Traders ask about 1099-B for taxes

Traders Ask: Can I Use My 1099-B? Here’s a free tool to find out.

Brokers must provide 1099-B to investors and traders with sales in securities or similar financial instruments. But active traders often ask “can I use my 1099-B to report my taxes? Or do I need to make additional adjustments?”

Popular tax software and IRS instructions could be misleading. Many traders may need to make additional wash sale adjustments not reported on 1099-B.

Some popular tax filing programs suggest that users can simply enter the totals from 1099-B, upload the form/statement, and done. But is it really that easy? Here’s what the IRS says:

  • IRS Publication 550 says: “Use the Form 1099-B to complete Form 8949 and/or Schedule D”.
  • The IRS Instructions for Form 8949 state: “If all Forms 1099-B (or all substitute statements) you received show basis was reported to the IRS and no correction or adjustment is needed, you may not need to file Form 8949.”

Note that the Form 8949 instructions state, “if… no correction or adjustment is needed”. Many active traders must account for additional adjustments, especially with wash sales.

When explaining the Wash Sale Rule, IRS Publication 550 acknowledges that your 1099-B reports limited wash sale adjustments. They remind taxpayers: “However, you cannot deduct a loss from a wash sale even if it is not reported on Form 1099-B.”

What this means for traders: You need to determine whether you have to make additional wash sale adjustments before you simply use your 1099-B totals.

Use our tool to help determine if you can use your 1099-B totals. Find out if you need to account for additional wash sale adjustments.

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How to account for additional adjustments.

Making additional wash sale adjustments can significantly complicate your trader tax reporting. Because the 1099-B does not provide details about individual wash sale adjustments, it’s nearly impossible to identify – let alone make – the additional wash sale adjustments required by the IRS. If this is your situation, you may wonder how to prepare accurate trader tax reports?

Experienced traders who need to make additional adjustments use TradeLog. TradeLog imports actual trade history for all your broker accounts and makes wash sale adjustments based on IRS rules for taxpayers. Where possible, TradeLog tries to reduce harmful wash sale effects. Making adjustments in a way that helps realize all the losses you legally can in the tax year. TradeLog doesn’t import 1099-B data because it lacks details of adjustments. What TradeLog does is allows you to reconcile with your 1099-B to help ensure no trade history is missing.

Will the IRS have a problem if your TradeLog-generated reporting has different wash sale adjustments than the 1099-B? Remember, the IRS requires traders to make additional adjustments. Ultimately, you’re responsible to make sure your tax reporting complies with the law. TradeLog allows you to generate a statement explaining the differences with your 1099-B. Some traders submit this statement with the Form 8949 in case it undergoes review.

Have more questions about 1099-B and trader taxes? Check out our Education section for more free education and resources for active traders.

Did you know? In 25 years, TradeLog-generated tax reporting has never been rejected by the IRS.

Please note: This information is provided only as a general guide and is not to be taken as official IRS instructions. Cogenta Computing, Inc. does not make investment recommendations nor provide financial, tax or legal advice. You are solely responsible for your investment and tax reporting decisions. Please consult your tax advisor or accountant to discuss your specific situation.