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Rounding on IRS forms

 
 
TObject
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      01-26-2006, 07:30 AM
What are the rules on rounding amounts to the whole dollar
when filing returns with IRS? Is it ok to round on some forms
and not round on other forms, or all forms need to done
the same way?

My particular interest is the schedules D, D-1 with a lot of very
small transactions, where rounding would introduce a substantial
inaccuracy. If I don't round on these schedules, should I also not
round on the form 1040, and all other forms, or can I take the
fractional amount from schedule D, round it, and then place
the rounded amount on form 1040?

TIA


 
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Phil Marti
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      01-26-2006, 01:07 PM
"TObject" <(E-Mail Removed)> wrote:

> What are the rules on rounding amounts to the whole dollar
> when filing returns with IRS?


Round EVERY entry on every form or none.

If you choose not to round, you'll have to do the return by hand. Every
software package I've seen automatically rounds, and the time it would take
you to override each rounded entry would make the software more trouble than
it's worth.

Check your state rules if you don't round the Federal. Many states now
require rounding.

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Phil Marti
Clarksburg, MD


 
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Paul Thomas, CPA
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      01-26-2006, 02:25 PM

"TObject" <(E-Mail Removed)> wrote
> What are the rules on rounding amounts to the whole dollar
> when filing returns with IRS? Is it ok to round on some forms
> and not round on other forms, or all forms need to done
> the same way?




As Phil said, you round on alal forms and schedules or on none of the forms
and schedules.

The rules are basically, less than 50 cents gets rounded down, 50 cents or
more gets rounded up.




> My particular interest is the schedules D, D-1 with a lot of very
> small transactions, where rounding would introduce a substantial
> inaccuracy. If I don't round on these schedules, should I also not
> round on the form 1040, and all other forms, or can I take the
> fractional amount from schedule D, round it, and then place
> the rounded amount on form 1040?



If the "very small" Schedule D transactions are with the same stock, you can
round up or down on the group of stocks to get the most accurate net gain or
loss amount. But I know what you are going through if you bought and sold
fractional shares (or a few truly penny stocks, like Enron!!) and have
pennies in sales price, pennies in basis, and pennies in gain/loss amount.

And while you can't e-mail it, you can build a spread sheet of the "D"
transactions and attach it to the return when you mail it in.



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Paul Thomas, CPA
(E-Mail Removed)





 
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TObject
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      01-27-2006, 06:17 AM
Thanks for the answers.

In case I choose to round, do you think it would be ok to
add an extra transaction on the Schedule D / D-1,
and call it "ROUNDING ADJUSTMENT" (or something
similar), just to make the sales total better match what was
reported to the IRS?


 
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Phil Marti
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      01-27-2006, 07:31 AM
"TObject" <(E-Mail Removed)> wrote:

> In case I choose to round, do you think it would be ok to
> add an extra transaction on the Schedule D / D-1,
> and call it "ROUNDING ADJUSTMENT" (or something
> similar), just to make the sales total better match what was
> reported to the IRS?


The theory of rounding is that it all balances out in the end, and the more
transactions, the more likely it balances. If you somehow wind up with a
total sales price significantly less than the 1099-B total, I'd first
suspect a missed transaction.

If you're over the 1099 total, no sweat. If you're under, your proposed
adjustment shouldn't hurt, but it also probably wouldn't be necessary.
--
Phil Marti
Clarksburg, MD


 
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