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I'm curious about how direct indexing impacts tax filing. You mentioned generating short term/long term capital gains numbers, which is fine, but what about all

by paxys 2y ago

I'm curious about how direct indexing impacts tax filing. You mentioned generating short term/long term capital gains numbers, which is fine, but what about all the different transactions? Won't someone using your service have to enter all of them manually on their return?

dmoy 2y ago
So I have zero enthusiasm for direct indexing, and there's effectively no chance I'm gonna use this product (or any other direct indexing company)[1], but The tax filing thing should be a non-issue. Yes you'll probably get a 1099-B with like a gazillion entries. But, assuming this is done normally, all your holdings will be covered stocks, and all the trades will show up as reported to the IRS in box 12. Then you'll be able to just summary entry with IRS 8949 box A/D, entering like literally two lines, and you're set. It sounds bad but it won't (I'M GUESSING!) be bad for tax filing headaches - two lines, same as any other broker. Yea I don't like Apex and they've fucked up a couple things for me before, but they should get this part right. And even if they don't... Say they don't report basis to the IRS, you can still enter summary, and just physically mail the IRS your 1099-B (even if you efile), and it'll still be okay without too much work. [1] my complaints stem mostly from portability. With a ~0.03% fee ETF, I can go to any broker in the future and still deal with it. If for whatever reason I want to stop working with <direct indexer X>, now I'm stuck dealing with thousands of individual holdings. If I was operating with large enough amounts that I could literally transfer to a different broker (IBKR) and hoist the remains into a creation unit of VTI or whatever, sure. But that's increments of $30M each, so ... lol not for people like me. Or maybe in the future there's enough direct indexer services that they solve portability at increments smaller than <huge ETF creation unit>. Then maybe yea, idk.
- Glyptodon 2y ago
  Only works out easy if nothing ends up being a potential wash sale with something in your other brokerage accounts.
  - dmoy 2y ago
    Ha, fair If you're also using a other direct indexing service, or doing a bunch of manual stock trades yourself, then RIP your time :(
Gh0stRAT 2y ago
IIRC if your brokerage reports everything to the IRS properly, you only need to fill out net short- and long-term capital gains on your schedule D rather than specifying every single transaction on a bunch of Form 8949 copies. Not sure if Double's underlying brokerage is reporting everything necessary for this to be the case though, as I believe some brokerages don't.

by paxys 2y ago

dmoy 2y ago

So I have zero enthusiasm for direct indexing, and there's effectively no chance I'm gonna use this product (or any other direct indexing company)[1], but The tax filing thing should be a non-issue. Yes you'll probably get a 1099-B with like a gazillion entries. But, assuming this is done normally, all your holdings will be covered stocks, and all the trades will show up as reported to the IRS in box 12. Then you'll be able to just summary entry with IRS 8949 box A/D, entering like literally two lines, and you're set. It sounds bad but it won't (I'M GUESSING!) be bad for tax filing headaches - two lines, same as any other broker. Yea I don't like Apex and they've fucked up a couple things for me before, but they should get this part right. And even if they don't... Say they don't report basis to the IRS, you can still enter summary, and just physically mail the IRS your 1099-B (even if you efile), and it'll still be okay without too much work. [1] my complaints stem mostly from portability. With a ~0.03% fee ETF, I can go to any broker in the future and still deal with it. If for whatever reason I want to stop working with <direct indexer X>, now I'm stuck dealing with thousands of individual holdings. If I was operating with large enough amounts that I could literally transfer to a different broker (IBKR) and hoist the remains into a creation unit of VTI or whatever, sure. But that's increments of $30M each, so ... lol not for people like me. Or maybe in the future there's enough direct indexer services that they solve portability at increments smaller than <huge ETF creation unit>. Then maybe yea, idk.

Glyptodon 2y ago
Only works out easy if nothing ends up being a potential wash sale with something in your other brokerage accounts.
- dmoy 2y ago
  Ha, fair If you're also using a other direct indexing service, or doing a bunch of manual stock trades yourself, then RIP your time :(

Gh0stRAT 2y ago

IIRC if your brokerage reports everything to the IRS properly, you only need to fill out net short- and long-term capital gains on your schedule D rather than specifying every single transaction on a bunch of Form 8949 copies. Not sure if Double's underlying brokerage is reporting everything necessary for this to be the case though, as I believe some brokerages don't.