During the earlier part of the year I did a lot of high frequency day trading, and still day trade a lot
looking at my taxable gains though on my Etrade, it shows that I have 300,000K of disallowed losses !!!! from wash sales. It is true that engaged in a lot of wash sales but I only hold a few positions now and they are not associated with the disallowed losses
most of the disallowed losses were associated TVix, SQQQ, and Sdow day trades, and I don't hold any of those for the last several months, sold them in July
But it looks like the wash sales just kept accumulating whereas I don't see the allowed loss when I finally got rid of the positions
I'm terrified that I will have a huge tax fill! how can I get out of this? My account is only about 250K total and its more or less net even for the year so how can this happen? it does not make logical senses.
How do I get out of this situation, is my broker misreporting and not adding to my final cost basis? they are closed now on the weekend.
It doesn't make sense I still have wash sales disallowences when no longer own the positions
Please call the broker and let them explain their reporting documents. But closing out the position will not negate the first sale that has the wash sale listed. When you get the 1099-B in February it may make more sense.
E*TRADE and all other US brokers are required by the IRS to account for wash sales. the broker is supposed to add the disallowed loss to the basis of the shares that caused the wash sale. when you sell those shares since your basis has been increased the wash sale loss is included in the net gain or loss that is reported. example: buy shares for $7 that cause a wash sale loss of $2. your basis is now $9. sell for $10 you now have a net $1 gain. sell for $8 you now have a net $1 loss. holding period of the wash sale shares tacks on to the replacement shares so a short-term wash sale loss can turn into long-term if the replacement shares are held long enough
Unfortunately, trades with an adjustment have to be reported on Form 8949.
A wash sale disallowed loss is an adjustment, code "W".
You will have to supply the details to IRS on Form 8949 or in equivalent form , e.g. consolidated 1099-B year-end printout.
the triggering transaction takes on the disallowed loss of a wash sale.
It all evens out in the end.
In the old days, when the rules were established, investors didn't do thousands of transactions a year.
broker's reports will show the wash sale. sell the shares causing the wash sale and brokers will show a reduced gain or increased loss. but most will not note that this has occurred.