Tax tips every Robinhood trader should read

With the advent of no-commission trading and easy-to-use apps, buying and selling stocks seems to have become everyone’s favorite hobby. When the market goes up—as it has on average for more than a decade, with the Dow, the S&P 500, and the Nasdaq all near all-time highs—it can all seem like fun and games.

But here’s something that’s not so fun: April 15.

For frequent traders who have been buying and selling up a storm on apps like Robinhood, tax season means it’s time to pay the piper. Even if you are a more conservative type, sweeping money into funds via a robo-adviser every week, it can all add up to a mountain of documentation.

Just ask Elliot Weiler. The 46-year-old, who heads the video department of the publication Consumer Reports, remembers receiving the transaction statement from his robo-adviser last year: It made for a whopping 78 pages of small-print type.

“At one point the online version of TurboTax wouldn’t allow me to import the data, because it exceeded its limit on transactions,” he marvels.

It’s a challenge faced by more investors than ever: Robinhood’s user base hit 13 million last spring and is still growing, despite the whole GameStop controversy that drew heavy criticism. Brokerage firms on the whole added 10 million new accounts in 2020, according to JMP Securities.

Now it’s crunch time: Robinhood announced that tax documents will be ready beginning this week. To help you navigate this blizzard of tax-reporting documents, here are a few tips to keep in mind:

Is the sheer volume of trades going to cost me?

Well, yes—either in terms of your own time and effort, or in terms of paying someone to handle the numbers for you. “I’d say one of the biggest tax challenges for frequent traders is actually entering all the sales into your tax-prep software,” says Kelley Long, a financial planner and CPA in Chicago. “If you’re a DIY tax person, you’re chancing errors—and if you’re paying someone, you’re going to pay more for data entry.”

How much tax will I pay for trading?

Treatment of capital gains is very different for short-term versus long-term holdings. If you have held a stock for more than a year, taxes are relatively favorable—almost everyone pays 15% or less, and many pay zero, depending on income level.

For day traders who are in and out of holdings all the time, though, it’s a different story. Short-term gains are treated as ordinary income, with federal tax brackets ranging from 10% to 37%.

Can I write off losses?

Yes. If you didn’t have luck on a particular trade—maybe, ahem, an attempted short squeeze went wrong—you can use those losses to offset other gains. If you don’t have any gains, you can cite those losses to offset ordinary income.

But there are limits: The maximum offset in a given year, for individuals or for married couples filing jointly, is $3,000. If you have more than that, the amount can be rolled over to future years. Remember that these losses have to be actually realized from a sale, and not just exist on paper.

Can I just leave this stuff for later?

Bad idea. Since there’s a higher degree of difficulty involved here, you might even have some trouble getting tax professionals to help you, especially if the time window starts to close.

“I avoid them like the plague,” admits George Papadopoulos, a financial planner and CPA in Novi, Mich., of potential clients with a backlog of trading records. “I find them the equivalent of the shoebox guys—you know, those taxpayers who are always late in filing only to show up a day or two before April 15 with a shoebox full of receipts. Robinhood day traders buy and sell without any commissions—but they are getting killed with tax preparer fees.”

This story was originally featured on Fortune.com