Blech. I guess for the sales, we’ll be getting a line-by-line document vs any kind of aggregate. In my case it’s only 50ish loans but still… An Excel macro, or more fun but less accessible except to us geeks, programming in Oracle or some other tool (I have a desktop Oracle installation). I’ve never imported into TurboTax from anything other than Quicken, should be interesting to see how that shakes out.
I could go back and edit each of my transactions to separate out the interest portion, and record a separate interest income transaction. But with the screwy way they have of reporting the principal balance on loans (the detailed transaction figure is often 1, 2, or 15+ cents different from the one at the top of the page), we can’t go back and figure out the actual principal value unless we captured it at the time of sale. Usually I did, but I had a couple of errors and missed several.
Ohhhhh now I understand where you’re coming from with that 14 cents. Just the accrued interest. Yeah I don’t know how they’d handle that. I don’t even know how I would handle it.
Since you didn’t ever necessarily receive that payment it hardly seems right to tax it as interest received. The buyer of the note paid you money. Even if he happened to pay exactly par value to you, who’s to say that he didn’t pay 14 cents of “markup” to you on the principal rather than cover that accrued interest? They should err on the side of the investor rather than the government and treat it as a capital gain, if anything. I’m keen to have them just ignore it. (“Too complicated, no taxes for you guys”)
If it turns out ignoring it is what happens, that’s yet another means to eek out some more tax-free profit. Not much though I guess. If the max interest rate is 24% you’re looking at max 2% in a cycle, and then you are destroyed anyway on the fees. Yeah I don’t know if this is even worth exploiting. I shall have to think it over.
Combine all these little quirks along with a second LendingClub IRA account, passing notes back and forth between the two, and I believe one could do some very interesting things.
I just downloaded mine, and per their figures I have a short-term loss of 17.28, and a long-term gain of 4.13, for a net loss of 13.25. My own crunching yielded a loss of 18.71 short-term, and gain of 10.28 long-term for a net loss of 8.43. Obviously I like their figures better.
At least the gain is on the long-term vs. the short - if those figures had been reversed I’d pay 25% or more on that 4 dollars; as it is I only pay 15%. So that saves me 40 cents - yeehaw!!
For lending Club, I calculated interest of 140.28. They calculated 141.37. I’ll have to see if the difference might be due to some recoveries (small amounts, less than a dollar). Or perhaps that included the accrued interest on those sales.
I did find something that might help with reporting all the sales: Here, Fidelity states that “If the time between your acquisition date and date of sale is more than a year, then it is long-term. If you acquired your shares on more than one date, then you may want to aggregate them and use “various” as the date acquired. However, you still must report separately short-term gains and losses on Form 8949 Part I, and long-term gains and losses on Form 8949 Part II.”. Phew - that’ll save some data entry!!!
On review, the 140.28 was taken from my 12/31 LC statement (total interest minus total fees). If I add in the 1.16 in recoveries (1.30 minus collections fees), that brings it up to 141.44 which is pretty close to the total on the OID document.
Not worth worrying over the 7 cents. That may be rounding error.
Looking at the sales report for one note: I sold for 20.03 with 20 cents fee. Principal was 19.09. The 1099 shows the net sale price as 19.83. So a net profit of 74 cents. Par value (on the year-end summary from FolioFn) was 19.16, including 7 cents interest (not the same 7 cents as above, just a coincidence that I looked at this particular note).
The totals shown on my FolioFn report match the sums on my spreadsheet (except there’s a tiny error on the principal figures there, a few cents, I’ll correct those later on).
So all in all, it seems like the accrued interest is handled by lumping it in the loan proceeds. So in the example above, I’ve got a capital gain of 74 cents, vs. 67 cents in gain and 7 cents in interest. If that gain is long term, I should pay 15% of the 67 cents and 25% of the 7 cents. But by lumping them together I might pay 15% on the whole 77 cents. Yep, saved 7 tenths of a cent there :D.
So arguably FolioFn isn’t reporting things correctly. But I imagine that overall the difference winds up being pretty trivial except for the largest investors.
Couple observations/questions from a small-scale LC player.
I used TurboTax to figure this out.
From my LC 1099-OID I had $50.80 in “Box 1”. That dropped my refund $12. 23.4% of that little bit goes to tax. That was a sucker punch right to my LC investing gut. I was planning on supersizing lunch for a couple weeks with those sweet dividends but it’s back to belt tightening.
I had two foliofn sales which didn’t change my refund (1099-B, both for losses). However, I had to manually enter both of those into Turbotax. If I end up with 1000 loans (versus my current 55) and end up selling the ones that end up making me sweat or that are into pure principal, that portion of manually entering them will drive me up a wall. Is there a way to import or lump them all together?
While the numbers above are fact, the rest is jokingly said. This is my form of going to a casino (which I do not enjoy because I lose money so much faster at the blackjack table). I wouldn’t mind to make money at this but it’s more of an experiment for me.
If they were losses, why didn’t you take a capital loss which should offset capital gains (if you had any), or income, if you had no capital gains. Both should lower your tax bill.
I put the totals into the Schedule D, with a purchase date of “various”. TT said something about needing to attach backup. It did not then prompt me to enter the Form 8949 data. I assume it would, at some point.
Doing some googling, what we need to do is get the trades into a TXF format (Tax Exchange format) file. It appears the major brokerages may provide this but of course FolioFn does not.
If you’re tracking everything in Quicken - and are recording every loan purchase on the correct date, and tying every sale to the correct purchase (which I am not), you can do a TXF dump directly from Quicken, then import that into TurboTax.
Since I’ve been tracking most of my routine sales and purchases as an aggregate (all interest/new loans/repayments in one transaction per type, on the last day of the month), I personally think it would be easier to write something to massage that 1099-B into TXF format (as core_dump mentioned doing). An Excel macro could probably do it, or a Java program or something.
Ooh - supposedly “regular” FolioFn brokerage customers can do a download of a TXF file. I don’t see any way to do this for Lending Club customers, but I sent FolioFn an email asking about it.
How did you determine that from the 1099-B itself? I just looked at mine and now I’m totally confused:
Short term box 2a sales price total: $146.3k
Principal balance at sale date total: $146.5k
(long term was $0 for both)
But nowhere on here does it tell me what my basis was. (And indeed it says the basis is not being reported.) So I can’t figure out how in the heck I’m supposed to get my P&L numbers using this 1099-B alone. I know for a fact I didn’t lose $200 this year. Wish I did! I probably made a bit over $20k and my OID only says $900 so that’s not where it went.
Thanks for digging that up! Yeah that will save a ton of time. Although that snippet said date acquired rather than saying you can aggregate multiple round-trip trades of the same security, that’s good enough for me.
wguy123, I am sorry to hear about your devastating tax hit this year. But do take the loss on the 1099-B items like amarone said. You’re allowed to take a loss of $3k even if you have no capital gains to offset. That buys a lot of supersized meals. Oh, and if you enjoy blackjack, learn to count cards – it’s not nearly as hard as it sounds and makes the game that much more fun, not to mention profitable. Only drawback is you have less spare mental energy left to use on the cocktail servers.
There are no dates directly on the schedule D itself so yeah you cannot escape at least filling out a 1-line 8949 either way.
I don’t have Excel (I’m too cheap to buy it) but I’d wonder if they have such string processing functions available? Maybe they do. I may poke around with OpenOffice to see if that’s even an option. Otherwise I was planning on just doing it with php via browser if anyone needs it, but otherwise just C++ locally if not. I have had to leave town unexpectedly for family issues so it’ll be a week before I can play with this.
I’m positive TurboTax will need basis info in that TXF file so I’m still clueless as to how I’d massage that out of the 1099-B when from what I can tell it just isn’t there period.
Why wouldn’t the basis just be the principal balance as of the date you sold it?
That is, assuming you were the original investor at Lending Club. If you purchased the note, I don’t know what the 1099 would show.
Say I invested 25 dollars in the note. It’s been paid down to 19.50 when I sell it for 20.00. My principal balance would be 19.50. My net sale would be 19.80 (20.00 minus the 1% fee). That’s a 30 cent gain.
Reporting it the way they did ignores the interest that had accrued, sort of; if that note had 19.60 interest I would either report it as 10 cents interest, 20 cents gain, or just take it at 30 cents gain. Makes little enough difference, and we have no easy way to find out the interest that had accrued unless we happen to take a snapshot as of the day the loan sold.
Have you resold any loans that you purchased on the platform? If so, what does the form show? Let’s say I bought that loan above when it was 22 dollars principal, and I paid 22.50 for it. I held it for a bit before selling it for 20.00. What’s my basis then? And what would the 1099 show?
I would think you’d almost have to figure out the per-share price (par would be 1.00 per one dollar “share”) as of purchase - in this case I guess I’d have paid 1.022 per share. And when I sold, I’d be selling 19.5 shares with a basis of 1.022 per share, so my basis is 19.94.
But of course you’ve had repayments in the interim (2.50 worth); you could argue that you should report capital gains (or losses, really) on that!!
Or maybe you treat that 50 cents as an investment fee on the purchase of the note, and subtract that from your sale price… bringing that 30 cent gain down to a 20 cent loss???
Looks to me like you have a 200 dollar loss here, if you were the original investor. However, if you bought those notes on FolioFn, you might have gotten them at a discount?
What happens if you convert that 1099B to a spreadsheet, and start filling in your purchase prices? and play with the numbers to try to figure out your basis for each note as a result of that?
oooh - and if your losses do exceed 3,000, I’m pretty sure you can carry over the remaining loss to the next year, and so on, until the entire loss is “used up”.
Excel should be able to handle it, at least the line-by-line stuff. I don’t know if there’s a way to turn a string of stuff from a single line, into multiple lines as shown in the TXF format, but it would be trivial to separate the bits by some specific character, then pull that into WordPad and replace all those with carriage returns. I’ll fool around with it some this weekend. I may wind up manually entering mine since it’s a small amount (50-60 entries at most) but now I wanna give it a try!!
TurboTax TXF file specifications are here. I glanced through the 042 version and there are samples of capital-gains TXF information.
I saw in TurboTax a link that says what to do if you can’t import:
That said, I think I’ve got the spreadsheet conversion working; there’s manual tweaking to get columns in the right places, then you take the output of that, tweak slightly, and import. There’s an issue with a checkbox on form 8949 (in TT, it says basis was reported); I don’t know if I can override that, or if there’s something I can put into the file header to say “turn it off”. Right now my file looks like this (header,plus first transaction only):
Yes, that’s precisely the problem. Since I live in one of those “bad” states, every note I acquire must be purchased on FolioFn. For a par value $24.00 note, it’s common for me to buy it at say 21.84 and sell it for 23.76. That’s obviously not a $0.24 loss like the 1099-B would imply. Conversely, I might buy something at 3% markup over par, hoping to sell it at 5%. Sometimes I cannot and have to sell it at just 1% markup. The 1099-B would imply a gain when I had an actual loss.
Then, as you said, if you toss in interim payments that really throws a monkey wrench into things. Now some of that is being reported on your 1099-OID and it’s left to you to sort out the aftermath. If you even can.
It’s not exactly rare for me to repurchase notes that I’ve already sold once, sell them again, and possibly even flip it a third time. This further complicates everything since I cannot simply match up note IDs.
Like I said, all of mine fall under that category, and my 1099-B shows the two figures I noted in my previous post. Just the sales proceeds and par value just like yours no doubt does.
My 1099-B is nearly 200 pages long so manual filling in or calculation of anything is out of the question. The year end trading summary might be of assistance in finding all the original purchase prices but I don’t know which ones had interim payments, etc. Not to mention the multiple repurchase/resale issue I mentioned.
I might be able to do it. Maybe. But I don’t see how a person armed only with a spreadsheet created from imported 1099-B + OIDs would even have a chance.
Heheh. Understood. When friends question me about staggering losses when I supposedly had an edge I just reply with “One word: Variance”.
Ho ho, good work! That looks like it should. As for the checkbox in the v42 file you linked to I saw there were some examples for no basis reported. Unfortunately they look virtually idential to me. Maybe an additional empty “$” line at the bottom of the entry for some of them (but not all!). I didn’t have the time to read the file in detail but I didn’t see an actual detailed description. It’s as if the spec isn’t completely described here.
core_dump, given all that, I’d be sorely tempted to just report what they say on the 1099-B, and screw it. Arguably, that’d allow IRS to match up their numbers with what they’ve been told… No, it’s not “right”, and you know you owe more than that.
Basically, you don’t have (and CAN’T have, at your level of trading) all the details you need. You’d have to track every single thing that happens with one of these notes - purchase, repayments etc. like I was rambling on. And they do NOT make it easy to recreate that data. Yes, there’s a monthly “report” from Folio detailing the sales (and I assume purchases; I haven’t purchased there) and there’s some kind of transaction ID on that, but that doesn’t match up to anything on the Lending Club side.
And of course Lending Club doesn’t offer any kind of transaction download - I suppose you could manually download the month-by-month transaction history, one painful query-ful at a time.
Then code yourself a nifty little system in Access, Oracle, or whatever to match and munch and crunch everything.
Oh wait - you have a job and a life, don’t you!!
I dunno what you can do. It seems to me like an effort to be honest would send up some audit red flags: “LC/FFn says 300 bucks? Yet you’re reporting 30,000 in income? Hmmmm, what else are you misrepresenting???”.
For what it’s worth, a link to my spreadsheet (with just one line filled in) is below. The situation with the basis-provided checkbox turned out to simply require a different set of reference codes on each transaction detail.
“Sorely tempted” is putting it mildly. The interesting part is that would probably survive an audit, too. I’m quite sure this will all be resolved legit-like by next year’s reporting, and if not then, then TY 2014. Maybe it’s best to takes what ye can gets until then.
This is certainly a valid point in general. Always best to match their own numbers even if they’re wrong. With schedule C income at a decent level I’ve already got a huge target on my back.
However in this case because the IRS isn’t getting basis information, they’re not actually seeing the $200 loss. All they see is $146k in sales proceeds. They don’t know if that was $146k profit or a 2 million loss. It’s up to you to supply the appropriate basis. For what it’s worth, this was the way all stock sales were reported up until 2011. (Don’t quote me on the year.) Loss or profit, they don’t know, it’s all dependent upon that basis column which is 100% honor system. Err it was I mean.
Which can get you in a pickle. I did some day trading in 2001 and like an idiot didn’t track my basis. I didn’t file, either. 7 years later the IRS filed a substitute for return and they had no choice but to assume that I made 100% pure profit on all those sales since they had no basis information. I received a hefty tax bill. Staggering. By this time half of those stocks didn’t exist, and no records were easily available.
A CPA told me: “If you can’t figure out your basis, then neither can the IRS. Keep that in mind when filing.”
Yeah that’s exactly what I was looking for, a reference code. But I didn’t see one in the examples. Is that the “N323” in your snippet? I’m on my laptop and can’t call up spreadsheets at the moment, otherwise I’d just open it and see what the score is.
Ouch on the tax bill :(. I guess you didn’t have any statements from the brokerages or anything at all. Were you able to challenge any of the tax that year?
In your case, while (because of your purchase/sales history) your own basis is a lot more complicated, don’t you think they’d generally assume the principal at sale is the basis? At least in my case I can produce FFn statements showing I haven’t made purchases.
Personally I’d suggest you discuss this situation with a tax specialist to see if they have any advice.
If you’re using Quicken or some such, start recording every transaction, every purchase / sale. And every repayment / interest payment as well. That should give you all the details you need for next year. That may not be workable if you continue trading at that level this year, but you could at least give it a try to get your January transactions entered and see what a pain it might turn out to be. Entering the sales (and repayments) would be a pain in that you’d have to select specific lots when you record the sale transaction.
I’m going to see if I can get a family member (who is a CPA and does taxes) to take a look at this thread and make any suggestions he can.
Oh yeah - reference code (also abbreviated at least one place I saw) as “refnum”. That is indeed the N323 etc. I stumbled across a site (mentioned in the spreadsheet) that listed the codes to use for the A / B / C categories (reported / no basis, reported / basis provided, not reported). Presumably other codes would be used for things like medical expenses, taxes paid, etc. I took the N323/N321 codes from the Quicken TXF export but of course I found those didn’t import correctly because of the basis reporting.
One brokerage I wasn’t even able to remember the name of. The other one said it would be “highly unlikely” to even be on microfilm because they are destroyed after 7 years. Brokerages aren’t too helpful when you haven’t even been a customer in years.
And no, I didn’t challenge the tax. I also had hefty schedule C income and by this time no documents for expenses, and no way to even estimate them. After tossing around some of my own numbers and adding up penalties I decided I liked the IRS’s numbers just as much as my own and didn’t want to stir up a hornet’s nest. I set up a payment plan to prevent them from seizing assets but am in truth just running out the statute of limitations on it.
Obviously the IRS and I are not pals.
If “they” means the IRS, sure, absolutely I think they would. Only thing is the IRS doesn’t get that info here. It was just provided as a convenience to us and since the basis checkbox is empty, their electronically filed info doesn’t show any of that principal column that we see. Or if the “they” is an actual IRS auditor, a person, yeah I think that would certainly fly fine as long as LC wasn’t the subject of the audit in the first place. If they want to subpoena records from LC and then dig through thousands of records trying to find a buck on each trade, so be it. I don’t see why they would though – the 1099-B looks pretty black&white unless you’ve been there… some random auditor likely has not been.
A tax specialist is very likely to give me an answer I do not like. The only relevant question to me is do I have a case, however weak, for using the numbers displayed on the 1099-B as-is? I say yes. Certainly if I had not made a public post about it beforehand, I would easily have a case. That answer means this is not a criminal matter if I make the “wrong” choice. I’ve already paid my estimated taxes for the year including LC income – anything “refunded” is going to be seized for back taxes so the IRS gets the money either way.
Worst case 3 years from now when this all gets sorted out in an audit I’ll end up owing penalties and interest on a few k. If/when that happens I’ll gladly pay it. It will still be less cash than I’d have to pay someone to sit there and calculate all this. (Good thing you don’t have to pay for the auditor’s hours! Not directly anyway)
That is definitely not workable, considering I have liquidated my entire portfolio and have gone to 100% trading. Last year will look like peanuts compared to this one. We are talking hundreds of notes per day that get bought and sold. It’s pretty wild and already takes several hours out of the day. If any of my notes happens to receive a payment, I sure do not know about it ever. That probably appears on some report on the LendingClub-proper site though… I rarely visit that side of things.
An easier solution would be to write down your account value at the start of the year. Then at the end of the year take the difference. Subtract out your OID and that which remains must be your capital gains. Ohhh, but wait, then your numbers wouldn’t match the sales proceeds reported to the IRS. You could make up a basis number which corresponds to your calculated gains but that would be a complete fabrication, even though it came out to be the right number. Damned either way.
No, this year I’m going to do what the Average Joe would do. Next year is a different matter and I have a feeling things will be different then. Certainly by then my software will have better data.
Yes, “they” referred to the IRS. I can’t speculate about how much trouble they’d go to to try to document a dollar here or there, I’m more worried that they’d decide to go with “hah - it’s ALL PROFIT” which would be pretty awful.
LC does indeed have reports that show interest paid, though it’s not easy. I looked at a recent statement and it lists all my loans (presumably except for ones I sold that month) and how much principal and interest each got. This is not in any format you could easily import into any software. Nor does it say on what date the payment was received (which is kind of essential in tracking gains / losses). There is a separate account activity query, that you can display all transactions for a period of up to one month.
Ideally, both Lending Club and FolioFn would have downloadable transactions files. FolioFn has nothing of the sort; Lending Club lets you download your portfolio (current values only, no transaction history).
Out of curiosity, when you’ve bought / sold the same loan twice, do you see separate note identifiers? I think that is how you could track which transactions are tied to which occurrences. I know that when I am selling a loan, I can find the same loan in the “for sale” list with different note IDs (for different sellers). Obviously this doesn’t help you if you’re trying to manually match things, but somewhere down the line it might help with automating things.
I meant actually buying/selling the same note twice, not loan. For that little slice of the whole loan, the note ID never changes regardless of how many times it’s been sold. However there is another identifier, ordernum (or orderid) which does in fact change each time the note changes hands. That ID isn’t displayed anywhere but it’s in all the FolioFn URLS. I do not think anything on LendingClub would reference a FolioFn ordernum.
Dates would be absolutely essential for having any chance of matching things up. You said they didn’t display dates on that payment report; big ouch there.
If might seem like a simple matter to have my software crawl through and take snapshots of princ/interest/etc of each note but this information is often incorrect at certain times of the day. One funny thing that happens is the note detail page, the FolioFn search listings, and the ‘my notes for sale’ will all show 3 different values! So long story short even with some automation going, often times I don’t even know what’s really going on with the notes.
Thought I should probably toss this in, which I forgot to mention:
And that is exactly what would happen if one didn’t file a proper return including a schedule D. I can certainly see the possibility that an LC investor who sells a few notes for a loss on Folio would at the end of the year just decide to ignore it. “Hey, it was a loss, why bother with it?” (wguy123, I think this applies to you.)
No schedule D means they will assume that 100% of your sales proceeds are profit; they don’t have any alternative. And they will send you a bill, most likely. That’s going to be a nontrivial amount, even if you only sold a few notes. It would certainly be way more than any interest you would have received that year on those. You could just pay it (bah!) or file an amended return, but if you have to pay someone to do that for you you’ve wiped out any of your profits either way.
Needing a schedule D means no 1040EZ nor 1040A for you. For someone that’s accustomed to walking into the grocery store around tax time and getting theirs done for free I can see this being an unpleasant surprise. All from selling one little note!
The only relevant question to me is do I have a case, however weak, for using the numbers displayed on the 1099-B as-is? I say yes. Certainly if I had not made a public post about it beforehand, I would easily have a case. That answer means this is not a criminal matter if I make the “wrong” choice. I’ve already paid my estimated taxes for the year including LC income – anything “refunded” is going to be seized for back taxes so the IRS gets the money either way.