Interactive Brokers Tax question

[Bob111]

Just wondering if I am missing something with the reports that IB provide. Last year I sent over every report I could find from IB to my accountant and the accountants fees nearly tripled. Apparently it was because they had to go through every individual international trade for the year and convert them to AUD and manually enter them into their system which was obviously time consuming.

I use an Nabtrade as well which connects directly to the accountants software and automatically does this, but apparently IB doesn't support this functionality.

Am I missing something in the reports here or is everyone having this problem?

 

[rnr]

Just wondering if I am missing something with the reports that IB provide. Last year I sent over every report I could find from IB to my accountant and the accountants fees nearly tripled. Apparently it was because they had to go through every individual international trade for the year and convert them to AUD and manually enter them into their system which was obviously time consuming.

I use an Nabtrade as well which connects directly to the accountants software and automatically does this, but apparently IB doesn't support this functionality.

Am I missing something in the reports here or is everyone having this problem?

Hi @Bob111,

Is your IB a/c in $Aussie or $USD?

Cheers, Rob

 

[Bob111]

Hi @Bob111,

Is your IB a/c in $Aussie or $USD?

Cheers, Rob

Aussie Dollars.

 

[bellenuit]

Last year I sent over every report I could find from IB to my accountant and the accountants fees nearly tripled.

I find IB reports very difficult to decipher even though I am the one who placed each transaction. I would hate to think what an accountant would make of them.

Have you considered maintaining your own records in a spreadsheet? That's what I do the day after each day I have transactions. That activity report gives you everything you need to know including their daily exchange rate for that day, which is what I use for converting to AUD for tax purposes.

I don't have many trades, perhaps 4 or 5 per week at most, so I find it easy to keep on top of things this way. It also means that any unusual transaction I encounter in the report can be investigated immediately while fresh in my mind.

At the end of the year my spreadsheet summary page has everything needed for the tax return, which is all I give to my accountant. I just use the IB reports to double check my figures (mainly using the Cash section) which summarises annual movements by transaction type and it gives a warm feeling when everything matches up with my totals.

 

[rnr]

Aussie Dollars.

I must be missing something then....if your a/c is in Aussie Dollars (A$'s) then most of the transactions are already in A$'s.
As an example you buy 500 US stocks in company Z and IB take x A$'s from your account...the conversion is done for them. The same applies when you sell a stock. Hopefully the accountants didn't go through all the transaction notes to work that out.

 

[Bob111]

I find IB reports very difficult to decipher even though I am the one who placed each transaction. I would hate to think what an accountant would make of them.

Have you considered maintaining your own records in a spreadsheet? That's what I do the day after each day I have transactions. That activity report gives you everything you need to know including their daily exchange rate for that day, which is what I use for converting to AUD for tax purposes.

I don't have many trades, perhaps 4 or 5 per week at most, so I find it easy to keep on top of things this way. It also means that any unusual transaction I encounter in the report can be investigated immediately while fresh in my mind.

At the end of the year my spreadsheet summary page has everything needed for the tax return, which is all I give to my accountant. I just use the IB reports to double check my figures (mainly using the Cash section) which summarises annual movements by transaction type and it gives a warm feeling when everything matches up with my totals.

I think I might have to start doing this to be honest.

 

[Bob111]

I must be missing something then....if your a/c is in Aussie Dollars (A$'s) then most of the transactions are already in A$'s.
As an example you buy 500 US stocks in company Z and IB take x A$'s from your account...the conversion is done for them. The same applies when you sell a stock. Hopefully the accountants didn't go through all the transaction notes to work that out.

Don't quote me on this as I am not an accountant but I am wondering if they need the actual A$ price of each share and not the total transaction?

 

[Bob111]

I thought my acountant had sorted this but our costs just keep going up. It is to the point now that IB is just not worth it. I must be missing something here that I'm hoping someone can help me with?

Below is an email from my accountant minus personal details.

The auditor usually requests the trade confirmation document for every trade – I have liaised with him and he will accept the annual detailed summary from IB but the annual totals in our system must balance back to your IB summary and I need to provide him the reconciliation of the IB summary to our software entries.

I don’t think (name) providing the exchange rate at the time of each trade is the solution - the FX rate changes continually throughout the day and there are multiple recorded rates, there isn’t one uniform set rate for each day or anything that simple. With more than ($) worth of trades placed in the 2021 FY, trying to get the rates correct this way so that your account balances at EOY would be near impossible.

Unless (name) has access to further information from IB, I still think the only way we can approach this is to work back from the annual summary to determine an annual FX rate and apply that to all transactions for the year – this is the method I have used so far to process these transactions. It provides the correct closing balances etc but is proving to be very time consuming.

As an option - is it possible in IB to conduct your international trades in AUD? If so, this would significantly reduce your accounting bill.

The other thing that would assist would be if (name) could work out the conversion rate for the year and was able to reconcile the annual summary from USD to AUD (including FX Gain/Loss, commissions, dividends etc) so that it was ready to do the data entry into our software. If he thinks this is something he could tackle, I’d be happy to talk with him so he understands what we need. This would be done after the end of FY – working from the annual summary.

 

[KevinBB]

First thing that strikes me is to ask ... is your IB account based in AUD? From your accountant's email, I think not. You can still have your account full of USD, but make sure that your base currency is AUD. If you don't do that, then your accountant is correct, taxation is a nightmare.

If your account is based in AUD, then IB do everything for you. My tax return (all futures investments) figures are taken from IB's annual report. All trades are converted at the one rate at end of day.

If you have any form of trust investment (e.g. listed property trusts, or ETFs, or similar), then things are a bit more complex. Personally, when I had stocks with IB, I kept all trust type investments in an Australian CHESS sponsored broker, so that I would get the EOY tax summary.

Now, if your account is based in AUD, which may be the case according to your previous posts, but your accountant seems not to think so, tell your accountant that the Realised part of the Realized & Unrealized Performance Summary, all transactions are converted to AUD at an end of day rate. That rate is available on your daily Activity Statement if you want to check it.

The other thing, your accountant is talking Audit, so I assume that the account is in the name of an SMSF. Is this the case? If the accountant needs to reconcile back to cash figures, the difference between the realised P&L, mark to market, and cash accounts, will be brokerage fees, mainly because IB take brokerage from the cash balance when each leg of the trade happens, but when reporting realised P&L brokerage is included there as well. I lost a lot of hair over this in the early days, but now have it under control.

KH

 

[KevinBB]

Sorry for second reply ... did you provide your accountant with the Activity Statement for the full year (July to June). If not that is what he should have.

KH

 

[Bob111]

First thing that strikes me is to ask ... is your IB account based in AUD? From your accountant's email, I think not. You can still have your account full of USD, but make sure that your base currency is AUD. If you don't do that, then your accountant is correct, taxation is a nightmare.

If your account is based in AUD, then IB do everything for you. My tax return (all futures investments) figures are taken from IB's annual report. All trades are converted at the one rate at end of day.

If you have any form of trust investment (e.g. listed property trusts, or ETFs, or similar), then things are a bit more complex. Personally, when I had stocks with IB, I kept all trust type investments in an Australian CHESS sponsored broker, so that I would get the EOY tax summary.

Now, if your account is based in AUD, which may be the case according to your previous posts, but your accountant seems not to think so, tell your accountant that the Realised part of the Realized & Unrealized Performance Summary, all transactions are converted to AUD at an end of day rate. That rate is available on your daily Activity Statement if you want to check it.

The other thing, your accountant is talking Audit, so I assume that the account is in the name of an SMSF. Is this the case? If the accountant needs to reconcile back to cash figures, the difference between the realised P&L, mark to market, and cash accounts, will be brokerage fees, mainly because IB take brokerage from the cash balance when each leg of the trade happens, but when reporting realised P&L brokerage is included there as well. I lost a lot of hair over this in the early days, but now have it under control.

KH

Thanks for your reply Kevin,

I just double checked and it is definitely based in AUDand you are correct it is an SMSF. I have provided the activity statement for the full year but I think I might go back to them with your information and see what they say.


Thanks again.