If so, you should be aware that your annual income tax return must indicate the gain or loss of each security sold during the year.

With the advent of on-line trading, individual investors are buying and selling stocks and other securities frequently. With the large volume of trading comes the equally large responsibility of tracking the following:

Date of purchase, number of shares, name of the company, purchase price, number of shares sold, date of sale, and gross proceeds.

If you are in the habit of buying a certain number of shares and selling a different amount than you purchased, or, if you buy securities at various intervals and values, it is important to keep track of the basis for each transaction. The IRS allows you to use the specific identification method of computing gains and losses on stock transactions, or you are able to use the average cost basis method, whereby a weighted average cost per share is computed.

In some cases, on-line trading companies may be able to provide most of the information required, however, most companies are not able to track this information accurately.

One final word about on-line trading: Studies have shown that most on-line traders are not holding their securities long enough to benefit from long-term capital gain tax rates. All securities held less than one year are subject to the higher ordinary income tax rate tables. Net losses in excess of $3,000 cannot be deducted and must be carried forward to future years.




If you itemize employee business expenses or are self-employed and you incur expenses related to your business, the IRS requires that you maintain the appropriate supporting documentation. This information would be presented to the IRS representative in the case of an audit.

First and foremost, expenses must be proven to be “ordinary, necessary and reasonable” to your business or employment to be deductible. Your Hawaiian vacation, although expensive and enjoyable, is probably not deductible as a business expense, even though you thought about work while you were lying on the beach!

Basic documentation required includes cancelled checks and receipts which prove that the expense was actually incurred. Auditors generally frown upon “cash receipts”, so credit card receipts and cancelled checks are usually better.

For meals and entertaining, the receipt should have a notation which indicates who you entertained, when, where, and the specific business purpose for the activity. For automobile expenses, you first need to determine the percentage used for business. This is generally calculated by dividing the number of business miles driven by the total miles driven (Note: business mileage does not include your normal commute to and from your primary place of business). The IRS requires that you maintain a written “log” of your business mileage, usually in some sort of calendar or diary. Total mileage should be documented my noting your odometer reading on January 1st and December 31st of each year.

One final word about business expenses: If you are employed at a company that has a reimbursement policy for business expenses, you should apply for reimbursement, rather than paying your expenses and deducting them on your tax return. This is important for two reasons: 1) A one hundred percent reimbursement is always better than a limited deduction on your tax return and, 2) The IRS will not allow any deduction for an expense incurred which would have been reimbursed by an employer, whether or not you actually applied for and received a reimbursement.



No matter how old your children are, they are required to provide proof of US citizenship when traveling abroad. The United States Passport Agency recommends that you apply for a passport for your newly born child as soon as a birth certificate is issued.

The initial passport application is the most complicated and birth certificates have a way of being difficult to locate when a passport is required. Once issued and in the government’s system, passports are readily replaced if lost, and are easily renewed at ten-year intervals.