Schedule D Software: No Substitute for a Tax Professional

Hiring a tax professional to prepare your Schedule D can be a costly. Currently, there are many software packages on the market that advertise a “do it yourself” approach to Schedule D preparation. It is easy to be seduced by these claims, as the price of the software can be much lower than the cost of a tax professional.

Unfortunately, depending on your trading, generating a Schedule D is not as easy as it sounds. When it comes to calculating wash sales, stocks and stock options are substantially identical securities. Many of the software packages on the market will not calculate the wash sales on this type of trading correctly and manual adjustments need to be made. Without a thorough knowledge of the wash sale rule you will not be able to make the proper adjustments.

The wash sale rule is just one of many obstacles in the path of creating a proper Schedule D. Other events that many software programs can’t handle are stock splits, spin offs, and option assignments, just to name a few. If any of these events have taken place in your trading account, it is no longer a simple matter of downloading your trades into the software and then having it spit out a Schedule D. Instead you will need to know the tax code well enough to be able to adjust for these events.