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After my weekend adventure at work (see last post), I got home last night to discover my TurboTax waiting at the door. Turns out I didn’t need to save that five bucks after all. Turns out, I must be a millionaire.

If you’re an Ameritrade customer who uses Turbotax, beware: DO NOT ACCEPT TURBOTAX’S OFFER TO DOWNLOAD YOUR 1099-B FROM AMERITRADE! That was what I did at first, and actually thought to myself, “Wow, maybe I won’t have to turn backflips and say a chant with my eyelids inside out to get the tax stuff to work this year.” But I thought too soon. After it announced Retrieve Successful!, I glanced up at the running tally of my amount owed/ refund, and immediately did a screen capture:

That’s right. After TT eliminated most of my deductions (hey, that 2% threshold is pretty high for a millionaire), it announced that I owe $1,312,256 in Federal Taxes. And here I was fretting over balancing my checkbook.

The problem is that when you allow TurboTax to download your 1099s directly, the cost basis of your trades does not flow through, only the figure required to be reported to the IRS (which is gross sales), and your entire trading activity for the year shows up as income. And anyone who daytrades knows how easy it is to take a bare-bones pattern-day-trade account, pop in and out 10 or 20 times ina day, and rack up multiple hundreds of thousands in gross trades with a net of maybe a hundred dollars gained or lost here and there.

If you do trade thru TDAmeritrade and file your taxes with TurboTax, here’s the solution that worked for me:

• Allow TurboTax to connect to AMTD to download your 1099s

• Uncheck the 1099-B and “retrieve” only the 1099-INT

• Log onto your AMTD account and go to the Gain/Loss section of your account under the Portfolio & Accounts tab

• Select Get Report As TXF File

• Now go back to TurboTax and import that TXF file

As far as I can tell, the numbers came out accurately after that (and after deleting the multi-million dollar earlier import, of course).

Importing the TXF file completely fills out your schedule D, and things look a little more realistic. Beware, however, that if you allow TT to retrieve all the 1099s and import the TXF file, it still shows the “whoa nelly” figure, so you must be careful not to accept the auto-download of the 1099-B.

For someone with only a few trades for the year and a big income (i.e. the opposite of me on both counts), this problem may tag a few grand onto your income without your noticing if you simply “trust” TurboTax, and result in your paying taxes that you don’t owe.

I’m an old country farm boy. I don’t trust no one.

Oh, and do I need to add a disclaimer, like “I’m not a tax professional” or something. Is that not crystal clear? Duh!