocks, whereby lots with the earliest acquisition date are sold first.
  • You have the ability to designate a method other than FIFO, or to choose a specific lot (or lots) which you purchased, to be matched against a specific sale (known in the industry as a "versus purchase").  The selection may be made by choosing "Sell VSP" from the "Action" drop-down box on the "Equities" order entry screen.  Alternatively, you may email info@tradingdirect.com with your selection prior to settlement date.

    Here is an example:
    • Trade Date Jan 4th 2011: Bought 100 XYZ at $25
    • Trade Date Jan 5th 2011: Bought 100 XYZ at $26
    • Trade Date Jan 6th 2011: Bought 100 XYZ at $27
    • Trade Date Jan 10th 2011, Settlement Date Jan 13th 2011: Sold 100 XYZ at $28
    Using the default accounting method of FIFO, this sale on Jan 10th would be matched against the purchase on Jan 4th at $25.
    If instead of FIFO, you would like to have this sale matched against the purchase on Jan 6th at $27, you would need to inform us of your lot selection by emailing info@tradingdirect.com prior to settlement date on Jan 13th.

    Note: Emails received after 12PM eastern time on settlement date will be attempted for processing on a best efforts basis.

    If you have further questions, please email info@tradingdirect.com.

4. Schedule D Help- IRS Publication 550 & other IRS.gov resources

  • If you need additional information about any of the topics referenced in section 1 above, including how to calculate cost basis and how to report options trades, a good place to start is with IRS Publication 550 (http://www.irs.gov/publications/p550/index.html). Most answers can be found here.
  • If you still have questions, consider searching www.irs.gov or contacting the IRS or a tax advisor directly. (Trading Direct does not provide tax advice)

5. Wash Sales

  • In general, for a normal Schedule D tax filer, he or she must report all sales on the Schedule D when filing taxes. When he or she takes a loss selling a stock, it is not to be repurchased until after 30 days, otherwise it is considered a “wash sale”, and the loss usually cannot be deducted.*
  • *For official definition and more details, see IRS publication 550 (http://www.irs.gov/pub/irs-pdf/p550.pdf ), page 58.

6. Substitute Payments (for Dividends received on Margined Positions).

  • If an account received a cash dividend from a stock which is margined (money is borrowed from the broker and held in the margin account), it is possible, via the IRS Lottery, that it may be deemed as a “substitute payment” (a.k.a. "cash in lieu dividend"). * The substitute payment may likely show up on revised 1099, and replace what was originally classified as a cash dividend.
  • *For more information about substitute payments, see these publications/links at the IRS web site:
    Publication 550 (page 20 & 58), and IRS Bulletin No. 2003-40 (page 60 of 96)

7. "Mark to Market" Election (for Active Traders)

  • If you trade securities as your primary source of income you may want to consider taking the section 475 “mark to market” election for your IRS tax reporting status.
  • The advantages are thought to include being able to takes losses as ordinary, no wash sale considerations, and carry back losses to prior years.*
  • The main disadvantage however is you must take unrealized gains at year end, and the election is permanent unless you apply for a rescission.*
  • *For official definitions and parameters, and to see how to qualify and apply with the IRS, see IRS Publication 550 (http://www.irs.gov/pub/irs-pdf/p550.pdf), page 70, and IRS Topic 429 (http://www.irs.gov/taxtopics/tc429.html)

8. IRA Contribution & Eligibility Information

  • Contributions made to an IRA are generally tax deductible, while contributions to Roth IRA’s are not.*
  • For tax year 2015, individuals under 50 years of age may contribute $5500 to an IRA. If over 50 it is $6500.*
  • If you are covered by your employer’s retirement plan or 401k, there is a phase out for IRA contribution deductibility. See IRS publication 590 for current details.
  • For Roth IRAs, if your modified adjusted gross income exceeds the eligibility limits, your contribution amount may be reduced. See IRS pub 590, pg 62, for eligibility rules and contribution limits.
  • For Education Savings Accounts, see IRS pub 790, pg 44 for details.
  • *See IRS publication 590 for up-to-date information, official rules and further details: http://www.irs.gov/pub/irs-pdf/p590.pdf

9. Normal and Early IRA Distributions

  • Normal distributions may generally start after the participant reaches 59.5 years of age, and mandatory distributions may start at age 70.5.*
  • If an IRA distribution is necessary before age 59.5, there is usually a 10% penalty that must be paid (in addition to any taxes that may be due), unless there is a qualified exemption.*
  • For Roth IRA’s, there may be a 5-year holding period requirement before taking a distribution.*
  • For the most up-to-date and further detailed information about IRS rules, see IRS publication 590 at http://www.irs.gov/pub/irs-pdf/p590.pdf
  • *See IRS publication 590 for up-to-date information, official rules and further details: http://www.irs.gov/pub/irs-pdf/p590.pdf

Disclosure: The above information contains general information on commonly addressed tax issues. It is thought to be accurate as of 2014, but not guaranteed. To confirm any information, consult the IRS or a qualified tax resource.