I have a hard enough time keeping track of the few trades I make come tax time. What do you do if you’re making hundreds or thousands of trades?
Doesn’t your broker send you a statement at the end of the year?
Day-traders just get a really thick statement.
And the realization that they probably didn’t make as much money as they thought they did.
I suppose that if you buy and sell all the shares of X within a single day, it wouldn’t be much of a problem. However, if you start buying the same company over and over and sell mixed shares (bought at different times and prices), you can get yourself into a would of hurt. I made that mistake with just a few trades back in the 1990’s and it was terrible to sort out. Your trading company won’t give you what you need to sort it out (or at least they didn’t back them) so you set yourself pain.
Shagnasty is right. Some traders don’t realize the tax problems they’re getting into by not keeping good records from the start. Many off the shelf trade order systems can help match closing trades to opening trades, but it is something to consider before you start trading, not after your accountant asks for your records.
Had one of these on my wife’s side of the family. Everyone thought he was doing great (because he only mentioned winning trades), but after the accountant presented the bill for going through his statements and filing a return, he probably would have been better off pumping gas (possible, as he lives in NJ).
I have a friend who makes dozens of trades a week, and he uses software from Schwab that tracks his profits and calculates his capital gains.