ArtsAutosBooksBusinessEducationEntertainmentFamilyFashionFoodGamesGenderHealthHolidaysHomeHubPagesPersonal FinancePetsPoliticsReligionSportsTechnologyTravel

An IRS tax audit versus my tax reports from Charles Schwab

Updated on April 3, 2014

Uncle Sam's IRS department wants you

A couple of times over the years I have had someone from the IRS either call or send me a message stating that I had forgotten to include some tax form related to my stock trading or that I needed to be more specific about this trade or that one.

In early 2008 I received a letter from “Tax-Payer's Hell." It said something like, “Come on in and see us, we would like to talk to you about your 2007 tax return; and, be sure to bring all of your supporting documents with you.”

I called the local IRS office and made an appointment to see Mrs. So and So.

Since I’m not a tax cheat, I knew that all I really needed to do was to go to my tax files for that year and dig out all of my receipts, income statements and figure out how to present the information relating to 350 to 400 stock trading transactions for the same period in some sort of understandable format.

I have a friend

This time I had an ace in the hole. 2007 was the year that Charles Schwab & Co. started creating a yearend report that included profit and loss for each trading transaction that had gone over their desk that year. There was a little gap that wasn’t too difficult to fill, relating to a couple of trades that had been opened in late 2006 and closed in 2007.

I gathered up all of my income documents, deduction statements, including charitable donations (I’m a tither at church), trade confirmations and Schwab’s report and headed for my appointment with the IRS. I had visions of standing before some sort an inquest, having to answer tough questions about why those blue jeans were worth $2.00 as a donation ad infinitum.

The inquisition

When I got to the IRS office I was ushered into a large cubicle with a couple of computers and a book or two, but much sparser than I had envisioned. After a couple of niceties we proceeded to get down to the business of auditing my return.

We went through the process of finding out if I was really who I said I was, whether I had made “x” amount of income and whether or not I really had “x” amount of dependants and deductions. That all went pretty well.

The moment of truth arrived. I could see Mrs. So and So scrolling down her computer screen to the area that covers other income. I pulled out a large stack of trade confirmations and handed them to her. I could see her thinking that this was going to take a while. The next thing I did brought a hint of a smile to her face. I asked her if she minded if I used Schwab’s profit and loss report to help keep us on track. Then she did the unexpected; her smile got bigger and she grabbed it from me.

The auditor then looked over the report for five or ten minutes and told me that I had made a trade that should have been treated as a wash sale and that I had made a little more than a thousand dollars more that I had reported. At that point, I had visions of having to do my tax return all over again, at least having to resubmit some sort of alternate version of it and having to pay an attendant penalty.

The surprising verdict

She grabbed her calculator, did a couple of quick calculations and smiled again. She then said, "You’ll be glad to hear that your error was within our allowable limits."

Then I heard what may have been almost as satisfying as, “You have a son and your wife is doing fine.” I can still hear her say, “Mr. Diamond, there is no change in your taxes.” A couple of weeks later I received an official letter from the IRS stating the same thing. I treasure that letter.

You had better believe that I have used the information provided by that Schwab year-end report to record the profit and loss from my trading activities involving stocks and derivatives on every tax return since.

( image)


    0 of 8192 characters used
    Post Comment
    • LillyGrillzit profile image

      Lori J Latimer 

      8 years ago from Central Oregon

      I do appreciate this article. So many people have the old school version of the IRS in their mind. Keeping Books and having documentation are paramount in what goes in a Tax Payer's return.

      I have counselled many Taxpayers to buy a notebook with envelopes to keep track of their Accounts Payable and Receivable. Handing a completed set of "books" clearly outlined by week, and / or month will bring a smile to an IRS examiner.

      I enjoyed this Hub as only a "tax" person can. Thank you!

    • profile image


      8 years ago

      Great Story....Makes one think ....a plus for trading with Schwab.

    • sheila b. profile image

      sheila b. 

      8 years ago

      I love happy endings.


    This website uses cookies

    As a user in the EEA, your approval is needed on a few things. To provide a better website experience, uses cookies (and other similar technologies) and may collect, process, and share personal data. Please choose which areas of our service you consent to our doing so.

    For more information on managing or withdrawing consents and how we handle data, visit our Privacy Policy at:

    Show Details
    HubPages Device IDThis is used to identify particular browsers or devices when the access the service, and is used for security reasons.
    LoginThis is necessary to sign in to the HubPages Service.
    Google RecaptchaThis is used to prevent bots and spam. (Privacy Policy)
    AkismetThis is used to detect comment spam. (Privacy Policy)
    HubPages Google AnalyticsThis is used to provide data on traffic to our website, all personally identifyable data is anonymized. (Privacy Policy)
    HubPages Traffic PixelThis is used to collect data on traffic to articles and other pages on our site. Unless you are signed in to a HubPages account, all personally identifiable information is anonymized.
    Amazon Web ServicesThis is a cloud services platform that we used to host our service. (Privacy Policy)
    CloudflareThis is a cloud CDN service that we use to efficiently deliver files required for our service to operate such as javascript, cascading style sheets, images, and videos. (Privacy Policy)
    Google Hosted LibrariesJavascript software libraries such as jQuery are loaded at endpoints on the or domains, for performance and efficiency reasons. (Privacy Policy)
    Google Custom SearchThis is feature allows you to search the site. (Privacy Policy)
    Google MapsSome articles have Google Maps embedded in them. (Privacy Policy)
    Google ChartsThis is used to display charts and graphs on articles and the author center. (Privacy Policy)
    Google AdSense Host APIThis service allows you to sign up for or associate a Google AdSense account with HubPages, so that you can earn money from ads on your articles. No data is shared unless you engage with this feature. (Privacy Policy)
    Google YouTubeSome articles have YouTube videos embedded in them. (Privacy Policy)
    VimeoSome articles have Vimeo videos embedded in them. (Privacy Policy)
    PaypalThis is used for a registered author who enrolls in the HubPages Earnings program and requests to be paid via PayPal. No data is shared with Paypal unless you engage with this feature. (Privacy Policy)
    Facebook LoginYou can use this to streamline signing up for, or signing in to your Hubpages account. No data is shared with Facebook unless you engage with this feature. (Privacy Policy)
    MavenThis supports the Maven widget and search functionality. (Privacy Policy)
    Google AdSenseThis is an ad network. (Privacy Policy)
    Google DoubleClickGoogle provides ad serving technology and runs an ad network. (Privacy Policy)
    Index ExchangeThis is an ad network. (Privacy Policy)
    SovrnThis is an ad network. (Privacy Policy)
    Facebook AdsThis is an ad network. (Privacy Policy)
    Amazon Unified Ad MarketplaceThis is an ad network. (Privacy Policy)
    AppNexusThis is an ad network. (Privacy Policy)
    OpenxThis is an ad network. (Privacy Policy)
    Rubicon ProjectThis is an ad network. (Privacy Policy)
    TripleLiftThis is an ad network. (Privacy Policy)
    Say MediaWe partner with Say Media to deliver ad campaigns on our sites. (Privacy Policy)
    Remarketing PixelsWe may use remarketing pixels from advertising networks such as Google AdWords, Bing Ads, and Facebook in order to advertise the HubPages Service to people that have visited our sites.
    Conversion Tracking PixelsWe may use conversion tracking pixels from advertising networks such as Google AdWords, Bing Ads, and Facebook in order to identify when an advertisement has successfully resulted in the desired action, such as signing up for the HubPages Service or publishing an article on the HubPages Service.
    Author Google AnalyticsThis is used to provide traffic data and reports to the authors of articles on the HubPages Service. (Privacy Policy)
    ComscoreComScore is a media measurement and analytics company providing marketing data and analytics to enterprises, media and advertising agencies, and publishers. Non-consent will result in ComScore only processing obfuscated personal data. (Privacy Policy)
    Amazon Tracking PixelSome articles display amazon products as part of the Amazon Affiliate program, this pixel provides traffic statistics for those products (Privacy Policy)