At about mid to late February, you may receive a form called a 1099-B. This form is normally issued by brokers and is predictably called “Proceeds from Broker Transactions’. This form is issued to you by a broker, or brokerage house. And it’s issued for any security or property that they handled the transactions for, during the year. Now the days of having a dedicated broker are pretty much behind us but if you have an account with a brokerage house, like TD Ameritrade, E-Trade, etc. You should receive this form, along with a summary of all the trades you have made. Including all disclosures and directions on what to do with the form by the middle to late February at the latest.
How is Form 1099-B Used?
Like I stated above the 1099-B is used for transactions handled by a broker. However, the main purpose is to help you and the broker properly report your capital gains. Also, this form can be used for barter transactions and property transactions. However these are very uncommon for the most part as people will not go through a broker to sell property. The form that most people will get for a property sale is actually a 1099-S.
Key Boxes
Payer and Recipient Information
This is self-explanatory but on the left side you can see who issued you the form (most likely your broker) and you can see your information as well. The main point for this information is to make sure that you information is accurate. Pay special attention to your identification number and make sure that is correct. This identification number is how the IRS makes a record of the income and if the number is wrong then you should request a new, correct 1099-B.
Box 1 Information of Sale
This box is actually split up into 7 boxes. Box 1a is the description of the property. Normally this will be a stock ticker/abbreviation and the amount of shares that was sold. Box 1b and 1c are the dates that the security for the transaction was acquired and sold. Box 1d is the total amount that the shares/property was sold for. 1e is the total amount that the shares/property was bought for. Box 1f is the accrued market discount which is very uncommon to see.
1g is amount of the loss that is not allowed due to a wash sale. A wash sale is a sale in which you sell a security (stock in most cases) and then you buy back into that same security within 30 days. This creates a “wash sale” situation when the stock is sold again and if it’s a loss then you cannot deduct the loss and the loss is a “wash sale loss disallowed”.
Box 2 Gain Term
This box consists of 3 check boxes these differentiate whether it is long term, short term or ordinary. These are useful because it affects which 8949 form you will end up filling out for this 1099.
Box 4 Federal Income Tax Withheld
This box states whether or not there was any income tax was withheld by your broker. Normally this isn’t very common but sometimes brokers do take federal income tax and withhold them for their clients.
Box 6 Reported to The IRS
This box is 2 check boxes that states whether the gross proceeds amount is net proceeds or gross proceeds. Most of the time this will be gross proceeds.
Box 12 Basis Reported to The IRS
This box indicates whether or not the basis (cost of the security) was reported to the IRS. If this box is not checked you might want to consult your own records to see what you actually paid for that security/transaction.
Boxes 14 – 16 State Information
These boxes are not mandatory but are offered as an option to fill out. The good thing about these security deals is that they usually aren’t state specific so these boxes are usually filled out.
What Is Taxable on Form 1099-B?
In most cases the taxable amount on Form 1099-B is difference between the gross proceeds minus the basis or cost. If the proceeds are more than the cost then the gain can be taxed as long term or short term capital gains at the rates for these classifications. If it’s less then it is a long term or short-term capital loss, on your tax return.
In summary this form is issued by brokers, and it calculates the profit from securities and some property transactions that the brokers handle during a specific tax year. This means that the gain or loss will go on Schedule D and Forms 8949, and it may be worth planning your sales of securities. If you are looking for someone to help you with your tax questions, it just so happens that I am a Certified Public Accountant that helps people answer their important tax questions.