Do you need a CPA firm?

Well, you've found us!.  Welcome!  Standing behind this web site is a real brick & mortar CPA tax firm.  When you become a client you will talk with myself, Colin M. Cody, CPA, CMA, and your work will be personally handled (and not merely "reviewed") by me.

As I've always said, tax preparers who are nothing more than form fillers do [in fact] need to worry about competition from do-it-yourself software. [But] those of us who use our knowledge and experience to massage the info have nothing to fear from those programs.
Kerry M. Kerstetter, MBA~CPA~ATP~ATA , January 18, 2006

Taxpayers requiring more assistance in their PLANNING, design and set-up of their trading business and with the PREPARATION or the REVIEW of their tax filings are encouraged to contact us for personally tailored tax advice at our normal rates.  [ Our fees ]    [ What's needed to get started ]

How can a CPA help you? 

Why work with a CPA? 

When it is not appropriate to necessarily use a local tax advisor (you get what you pay for) 

Tax Mama's "I  can do it myself, thank you!" 

U.S. gov't study of "commercial tax preparation chains" shows 100% error rate in preparing and advising on business income taxes (pdf)

Smart Money's Finding a Tax Pro 

Questions and Answers about going on Extension (pdf)

The Blade's Complicated Returns send filers to the Pros 

What's needed to get started right away?

CPA services fee schedule

• A CPA compared to doing it yourself. In many matters, you simply cannot do it yourself. It would take too long to acquire the necessary level of knowledge and skills. Iin some areas, you might be able to do it alone - whether it is accounting and recordkeeping, or preparing income tax returns or a thousand other money-related matters. But operating on your own, without guidance, is like putting an addition on your house without the help of an architect, or carpenter, or electrician, or plumber. Sure, you could learn to do the tasks, but probably not with as much skill as the experts, and the years necessary to acquire the knowledge and experience would make anticlimactic the completion of the task. Even if you could finish the house addition within enough time to enjoy it, it might not be built well enough to stand up over time. Also, two heads are always, well almost always, better than one. If you are a smart independent self-starter, try this approach - do all the research, lay the plans, assemble the team if others could be involved, and then call in the CPA to be quarterback, or at least be your guide
  
  When you retain us as a full service client you are not just hiring a tax forms assembler.  If all you needed was forms assembly, purchase our step-by-step instructions and forms examples or our do-it-yourself software site #1 or site #2.  
  
  When you become a full-service client you are getting our ideas and insights for your particular circumstances, each year.  A Trader's situation often changes from time-to-time and the tax law and court cases also change - constantly!   As an example - right in the middle of the 1998 tax filing season and again right in the middle of the 2001 tax filing season serious new laws that retroactively effected trader status filers were issued.
  
  When you become a client via TraderStatus.com you will speak and email directly with Colin M. Cody, CPA about your concerns.  Your important work is not delegated to support staff and then merely given a cursory 30 minute review and "sign-off" by the CPA in charge.  Rather, your tax work is given the proper attention it deserves and frankly, the attention that you are paying for!
  
  Many Investors all across the country from California to Florida to Rhode Island make us their first choice for their tax planning and compliance reporting, including having their State tax returns and Federal 1040 tax returns reviewed or prepared at annual fees starting at $400 per year.   Full Trader Status tax planning, compliance reporting, and tax return review or preparation generally start at $700 per year.   Mark-to-Market accounting entails more work and is accordingly priced a little higher.  Click here for an estimate on how much it costs  to have a Federal 1040 (not including State returns, tax planning or consulting) prepared at other CPA firms, not including trader status tax planning and consultations.
  
  TraderStatus.com provides you with the services of a personalized, boutique-style CPA firm to work with you on the most expensive expense item you will likely ever have while being a trader: Your Federal Income Taxes! 
  
  A personalized boutique-style CPA firm means that you are getting more direct "hands-on" attention.  Personalized means Trader Status taxation is our expertise.  We consulted by Traders, CPAs, Tax Attorneys and Government Employees from all across the USA on Trader Status matters.  We consult with the IRS on cutting edge concepts - our direct input and proposals have been incorporated into today's Internal Revenue Code.  Colin is qualified to interpret the law on your behalf - he helped write it!
  
  For those taxpayers who have significant money involved in the stock market, more sophisticated tax minimization techniques, asset protection and retirement planning strategies and a choice of entities utilizing Corporations (forms 1120 and 1120S), Family Partnerships, Limited Partnerships, General Investment Partnerships and LLCs (form 1065), Estates and Trusts (form 1041) and Estate planning, Gifting and Generation skipping transfers (form 709) are handled and billed based on their complexity. MINIMIZE THOSE TAXES!  Fees for a multi-member LLC, General Partnership or S-Corp generally start from $750 per year.
  
  IRS controversy issues, tax return audits and even routine IRS and State inquiries are best handled by a professional CPA firm, rather than going it alone and risking "putting your foot in your mouth". Taxpayers signing a special IRS limited Power-of-Attorney may retain us to represent them with many of these issues. Contact us before you contact the IRS in response to an imposing inquiry.
  
  A REVIEW of your self-prepared returns may be arranged.  If desired, the preparation of the tax forms that comprise the bulk of your tax return can be done with software available for only $12.50.  Reviewed returns do not usually carry a "Paid Preparer's Signature" for the IRS to rely on.  It is possible that a tax filing containing sophisticated or complex positions that does not bear the signature of a qualified CPA, Tax Attorney or other professional preparer may invite further review at the Internal Revenue Service Center.  A REVIEW might not cause your return to be less likely to be chosen for audit, but it could mean that your return is more likely to be free from any obvious errors that would cause problems during an audit.  90% of the annual tax procedure is consulting, planning and over all designing what to do on the tax return and 10% is the actual preparation and assembly of the IRS forms.  Because of the necessity to work with and to understand the complex issues involved; the cost for a review, analysis and consultation generally will range about the same as the full tax planning & compliance services discussed above. What a review service does is puts you in the middle where you get a "hands-on" approach that with our guidance may remind you of extra deductible expenses that you paid during the year.
   

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  CPA services fee guidelines
  Professional services are billed on a one-on-one basis, though the majority of traders do seem to fall within certain ranges as listed below.  If your work requires more than the usual amount of attention, the fees will raise accordingly.
   

• Consultation and preparation of form 1040 for a Schedule D / form 8949 trader with all trades reconciled and listed by you with software such as Excel or listed in a report provided by the Broker has usually been in the range of $700 to $1,200.*
   
• Consultation and preparation of form 1040 for a Form 4797 mark-to-market  trader with all trades reconciled and listed by you with software such as Excel or listed in a report provided by the Broker  and most M2M computations listed by you in Excel has usually been in the range of $700 to $1,500.*
   
• Consultation and preparation of separate entity forms 1065, 1120S or 1120 usually range about $200 to $400 higher than would the same activity reported on a form 1040.
   
• Preparation of a simple form 1040 for each of the owners of the entity reflecting the flow-through from schedule K-1 is usually $150 to $300 additional for each form 1040.

* Occasionally, complications will increase the work level and the fees charged. Such as: trading more than one of the three normal classes (securities, futures and forex) will cause complications, additionally there are unique issues and special tax laws when trading some ETFs and Precious Metals.
○ Using a nominee, rather than having the trader(entity) tax ID# being used by the broker.
○ Holding open positions at year end.
○ Having unsettled trades at year end.
○ Issues regarding M2M vs. Capital Gains method of accounting.
○ Where you profitable in all areas of trading ?  That’s often easier/cleaner than if there are losses.
○ If you had losses in any given class or K-1, that sometimes is a complication.
○ If you have more than one broker, then each account creates more work.
 

• Review of tax returns previously filed, usually is no charge (but see form 1040X amended returns further down).
   
• Review and interactive consulting with you regarding your self-prepared current year tax return before filing with the IRS, ranges at about $450 to $750.
• Extra copies of tax returns or schedule K-1s are usually available upon request.  One copy of your tax return or K-1 is always included with tax compliance work.  If you require additional copies of current year or prior year returns, or of your Schedule K-1s these can usually be provided for a reasonable archival research fee starting at approximately $50 per tax return or schedule.  Delivery of copies is usually done via an emailed PDF, although mailed paper copies, mailed PDF on CD-R , fax, or FedEx can often be arranged when desired
   
• Consultation and preparation of mark-to-market (M2M) election(s) for a new client, or a non-client is a flat fee of $125.
   
• Consultation and preparation of mark-to-market (M2M) election(s) or Sec 988 election(s) for an existing client is built into the annual fee that is charged.
   
• Form 3115, usually required only once, one year after filing the election for M2M, is usually a flat fee of $350 for most taxpayers. but more complicated situations may be charged accordingly perhaps up to $500.  Preparation of Form 3115 if required for other than M2M changes, will incur fees starting at $1,000 and up.
   
• Net Operating Loss (NOL) basic carryback on an amended return,  form 1040X, is usually a flat fee of $400 per year that is "touched."  e.g. a $100,000 NOL from 2011 carried back to 2009 where it is all used up would be a $800 flat fee.   Another example would be - same as the above but after 2009 there still remains some unused NOL that is carried forward to 2010 - this would be a $1,200 flat fee.   Also see the form 1045 preparation fee below which most often accompanies the 1040X computations.
  
  Additional fees are charged when there are more complex carryback computations involved.  Generally about $200 to $500 per year that is "touched."   Complications might be: deductions for charitable donations, other itemized deductions, alternative minimum tax, credit for prior year alternative minimum tax, multiple state returns involved.
  
  Certain State NOL carryback work will be charged separately.  CA, GA, NY, NYC can have particularly complicated situations.  The additional fee for these and some other complicated States might range from an additional 50% of the cost for the IRS carryback to an additional 200% of the cost for the IRS carryback.  e.g. if the Federal cost was $1,200 + $250 then a particularly complicated NY/NYC could be $1,200 + $250 + $2,400 or $3,850.
   
• Form 1045 when prepared for the NOL is usually up to $250 additional over the 1040X fee schedule above. (form 1045 may not be filed later than December 31^st of the year after the year that had the loss).
   
• IRS audits of returns prepared here that are closed and settled before the need for an appeal, range $1,000 to $2,500.
   
• IRS audits of returns prepared elsewhere that are closed and settled before the need for appeal, range $1,500 to $5,000.
   
• Election to go through an appeal of an unsettled audit usually falls within the range of $3,000 to $7,500 (or more) additional. Most situations do run a minimum of $5,000 additional.
   
• Entity formation consulting is flat fee of $500 plus costs which are charged directly to your credit card, without a markup.

National averages for tax year 2006 for tax return preparation excluding any tax planning throughout the year:

• $115 for a Form 1040 and one State return (individual)
• $205 for a Form 1040, Schedule A and one State return (individual)
• $n/a for a Form 1040, Schedule C, Home Office, and other trader schedules and one State return (individual)
• $518 for a Form 1065 (partnership)
• $685 for a Form 1120 (corporation)
• $656 for a Form 1120S (S corporation)
• $430 for preparing a Form 1041 (fiduciary)
• $1,729 for Form 706 (estates)
• $521 for a Form 990 (tax exempt)

What's a Reasonable Price to Pay for Having My Basic Tax Return Prepared Elsewhere? 

In November 2005 the IRS issued national averages for professional tax return preparation fees for individual taxpayer form 1040 work.  Based on these averages for the tax return preparation only, and considering our fees are more inclusive and include all tax planning throughout the year, we have been undercharging our clients for years.

See page #79 at:  http://www.irs.gov/pub/irs-prior/i1040--2005.pdf

Estimated Average Preparation Times and Out-of-Pocket Expenses by Return Preparation Method

What's needed to get started for tax planning ...review ...tax prep and your M2M election:

• A prepaid nonrefundable retainer fee of $700.00
• If you have a LLC, corporation or partnership there may be an additional retainer needed.
• A photocopy or PDF of your complete prior year's Federal Form 1040, schedules & attachments (excluding any lengthy attachments/listings of "Sch. D trades" or "Form 4797 trades").
• A photocopy or PDF of your complete prior year's State & Local income tax returns.
• A photocopy or PDF of your complete prior year's Federal & State entity tax returns, schedules & attachments (excluding any lengthy attachments/listings of 1099-B and "Sch. D & form 8949 trades" or "Form 4797 trades").
• An e-mailed listing of your current year's trading activity (preferably a downloaded listing from your broker or in an Excel spreadsheet format) or a mailed hardcopy of broker supplied trading activity. Click here for Schedule D / form 8949 / Form 4797 software that may be helpful in analyzing and summarizing your trades.
• Your brokers' form 1099-Bs, which you've reconciled to the current year's trading activity.
• If mark-to-market has been elected, your December 2010 and December 2011  M2M calculations.

All your other year 2011 tax paperwork, such as:

• 1099's (dividends, interest, sales, miscellaneous income)
• W2's
• K-1's (from partnerships, s-corporations, trusts)
• Rental income activity (including depreciation schedule)
• Itemized deduction listings (medical, taxes, interest, charity, miscellaneous)
• Trader Status business expenses
• Notation of any family changes for 2011/2012: births, deaths, marriage, divorce etc.
  Please verify spouse's and children's SS#'s - the IRS is cracking down on these.
  Please provide the date of birth of each person / dependent listed on the tax return.
• Details of any automobile donations made. (note that new rules are in effect starting with 2005)
• Verify qualifying charities here.
• Do not write an Individual's Capital Gains from sale of securities (stocks, bonds, options) on blank paper.  if you write your trades by hand, please use this newly required  IRS Schedule D-1.  Large numbers of transactions should be submitted in an Excel file, which can then be electronically ported by us onto the proper IRS form.
  
  Data via email or CD-R is preferred.  FYI here's a list of "FTP" file transfer sites:
• AOL's Xdrive offers 5GB storage for uploading files that can be accessed.
• pmStation.com and 4shared.com offers 5GB storage for uploading files that can be accessed.
• Microsoft's Windows Live SkyDrive offers storage for uploading files that can be accessed.

Click here for our mailing address

Optional - A Little Client Tax Organizer fill in the PDF.  When done, do a FILE  SAVE and then email the saved PDF to us.

2010 Client Tax Organizer print this PDF if you'd like to use it as a pencil and paper aid.


IRS now allows CPA's to send tax returns to you via email PDFs with no manually signed CPA signature required: http://www.irs.gov/irb/2004-33_IRB/ar10.html (see IRS notification reproduced at bottom of this page)  Payroll tax returns notice: http://www.irs.gov/newsroom/article/0,,id=141058,00.html

Note, effective with the 2005 form 1040, the IRS said that they no longer accept program print-outs on blank paper, rather they must be properly formatted and printed on IRS Schedule D-1. (This requirement was retracted in January 2006).   See below for some of the automated "Trade Matching" or "Schedule D" programs available from other web sites  (some of these may also offer free demo or lower priced versions for a restricted number of transactions):

Note: effective with 2008, brokers are required to submit form 1099-B no later than later than February 15th of the following calendar year. (the prior law was January 31st)
(Pub. L. 110-343, Div. B, §403(a)(3), amended subsec. (b) of IRC §6045)

Note: In order to bridge an income tax revenue gap cause by underreporting of taxable gains by taxpayers - brokerage houses will be replacing the 1099-B reporting of sales of stocks, mutual funds and bonds with new gain-loss computations of stocks, mutual funds, options and bonds. This new provision is expected to raise $6.7B between 2011 and 2020.

Mark-to-market traders should notify their brokers, in writing, not to employ the wash sale rule when compiling their gain-loss computations (see §1.6045-1(d)(7)(ii)(C) further below).  Similarly, the updated "versus purchase" or "tax lot reporting" procedures that many brokers are now bringing to their websites are not applicable to mark-to-market traders. Exception: wash sale and versus purchase are applicable at the beginning of the initial year of the M2M election.

WASH SALE TRICK in case your broker fails to eliminate the wash sale calculations:  EVERY December (preferably before the 25th) close all positions in the account, going all cash.  Stay all cash with no buying or selling of securities for at least 31 calendar days.  By doing this trick, all of the account's wash sale computations should be reversed out under the 31 day rule and the bottom line resulting gain/loss computation provided by the broker to the IRS should be exactly that same as would be for a M2M trader without wash sales adjustments.

M2M TRICK The above trick is also helpful for maintaining easier to compute and verify M2M adjustments for M2M traders as well.  But rather than staying all cash for 31 days, simply go all cash before December 25th and stay all cash with no buying or selling of securities until January 1st.

On October 3, 2008 H.R. 1424 Emergency Economic Stabilization Act of 2008 (Act, Pub. L. No. 110-343). was passed into law.
The law requires brokers to maintain the cost basis to prepare gain-loss computations and reports to be submitted to the Internal Revenue Service (IRS) with a copy sent to the taxpayer.  In lieu of the default of FIFO determination of the cost basis, the brokerage house is not prohibited from using "versus purchase" or "tax lot reporting," nor is the brokerage house prohibited from ignoring the wash sales rule for taxpayers who have elected M2M.  Short sales are no longer to be reported to IRS based on the date of the sale that opens the short position, but will now be reported once the short position is covered or closed.

The initial effective date to begin cost basis reporting for most stocks applies to positions opened after December 31, 2010.

The initial effective date to begin cost basis reporting for most mutual funds and dividend reinvestment plan stock (or similar "average cost basis" arrangements) applies to positions opened after December 31, 2011.

S corporation activity after December 31, 2011 will be reported to the IRS on form 1099-B in the same fashion as Individuals and Partnerships, which effectively closes an illegal non-reporting loophole.

The initial effective date to begin cost basis reporting for most debt instruments, stock options* and certain other securities applies to positions opened after December 31, 2012.

Effective with 2011, securities brokers are required to do the trade-matching and provide the gain-loss report to the customer no later than February 15th of the following calendar year.  Pub. L. 110-343, Div. B, §403(a)(2), added this requirement. IRC §6045, §6045A & §6045B cover special new rules for the reporting of options*, wash sales, "versus purchase" or VSP sales, transfers of securities into broker accounts, and corporate actions such as stock splits and spin offs.  See Wolters Kluwer Financial Services Cost Basis Reporting Resource Center for additional details.

New (starting with 2011) form 1099-B  (alternate link) will report to the IRS your wash sales and your FIFO (or VSP) taxable gain-loss for each sale made.  Proposed instructions to securities brokers were issued on 12/17/2009 see Reg-101896-09

New (starting with 2011) form 8949  (alternate link) will be used to report short-term and long term gains and losses.

New (starting with 2011) schedule D  (alternate link) will be used to report a summary of short-term and long term gains and losses.


* As of November 2008  IR Regs §1.6045-1(a)(3)(vi) remained unchanged: "[The term "security" means:] An interest in a security described in paragraph (a)(3) (i) or (iv) (but not including options or executory contracts that require delivery of such type of security)."   and Regs §1.6045-1(a)(9) remains unchanged "[The term "sale" does not include grants or purchases of options, exercises of call options, or entering into contracts that require delivery of personal property or an interest therein."   Meaning - that taxpayers may need to continue to do their own trade matching when it comes to their options trading. 

But now §403(a)(2) mandates that IR Code §6045 is amended as follows:

IRC §6045(h) Application to Options on Securities-   
(1) EXERCISE OF OPTION- For purposes of this section, if a covered security is acquired or disposed of pursuant to the exercise of an option that was     granted or acquired in the same account as the covered security, the amount received with respect to the grant or paid with respect to the acquisition of such option shall be treated as an adjustment to gross proceeds or as an adjustment to basis, as the case may be.   

(2) LAPSE OR CLOSING TRANSACTION- In the case of the lapse (or closing transaction (as defined in section 1234(b)(2)(A))) of an option on a specified security or the exercise of a cash-settled option on a specified security, reporting under subsections (a) and (g) with respect to such option shall be made for the calendar year which includes the date of such lapse, closing transaction, or exercise.   

(3) PROSPECTIVE APPLICATION- Paragraphs (1) and (2) shall not apply to any option which is granted or acquired before January 1, 2013.

See H.R.5720 for full details.

update: On October 12th, 2010, the IRS issued final regulations for the Cost Basis Reporting Law, enacted as part of the 2008 Emergency Economic Stabilization Act.

update: IRS Notice 2010-67 dated October 25, 2010  delays until January 1, 2012 the requirement for broker-dealers to transfer historic cost basis information along with a "covered security"** during a DTC transfer to another custodian.  Such transfers during 2011 at the broker-dealer's determination, may result in the item being classified as a "non-covered security" and exempt from the cost-basis rules.

Further action may be forthcoming as the industry complains to the IRS about the requirement as it pertains to providing the cost-basis information along with securities lending transfers.

** IRC §6045(g)(3) defines a covered security as any "specified security" purchased on or after January 1, 2011 in the case of equities (other than stock of a regulated investment company ("RIC") or stock that is part of a dividend reinvestment plan ("DRIP"); January 1, 2012 in the case of RIC or DRIP stock; and, January 1, 2013 in the case of any other security unless exempted by the IRS. A specified security is any share of stock in a corporation; any note, bond, debenture, or other evidence or indebtedness; any commodity or contract on such commodity; and, any other financial instrument determined by the IRS to be appropriate for cost basis reporting.

update: re: M2M election
IRS Wash Sales Regulations allow M2M securities traders to inform their  broker of their M2M trader status and request that the broker not apply wash sale computation to the securities traded in the account:

Write-up provided by KPMG pdf.

IRS Notice 2010-67 pdf.

Cost Basis Solution Website html.