Form 1099-B: What Is It, Who Files It and Who Gets It?

Form 1099-B is a tax form issued by brokers or barter exchanges to both the IRS and the taxpayer. It provides details about sales of stocks, bonds, or other securities. Typically, brokers are responsible for filing this form with the IRS, while investors receive a copy. Investors then use the information on the form to report their capital gains or losses on their tax returns. The information provided on Form 1099-B includes the date of sale, the type of security sold, and the amount of proceeds received, which helps taxpayers report their taxable income accurately.

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What Is Form 1099-B?

Form 1099-B is a tax document used by investors and taxpayers who engage in the sale of securities, such as stocks, bonds or mutual funds. Issued by brokers or barter exchanges, this form reports the proceeds from these transactions to both the taxpayer and the Internal Revenue Service (IRS). It helps ensure that individuals accurately report capital gains or losses on their tax returns.

The form includes essential details about each transaction, such as the date of sale, the type of security sold, the number of shares or units and the sale price. It also provides information on the cost basis, which is the original value of the asset for tax purposes, adjusted for factors like stock splits or dividends.

The information reported on Form 1099-B directly determines the amount of tax the IRS will expect from you, so double-checking it for accuracy is advisable. For instance, capital gains are typically taxed at a lower rate than ordinary income, but failing to report them correctly can lead to penalties. Understanding your capital gains or losses can also help you make informed decisions about your investment strategy and tax planning.

How Form 1099-B Is Reported on Your Taxes

When you receive Form 1099-B, start by determining whether your transactions resulted in a capital gain or loss. A capital gain occurs when you sell a security for more than you paid for it, while a capital loss occurs when you sell for less. Short-term gains, from assets held for one year or less, are taxed at ordinary income rates, while long-term gains, from assets held for more than a year, benefit from lower tax rates. These gains and losses are reported on Schedule D of your tax return.

One of the key elements in reporting transactions on Form 1099-B is the cost basis, which is the original value of the asset adjusted for factors like stock splits or dividends. Brokers often provide this information, but it’s important to verify its accuracy. An incorrect cost basis can lead to overpaying or underpaying taxes. If your broker does not provide a cost basis, you are responsible for calculating it. Keeping detailed records of your purchases and any adjustments can help here.

Who Can File Form 1099-B?

Typically, it is the responsibility of brokers or barter exchanges to file Form 1099-B with the IRS. They must also provide a copy to the taxpayer who engaged in the transaction. If you are an individual investor, you do not need to file this form yourself. Instead, you should receive it from your broker, who is required to report any sales of securities, commodities or other financial instruments to the IRS on your behalf. This ensures that both you and the IRS have a record of your transactions for the tax year.

Brokers are required to send Form 1099-B to their clients by February 15 of the year following the tax year in which the transactions occurred. This timeline allows taxpayers to have all necessary documentation in hand when preparing their tax returns. If you have not received your Form 1099-B by this date, it is advisable to contact your broker to ensure there are no discrepancies or delays.

What to Do With Form 1099-B

Form 1099-B: What Is It, Who Files It and Who Gets It?

While individual taxpayers do not file Form 1099-B, it is recommended that they check the information on it for accuracy. This is the information the IRS will use to determine the tax owed. If the information on the form contains an error, the taxpayer may need to file Form 8949 with accurate information. If the Form 1099-B is correct, the taxpayer can report the capital gains transactions directly on Schedule D.

A Form 1099-B can be complex, especially if you have numerous transactions to report. Many taxpayers find it beneficial to use tax software, which can simplify the process by automatically importing data from your broker and calculating your gains and losses. Alternatively, working with a financial advisor or tax professional can provide personalized guidance and ensure that your filing is accurate and compliant with IRS regulations.

Bottom Line

Form 1099-B is a tax form used to report the proceeds from broker and barter exchange transactions to the IRS. Brokers are responsible for filing Form 1099-B with the IRS and providing a copy to the taxpayer, who then uses this information to report capital gains or losses on their tax return. Taxpayers don’t file Form 1099-B but refer to it to make sure what the broker has reported is accurate because the information can have a significant impact on taxes owed.

Tips for Tax Planning

A financial advisor who has experience with taxes can help you with your planning. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three financial advisors in your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.

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