TXF Format Solves Broker Import Issues
Most tax preparation software provides some mechanism for the direct import of trade data from the broker. However,
direct import is too uncertain, much like rolling the dice. There are hundreds of brokers and no standard format,
so there are likely going to be errors. Sometimes trades are matched up, while other times just the raw data is provided.
Beginning with tax year 2011, there are significant IRS changes, like the new form 8949, which only increases the potential
for chaos. And, you have to give your tax preparation software the password to your financial account.
Instead of hoping that the unknown broker format and your tax preparation software will be in agreement each year,
the universal TXF format should be used to guarantee successful import of trade data. Most brokers will let you download
individual transaction data for stocks and options into CSV or XLS format. Active traders especially should prepare
the trade data externally in a spreadsheet, convert it to TXF, and then import into tax preparation software. You will know
exactly what data gets imported with this approach.
Typically, one of the desktop products is required for TXF import, but the cheapest version is likely more than sufficient.
It is generally recommended to purchase the lowest priced desktop edition, because you can easily upgrade should you find it
insufficient. On the other hand, it is very difficult to downgrade should you find the more expensive product unnessary.
You would have to call customer support, get the refund, remove the old software, make the new purchase, install the downgrade,
and re-enter your data.
The TXF file approach completely circumvents the many broker download issues, gives control of trade data back to the taxpayer,
and saves money.