Tax Reporting: Equity and Index Options Transactions
Equity options and equity index options are options to buy or sell stock valued by reference to an equity or narrow-based security index. Proceeds from the sale of equity options, both puts and calls (options that entitle the purchaser to sell or buy equity shares) and equity index options are not required to be reported on Form 1099. However, proceeds associated with the exercise and assignment of equity options is reportable on Form 1099-B. Please consult your tax advisor for additional information and guidance in this area.
In compliance with Treasury Department Circular 230, unless stated to the contrary, any information contained in this FAQ was not intended or written to be used and cannot be used for the purpose of avoiding tax penalties that may be imposed on any taxpayer.
Tax Reporting: Does IBKR support Average Cost method for calculating cost basis?
No. Average cost strictly applies to mutual funds and dividend reinvestment plans and cannot be used to calculate cost basis for individual securities.
In compliance with Treasury Department Circular 230, unless stated to the contrary, any information contained in this FAQ was not intended or written to be used and cannot be used for the purpose of avoiding tax penalties that may be imposed on any taxpayer.
Tax Reporting: How often may I change the tax basis method on my account?
You may change the tax basis methodology at any time by logging into Account Management and accessing the Tax Basis Declaration page in the Report Management menu. When you change the Tax Basis Declaration, the new methodology applies to trades made after the change; it does not affect existing trades.
By default, the tax basis methodology is set to First In, First Out (FIFO). Choose from First In, First Out (FIFO), Last In, First Out (LIFO), or Maximize Losses (ML). The tax basis declaration will appear in the Code column on your Activity Statement for trades where a methodology other than FIFO has been applied.
In compliance with Treasury Department Circular 230, unless stated to the contrary, any information contained in this FAQ was not intended or written to be used and cannot be used for the purpose of avoiding tax penalties that may be imposed on any taxpayer.
Tax Reporting: What is the difference between FIFO and LIFO cost basis methods?
FIFO is the default accounting method used by the IRS for most taxpayers, unless another method is chosen prior to the sale of a security. FIFO cost basis method assumes the first shares you sell are matched with the first shares you purchased. LIFO assumes the first shares you sell are matched with the shares you purchased last. IBKR allows you to change the tax basis on your account but defaults to FIFO for assets sold from your account. See FAQ: How often may I change the tax basis method on my account?
In compliance with Treasury Department Circular 230, unless stated to the contrary, any information contained in this FAQ was not intended or written to be used and cannot be used for the purpose of avoiding tax penalties that may be imposed on any taxpayer.
Tax Reporting: What other statements does IBKR offer at the end of the year?
For all clients, IBKR provides an Annual Statement and a Dividend Report.
Your Annual Statement shows trade detail for your account gain and loss on a First In, First Out (FIFO) and a Mark-to-Market (MTM) matching basis or the specific method of tax accounting selected for your account. Your Dividend Report shows account detail for all dividends, and payments in lieu of dividends, as well as withholding on these amounts.
US clients are also provided with a Gain/Loss Summary Worksheet and a Gain/Loss Worksheet for 1256 Contracts. See the relevant FAQ for a description of the Gain/Loss Summary Worksheet.
The Gain/Loss Worksheet for 1256 Contracts shows detail on mark-to-market profit and loss for sales of equity options, futures (excluding single stock futures) and future options in your account.
For further explanations of these statements on the IB website, from the PRODUCTS menu select Tax Information and Reporting, and see the US Persons and Entities tab. Your statements are accessible from our website by logging in to Client Portal and accessing the Tax section of the Reports menu.
In compliance with Treasury Department Circular 230, unless stated to the contrary, any information contained in this FAQ was not intended or written to be used and cannot be used for the purpose of avoiding tax penalties that may be imposed on any taxpayer.
Tax Reporting: Does IBKR offer a Gain/Loss Worksheet?
Yes. At calendar year-end, IBKR provides a Gain/Loss Summary Worksheet showing trade gain and loss detail for all securities (stocks, options, single stock futures and bonds) for the year. The summary worksheet is available by logging in to Client Portal and accessing the Reports > Tax menu.
Transactions are split into two parts: Short-Term Capital Gains and Losses, and Long-Term Capital Gains and Losses. All attempts have been made to tie total proceeds shown on this worksheet to your Form 1099-B total proceeds, however discrepancies may exist. Proceeds are reported net of all commissions. Gains and losses are calculated using First In, First Out (FIFO), Last In, Last Out (LIFO) or a Maximize Losses (ML) methodology, whichever method has been selected by the user for a particular trade.
We suggest that you review this summary worksheet carefully and verify its contents. Please consult your tax advisor if you have any questions regarding tax reporting.
In compliance with Treasury Department Circular 230, unless stated to the contrary, any information contained in this FAQ was not intended or written to be used and cannot be used for the purpose of avoiding tax penalties that may be imposed on any taxpayer.
Tax Reporting: Where can I access account details associated with my transaction gains and losses?
Detailed information is available on your daily, monthly and annual statements accessed by logging in to Client Portal.
In Client Portal click the Reports > Statements menu. When you run a statement you have the option to format the information in HTML, PDF or CSV format for import to various applications including Captools, Tradelog, GainsKeeper, MS Money, Excel or Quicken to facilitate your gain and loss calculations.
If you need assistance downloading your statements, please contact the Client Service Service Center.
In compliance with Treasury Department Circular 230, unless stated to the contrary, any information contained in this FAQ was not intended or written to be used and cannot be used for the purpose of avoiding tax penalties that may be imposed on any taxpayer.
Tax Reporting: How Gross Proceeds Reported on 1099-B Relate to Gains or Losses
In compliance with Treasury Department Circular 230, unless stated to the contrary, any information contained in this FAQ was not intended or written to be used and cannot be used for the purpose of avoiding tax penalties that may be imposed on any taxpayer.
Tax Reporting: Is there a statement that shows my realized and unrealized profit and loss?
Yes. This information is available by logging in to Client Portal and selecting the Reports > Statements menu option.
In compliance with Treasury Department Circular 230, unless stated to the contrary, any information contained in this FAQ was not intended or written to be used and cannot be used for the purpose of avoiding tax penalties that may be imposed on any taxpayer.
Tax Reporting: What is the difference between realized and unrealized profit and loss?
An unrealized profit or loss (also known as a paper profit or loss) occurs when a security increases or decreases in value above (profit) or below (loss) the price paid for that security. A realized profit or loss occurs when you sell the security. The difference between the price at which the security was purchased and the price at which the security was sold is the realized profit or loss.
For regulated futures contracts, realized profit and loss is the actual aggregate profit or loss recognized over the course of the year from transactions in commodity futures and currency futures contracts on a mark-to-market basis, and is reported in box 13 of Form 1099-B for noncovered securities.
Refer to IRS Publication 550, Investment Income and Expenses, and Publication 551, Basis of Assets for details on reporting gains and losses, including determining cost basis. Additional information is provided in the instructions to IRS Form 6781 and the Instructions to Schedule D (and Form 8949). Consult your tax advisor for further guidance.
In compliance with Treasury Department Circular 230, unless stated to the contrary, any information contained in this FAQ was not intended or written to be used and cannot be used for the purpose of avoiding tax penalties that may be imposed on any taxpayer.
