1099-B Cost Basis Reporting has created a big mess since 2011. These problems are huge for active traders who may have reports that are hundreds and even thousands of pages long. TradeLog has created this page dedicated to problems reported as taxpayers attempt to reconcile 1099-B with accurate Form 8949 calculations.
PLEASE NOTE:
Due to the above mentioned problems, in many cases it will be impossible to reconcile your 1099-B to Form 8949.
The chart below is designed to help you identify how your broker reports options as well as referencing known problems - which are explained in detail below.
Is your broker not listed? We only list brokers that we have been able to confirm by reviewing their reporting. If you have questions about your broker's 1099-B reporting and you have an active TradeLog subscription, then please send your 1099-B and your TradeLog data file with your questions. Click here to submit that information.
Broker | TradeLog Reconciliation Settings | Known Problems (Click for Details) |
||
---|---|---|---|---|
1. Sales Adjusted for Option Premiums | 2. Broker Reported Gain/Loss INSTEAD OF the Actual Proceeds for Short Options | 3. Broker Reported Options Opened Prior to 2014 | ||
Apex | Yes | No | Yes | BOA Merrill Lynch |
No | No | Yes |
Charles Schwab | Yes | No | No | |
E*Trade | Yes | No | Yes | |
Fidelity | Yes | Yes | No | |
Interactive Brokers | Yes | No | Yes | |
Optionshouse - Apex | Yes | No | ? | |
OptionsXpress | Yes | Yes | 2014-No 2015-Yes | |
Scottrade | Yes | No | No | |
TD Ameritrade | Yes | Yes | Yes | |
TradeKing | Yes | ? | No | |
Tradestation | Yes | Yes | Yes | |
Vanguard | Yes | Yes | No |
Section 1256 Contracts The IRS directs brokers to separately report options that qualify as Section 1256 contracts on the 1099-B. These are often listed in a section of the reporting titled Regulated Futures Contracts. However, neither the IRS or SEC provide definitive listings of contracts that qualify for Section 1256. Therefore, interpretations may vary between brokers, CPAs, and other tax authorities as to whether a contract should be treated as Section 1256 or not.
TradeLog uses a default listing of option contracts recognized as Section 1256, this is the Broad-Based Index Options settings in TradeLog. TradeLog's default list is based on information published by Twenty-First Securities Corporation, a recognized authority in taxation.
Large positive or negative differences in proceeds between the 1099-B and TradeLog may be the result of different identification of Section 1256 contracts. TradeLog users can see which contracts are treated as such by going to the Find menu and choosing Futures. This will display all trades labeled with the type of FUT-XXX. Comparing that listing with the 1099-B should reveal if there are differences.
Taxpayer options:
Non Reported Options We have seen numerous examples where the broker does not report some options to the IRS on 1099-B for no apparent reason. These are options that are opened and closed in 2014 and typically are considered covered securities. While we cannot state definitively if the broker is in error as they may have some legitimate reason for that reporting, the bottom line is that it will affect reconciliation with TradeLog. A positive reconciliation difference it typically the result.
Taxpayer options:
Reporting Date for Short Sales. Brokers are not required to apply the Constructive Sale Rule when reporting short sales on 1099-B. Therefore, brokers will generally report ALL short sales as closed based on the settlement date of the closing position. Since the Constructive Sale Rule does apply to taxpayer reporting on Form 8949 there may be discrepancies between what the tax payer is required to report and what is reported on Form 8949 if there were short sales that closed at a gain in the last few days of 2014. In this case you may be reporting more sales on form 8949 than are on 1099-B. Click here to learn more about IRS short sale reporting rules.
This problem may also carry over from previous years. If your 2013 Form 8949 reported a short sale closed in that year, but the broker did not report the same trade closed until 2014, then the 1099-B for 2014 will list short sales that you already reported to the IRS. In this situation the broker may report more sales than are reported on the 8949.
Taxpayer options:
As a result, the 1099-B will report less gross proceeds (sales) than what should be reported, making reconciling the 1099 almost impossible. This is a strong reason why this method of reporting should not have been allowed by the IRS.
This problem has been confirmed with Fidelity, OptionsXpress, TDAmeritrade, and Tradestation reporting.
Taxpayer options:
The following problems affect 1099-B reporting in general because of differences in IRS rules.
Reporting Date for Short Sales. Short sales are not necessarily reported by the trade date like other trades. In general, a short sale closed at a loss is reported based on the settlement date of the closing trade. Short sales closed at a gain are subject to the Constructive Sale Rule, which means they should be reported as closed on the trade date of the closing trade. Learn more about short sale reporting.
Brokers are not required to apply the Constructive Sale Rule when reporting short sales on 1099-B. Therefore, brokers will generally report ALL short sales as closed based on the settlement date of the closing position. Since the Constructive Sale Rule does apply to taxpayer reporting on Form 8949 there may be discrepancies between what the tax payer is required to report and what is reported on Form 8949 if there were short sales that closed at a gain in the last few days of 2013. In this case you may be reporting more sales on form 8949 than are on 1099-B
This problem may carry over from previous years also. If your 2012 Form 8949 reported a short sale closed in that year, but the broker did not report the same trade closed until 2013, then the 1099-B for 2013 will list short sales that you already reported to the IRS. In this situation the broker may report more sales than are reported on the 8949.
Taxpayer options:
We have seen examples that indicate Interactive Brokers is reporting all short sales as closed on the trade date of the close position. The IRS instructions for 1099-B reporting state that a short sale is reported as sold on the date the security was delivered to close the short sale, this is generally the settlement date of the close position. The IRS says that the Date of Acquisition is the date the security was acquired to close the short sale, this is the trade date of the close position. IB's reporting of short sales as sold on the trade date is different from most other brokers we have seen and appears to be incorrect based on 1099-B requirements.
Because IB is reporting by trade date, they may report some short sales as closed in 2013 whereas other brokers would report the sale closed in 2014 because of settlement. TradeLog reports all short sales based on Form 8949 and Publication 550 instructions, which are also different than 1099-B instructions. The 1099-B reconciliation process for reconciling sales in TradeLog is designed to account for the reporting of short sales based on the IRS rules referenced above. Therefore, IB customers who have short sales that close in the last three business days of 2013 may have reconciliation differences in gross sales and cost basis between Form 8949 and the 1099-B.
IB is adjusting for wash sales between some option trades. These trades and corresponding wash sales are not reported on 1099-B. However, we have seen examples where the cost basis of an exercised option was adjusted for a wash sale. In this case, the assigned stock position was adjusted for the option premium, and that adjustment included a wash sale between options. Since the assignment can result in a sale of stock (such as in a call option), the result is a wash sale adjusting sale proceeds for a stock.
There are serious questions regarding this method of adjusting an exercised option for a wash sale based on IRS rules for option reporting in Publication 550. Since the broker does not report options to the IRS, the real problem in this situation is the adjustment to sale proceeds which can cause a difference in the total sales reported on Form 8949 and the total from 1099-B. This difference can be very difficult to isolate since the options are not reported on 1099-B; it requires an examination of the realized G&L reporting from IB, look for wash sales that were adjusted to exercised options.
When a short sale triggers a wash sale, TradeStation is adjusting the Proceeds of the trade for the wash sale instead of the Cost Basis. The result is that the Gross Proceeds on the 1099-B may be less than the proceeds reported by TradeLog based on trade history (on the 1099 Reconciliation report this will show as a positive difference).
Taxpayer options:
Have you seen a 1099-B problem not listed above? Submit an online support request and let us know!
Below is a list of known issues or facts that we have had reported about various broker 1099-B reports for the 2012 tax year. Please be aware of these factors if you are having difficulties reconciling your trade history. Remember, brokers have been asked to do something almost impossible in what they have to report, therefore there are many differences and some areas are matters of interpretation. Our goal is to help you be aware of why your 1099-B may report things they way it does, and try to help resolve reconciliation challenges.
Reporting Date for Short Sales. Short sales are not necessarily reported by the trade date like other trades. In general, a short sale closed at a loss is reported based on the settlement date of the closing trade. Short sales closed at a gain are subject to the Constructive Sale Rule, which means they should be reported as closed on the trade date of the closing trade. See our Trader Tax Topic to learn more.
Brokers are not required to apply the Constructive Sale Rule when reporting short sales on 1099-B. Therefore, brokers will generally report ALL short sales as closed based on the settlement date of the closing position. Since the Constructive Sale Rule does apply to taxpayer reporting on Form 8949 there may be discrepancies between what the tax payer is required to report and what is reported on Form 8949 if there were short sales that closed at a gain in the last few days of 2012. In this case you may be reporting more sales on form 8949 than are on 1099-B
This problem may carry over from previous years also. If your 2011 Form 8949 reported a short sale closed in that year, but the broker did not report the same trade closed until 2012, then the 1099-B for 2012 will list short sales that you already reported to the IRS. In this situation the broker may report more sales than are reported on the 8949.
Taxpayer options:
E*TRADE properly segregates their 1099-B reporting based on holding period and covered / non-covered securities. This results in four or more sections of the 1099-B. They do not provide a total of all Gross Proceeds reported on 1099-B. This total is not required by the IRS, however some TradeLog users get confused when looking up Total Gross Proceeds for reconciling their 1099. E*Trade clients need to find the section total for "Sales Price Less Commissions and Option Premiums" (Box 2a) at the end of each sub section of the 1099-B; add up each sub-total in order to get the total Gross Proceeds reported on 1099-B.
Fidelity appears to have a stricter interpretation of IRS definitions for covered securities than some other brokers. Therefore, securities that may be reported as covered by another broker may not be reported as covered by Fidelity. Whether Fidelity is accurate or not in their classification would require close examination of IRS requirements along with the tax structure of the stock issuer, and possibly a legal opinion. TradeLog uses general guidelines for assigning covered securities. Therefore, adjustments may need to be made in Tradelog to assign some securities to the non-covered section of Form 8949 for accurate 8949 reporting. Click here to learn more about adjusting 8949 code in TradeLog.
In addition, we have seen examples where Fidelity reported most trades for a security as covered, but some trades in the same year for the same security were not reported as covered. This can also affect the accuracy of reporting and may require adjustment manually in TradeLog. Click here to learn more about adjusting 8949 code in TradeLog.
When a short sale triggers a wash sale, Fidelity is adjusting the Proceeds of the trade for the wash sale instead of the Cost Basis (see more details on our blog article: Wash Sale Adjustments on Short Sales). The result is that the Gross Proceeds on the 1099-B may be less than the proceeds reported by TradeLog based on trade history (on the 1099 Reconciliation report this will show as a positive difference).
Taxpayer options:
We have seen examples that indicate Lightspeed is reporting all short sales as closed on the trade date of the close position. The IRS instructions for 1099-B reporting state that a short sale is reported as sold on the date the security was delivered to close the short sale, this is generally the settlement date of the close position. The IRS says that the Date of Acquisition is the date the security was acquired to close the short sale, this is the trade date of the close position. Lightspeed's reporting of short sales as sold on the trade date is different from most other brokers we have seen and appears to be incorrect based on 1099-B requirements.
Because Lightspeed is reporting by trade date, they may report some short sales as closed in 2012 whereas other brokers would report the sale closed in 2013 because of settlement. TradeLog reports all short sales based on Form 8949 and Publication 550 instructions, which are also different than 1099-B instructions. The 1099-B reconciliation process for reconciling sales in TradeLog is designed to account for the reporting of short sales based on the IRS rules referenced above. Therefore, Lightspeed customers who have short sales that close in the last three business days of 2012 may have reconciliation differences in gross sales and cost basis between Form 8949 and the 1099-B.
We have seen examples that indicate Interactive Brokers is reporting all short sales as closed on the trade date of the close position. The IRS instructions for 1099-B reporting state that a short sale is reported as sold on the date the security was delivered to close the short sale, this is generally the settlement date of the close position. The IRS says that the Date of Acquisition is the date the security was acquired to close the short sale, this is the trade date of the close position. IB's reporting of short sales as sold on the trade date is different from most other brokers we have seen and appears to be incorrect based on 1099-B requirements.
Because IB is reporting by trade date, they may report some short sales as closed in 2012 whereas other brokers would report the sale closed in 2013 because of settlement. TradeLog reports all short sales based on Form 8949 and Publication 550 instructions, which are also different than 1099-B instructions. The 1099-B reconciliation process for reconciling sales in TradeLog is designed to account for the reporting of short sales based on the IRS rules referenced above. Therefore, IB customers who have short sales that close in the last three business days of 2012 may have reconciliation differences in gross sales and cost basis between Form 8949 and the 1099-B.
IB is adjusting for wash sales between some option trades. These trades and corresponding wash sales are not reported on 1099-B. However, we have seen examples where the cost basis of an exercised option was adjusted for a wash sale. In this case, the assigned stock position was adjusted for the option premium, and that adjustment included a wash sale between options. Since the assignment can result in a sale of stock (such as in a call option), the result is a wash sale adjusting sale proceeds for a stock.
There are serious questions regarding this method of adjusting an exercised option for a wash sale based on IRS rules for option reporting in Publication 550. Since the broker does not report options to the IRS, the real problem in this situation is the adjustment to sale proceeds which can cause a difference in the total sales reported on Form 8949 and the total from 1099-B. This difference can be very difficult to isolate since the options are not reported on 1099-B; it requires an examination of the realized G&L reporting from IB, look for wash sales that were adjusted to exercised options.
We have received reports where TD Ameritrade clients found the 1099-B to be missing trades, when reported to TD Ameritrade they were informed that a new 1099-B will be issued to them in a few weeks. If TD Ameritrade clients have irreconcilable 1099-B problems they should contact TD Ameritrade to verify whether the 1099-B issued was accurate.
Taxpayer options:
When a short sale triggers a wash sale, TradeStation is adjusting the Proceeds of the trade for the wash sale instead of the Cost Basis. The result is that the Gross Proceeds on the 1099-B may be less than the proceeds reported by TradeLog based on trade history (on the 1099 Reconciliation report this will show as a positive difference).
Taxpayer options:
Have you seen a 1099-B problem not listed above? Submit an online support request and let us know!
Below is a list of known issues or facts that we have had reported about various broker 1099-B reports. Please be aware of these factors if you are having difficulties reconciling your trade history. Remember, brokers have been asked to do something almost impossible in what they have to report, therefore there are many differences and some areas are matters of interpretation. Our goal is to help you be aware of why your 1099-B may report things they way it does, and try to help resolve reconciliation challenges.
Charles Schwab
Etrade
Fidelity
Interactive Brokers
OptionsXpress
Penson
TD Ameritrade
TradeStation
Have you seen a 1099-B problem not listed above? Submit an online support request and let us know!