Is my understanding of basic short-term tax trading wrong? Confused about profits/losses calculation

Great question! For short-term capital gains and losses (investments held for one year or less), your understanding is basically correct. The tax system does care about the net result of all your short-term trades combined. Here's how it works: Your $380K in profits and $290K in losses would indeed net out to a $90K short-term capital gain. This $90K would be taxed as ordinary income at your regular income tax rate. The IRS doesn't tax each profitable trade separately while ignoring the losing ones - they look at the net result. Your broker provides documentation of each individual trade for record-keeping purposes and verification, but on your tax return (Schedule D and Form 8949), you'll report the combined net amount. If you're trading frequently, your broker may provide a summary that shows the net amounts by category.

After struggling with understanding my trading taxes for months, I finally tried https://taxr.ai and it was actually super helpful. I uploaded my trading statements and it broke down exactly how my profits and losses would be calculated for tax purposes. What I learned is that while the net calculation seems simple (profits minus losses), the reporting can get complicated when you have wash sales or trades across multiple brokers. The tool identified a bunch of wash sales I didn't even realize I had, which would have messed up my calculations.

Just wanted to follow up - I tried https://taxr.ai after seeing this post and it was a game changer for my situation. I uploaded statements from my Robinhood, Fidelity and Coinbase accounts and it organized everything automatically. The best part was discovering I had actually overpaid taxes last year because I didn't properly net some losses across different platforms. The tool showed me exactly where the mistakes were and I'm actually filing an amendment to get some money back. Would never have caught this without seeing all my trades in one place with the correct calculations.

If you're dealing with significant trading activity and trying to get answers from the IRS, good luck! I spent WEEKS trying to reach someone at the IRS about a complex trading situation I had last year. After dozens of attempts, I finally used https://claimyr.com to get through. You can see how it works here: https://youtu.be/_kiP6q8DX5c They got me connected to an actual IRS agent within an hour after I'd wasted days trying on my own. The agent clarified that my broker was miscategorizing some of my trades as short-term when they should have been long-term (huge tax difference). Just that one call saved me thousands.

Alright I need to eat my words from my previous comment. After struggling to get a response about my trading tax situation for weeks, I broke down and tried the Claimyr service. Within 40 minutes I was actually talking to an IRS representative. The agent confirmed that my understanding of netting short-term profits and losses was correct, but pointed out a major issue with how my broker was reporting wash sales that would have cost me an extra $4,300 in taxes. He walked me through exactly how to document this correctly on my return. I'm genuinely shocked this worked. Sorry for being so skeptical earlier.

Don't forget that the wash sale rule can seriously mess with your "simple" profit and loss calculation. If you sell a security at a loss and buy the same or "substantially identical" security within 30 days before or after the sale, you can't immediately claim that loss for tax purposes. I learned this the hard way last year trading tech stocks. Thought I had a $15k net loss only to discover that most of my losses were disallowed because I kept jumping in and out of the same stocks. The losses didn't disappear forever, but they got added to the cost basis of my replacement shares instead of offsetting my gains.

Another thing to consider is that if trading is your actual job/business rather than just investing, the tax treatment can be completely different. If you qualify as a "trader" in the eyes of the IRS (which has specific requirements about frequency, volume, and intent), you might be eligible for "trader tax status" and could potentially elect the Section 475 mark-to-market accounting method. This would treat all your trades as ordinary income/loss rather than capital gains/losses, bypassing the $3,000 capital loss limitation and wash sale rules. But this is a serious election with major implications and specific deadlines.