IRS Form 1099-B, also known as Proceeds From Broker and Barter Exchange Transactions, is a tax document used to report capital gains or losses from the sale of securities, such as stocks and bonds. This form is also used to record a barter exchange. Brokers send completed 1099-B forms to the IRS and to their clients, who then use the information contained to complete their income tax returns.
Common Uses
Reporting gains or losses registered in relation to:
Brokers complete 1099-B forms. These include individuals, firms, and government agencies that act as a middleman between investors and a securities exchange on which brokers and traders buy and sell stocks, bonds, and other securities.
The 1099-B form is used to report capital gains, which is income earned from the sale of a security and subject to being taxed. The form is also used to report losses incurred when a sale yields less than the price at which a security was purchased. Losses can offset tax liabilities. In addition, a 1099-B can document a barter or exchange of services. This, too, is considered taxable.
The recipient of a completed 1099-B uses the information it contains to complete their annual income tax return and other tax forms investors are required to file, such as Schedule D (Form 1040) and Form 8949.
Deadlines
The deadline for sending 1099-B forms to taxpayers is February 15, and the deadline for filing them with the IRS is March 31.[1]
1099-B vs. 1099-DIV vs. 1099-INT
Where a W-2 is used to report a full-time employee’s income, a suite of 1099 forms developed by the IRS exists to report income earned in other ways.
1099-B: Used to report the sale of assets, such as stocks, bonds, or services rendered through a barter-based exchange. 1099-DIV: Used to report dividends. 1099-INT: Used to report interest.
1099-B Form Parts (30)
Below are the general parts of a 1099-B. Bear in mind the format of the form can vary across states. Check the IRS instructions for more specific details about each input area.
1. Payer’s Information
The form asks for information about the payer, including a name, address, ZIP code, and telephone number.
2. Payer’s TIN
This is the payer’s Taxpayer Identification Number (TIN).
3. Recipient’s TIN
Use Form W-9 to request the recipient’s TIN. The recipient’s TIN can constitute a social security number, individual taxpayer identification number, adoption taxpayer identification number, or employer identification number.
4. Recipient’s Information
The form asks for information about the recipient, including a name, address, ZIP code, and telephone number.
5. Account Number
This is required if the broker has to file multiple forms for the same recipient, or if the FATCA checkbox is checked.
6. 2nd TIN Not.
Enter an “X” if the IRS sent two notices within three years that the recipient provided an incorrect TIN.
7. CUSIP Number
Enter the CUSIP, or Committee on Uniform Security Identification Procedures, number, which identifies the security.[2]
8. FATCA
Check this box if the filer is a foreign financial institution reporting payments to a U.S. account.
If any state tax was withheld, enter its dollar value here.
12. Applicable Checkbox
Enter one of the below codes in this box. The recipient will use this code to fill out their income tax return.
Code A: Short-term transaction being reported to the IRS
Code B: Short-term transaction not being reported to the IRS
Code D: Long-term transaction being reported to the IRS
Code E: Long-term transaction not being reported to the IRS
Code X: Holding period unknown
13. Description of Property
Describe the issuer of a stock and the number of units held, as well as the classes of stock (“C” for common, “P” for preferred, and “O” for other) and subclasses. If the exchange was a barter-based transaction, describe the service bartered. If regulated futures contracts and forward contracts are being reported, enter “RFC”.
14. Date Acquired
Input the date the securities were purchased or the barter exchange occurred. Leave this box blank if the securities were acquired on various dates.
15. Date Sold or Disposed
By the same token, enter the date of the sale being reported to the IRS.
16. Proceeds
This box is for the gross proceeds of all sales. Make sure to subtract the commissions paid to brokers. Show a loss as a negative amount by enclosing it in parentheses.
17. Cost or Other Basis
In Box 1e, enter the adjusted cost basis of securities sold. Enter 0 only if the securities sold had a basis of zero.
18. Accrued Market Discount
Box 1f asks for the amount of accrued market discount, or the gain in the value of a discount bond as it approaches maturity.
19. Wash Sale Loss Disallowed
Box 1g is the place to input loss disallowed or the amount that cannot be claimed for tax purposes because the investment was sold at a loss and then repurchased within 30 days.
20. Term
This box contains three boxes, one of which should be checked. The first indicates short-term gain or loss, the second long-term gain or loss, and the third ordinary. Typically, a sale within a year of purchase is considered short-term, whereas a sale that occurs more than a year after purchase is long-term. The term determines the tax rate applied.
21. Box 3
Box 3 asks the filer to check whether the proceeds are from collectibles or QOF. Collectibles are alternative investments, such as antiques and art. QOF, or Qualified Opportunity Fund, refers to corporations set up for the purpose of investing in a qualified opportunity zone property.
22. Federal Income Tax Withheld
If any federal tax was withheld on the sale, enter its dollar amount here.
23. Box 5
Check this box if the security was noncovered.
24. Reported to the IRS
Indicate whether gross proceeds or net proceeds were already reported to the IRS.
25. Loss
Check the box if loss is not allowed based on the proceeds.
26. Closed Contracts
Indicate how much profit or loss was realized in the previous year on closed contracts.
27. Open Contracts
Indicate how much profit or loss was realized in the previous year on open contracts.
28. Aggregate Profit
Input the amount of aggregate profit or loss realized on contracts.
The form’s final box is the place to specify a dollar amount representing the value of a barter exchange, which is subject to being taxed. If, for example, a contractor exchanged building services for marketing services, then the value of the services exchanged should be reported on Form 1099-B.
Instructions for Filers (5 Steps)
1. Collect W-9
The payer should collect a W-9 from the individual whose sale or exchange is being reported. This contains information necessary for completing the 1099-B, such as the recipient’s TIN.
2. Obtain Blank Forms
Download the 1099-B. Use only the forms with black text; the IRS will not accept the first form, which is in red.
3. Complete 1099-B
Make sure to complete a copy for every transaction that occurred the previous year. It’s important to note that brokers generally receive a commission or fee for selling an asset, but this does not get reported on a 1099-B. Brokers are not required to file Form 1099-B for sales that occur under specific circumstances.
Copies of 1099-B forms filed with the IRS must be sent to the taxpayers whose income they document. The recipients of 1099-B forms use the information contained in them to fill out their income tax returns.
Frequently Asked Questions (FAQs)
What’s a Composite 1099?
Some firms use a Composite 1099 Form to consolidate the information on various 1099 forms. If a taxpayer will be receiving multiple forms, such as 1099-B, 1099-DIV, and 1099-INT, in a single tax year, then often issuers will choose to send a Composite 1099 instead.
What’s a cost basis and how do I calculate it?
The cost basis is part of a formula for calculating gain or loss. In the simplest terms, it’s the total amount paid for an asset plus the commissions and taxes paid to brokers.[4]
To calculate the cost basis, divide the basis of all shares in an account by the total number of shares. The reason for calculating the cost basis is to ensure that any dividends that were already taxed are not taxed again.
What if I don’t report the information that appears on my 1099-B?
The IRS will likely deliver a CP2000, or a Notice of Underreported Income, which assigns penalties and interest on unreported income.[5]
To avoid these consequences, make sure Schedule D or Form 8949 is identical to the information on a 1099-B.
