The simplest way to avoid back taxes is to file a tax return. It really is that simple!

For a lot of individual investors, taxes aren’t something that gets much attention until March and April.

However, the IRS is always watching, as the subject of an article from the NY Daily News found out recently. The last paragraph is the one point that all investors should remember.

“If you don’t file, the IRS assumes that you have 100% profit, that basically it’s as if you bought the stock at no cost.” – Manhattan CPA Marc Albaum

While buying a stock at no cost would be great, that’s probably the ONLY way you could truly afford the resulting tax bill.

Until someone figures that trick out, stick with filing a Schedule D. Even if you get it totally wrong, you’ll still be better off than that guy!

Sources:

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Trader nailed with $172 million bill in back taxes, asks ‘What’s the IRS?’
Bill Hutchinson – Daily News – August 24, 2010
http://www.nydailynews.com/ny_local/2010/08/24/2010-08-24_thought_you_had_irs_problems_failed_daytrader_nailed_with_172m_bill.html