1099-B

Form 1099-B ('Proceeds from Broker and Barter Exchange Transactions') is the cornerstone document for reporting capital gains and losses on your federal tax return. Brokers are required to send this form — and a copy to the IRS — by February 15 following the tax year in which transactions occurred. For investors with active accounts, a consolidated 1099 statement typically bundles the 1099-B with 1099-DIV and 1099-INT information into a single multi-page document.

Each reportable transaction on the 1099-B includes the description of the security, the date acquired, the date sold, the gross proceeds (box 1d), the cost basis (box 1e, for covered securities), whether the gain or loss is short-term or long-term (box 2), and any adjustments such as wash sale disallowances (box 1g). The 'covered' versus 'noncovered' distinction matters because brokers are only required to report basis for covered securities — stocks acquired after January 1, 2011; mutual fund shares acquired after January 1, 2012; and most fixed-income securities and options acquired after January 1, 2014.

For noncovered securities, the basis field is blank on the 1099-B. The investor must supply the correct basis from personal records. Using an incorrect or assumed basis on Form 8949 without supporting records creates audit risk and could result in overpayment or underpayment of taxes.

Investors should review their 1099-B carefully before filing. Brokers may report incorrect basis for several reasons: corporate actions that adjusted share prices (like splits or mergers) may not always be reflected; DRIP reinvestments in older taxable accounts may not have been tracked from the start; and wash sale calculations may be incomplete if the wash sale involved accounts at different brokers.

Any corrections to broker-reported data must be entered in column (g) of Form 8949 with the appropriate adjustment code, and box 'B' is checked in the transaction's categorization to indicate the basis was incorrect as reported. Retaining brokerage confirmations and year-end statements for at least three years (ideally longer for positions not yet sold) provides the documentation needed to support any adjustments.

Reading Your 1099-B: Major brokerages issue consolidated 1099 statements in February that organize 1099-B transactions by category: short-term covered, short-term noncovered, long-term covered, long-term noncovered. Each transaction row shows the security description, acquisition date, sale date, proceeds, adjusted cost basis (for covered securities), any wash sale adjustment, and the resulting gain or loss. Across the bottom of each section, the broker summarizes the net gain or loss for that category. When importing the 1099-B into tax software, verify that the software correctly categorizes each group — short-term and long-term — into the corresponding Part I or Part II of Form 8949. A mismatch between the broker's categorization and the tax form categorization is a common source of error that can affect both the tax rate applied and the net amount of any carryforward loss.

Cost Basis Reporting: Cost basis reporting on the 1099-B is reliable for most straightforward purchases but has documented blind spots. Brokers do not track basis changes resulting from corporate spin-offs unless they have built specific adjustment logic into their systems — investors must manually track the basis allocation using the IRS-approved allocation ratio for the transaction. Mergers and acquisitions that are structured as tax-free reorganizations require a basis carryover that the broker may or may not have applied correctly. Stock options exercised through a broker may show the exercise price as basis without including the compensation income already recognized, creating an apparent double-reporting of income. Reviewing each reported transaction against your own purchase and corporate-action records annually — not just at filing time — is the most reliable way to catch basis errors before they propagate into a filed return and potentially trigger an audit.