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Tax Reporting: Understanding The Codes in Column B of the Form 8949 Worksheet

B: The basis shown in box 3 of Form 1099-B is incorrect. For example a wash sale is unreported on Form 1099-B, because the original purchase was a noncovered security and the replacement purchase is a covered security. The basis reported on Form 1099-B for the covered security will not include the disallowed loss from the sale of the noncovered security.

O: The proceeds shown in box 2 of Form 1099-B is incorrect. For example a covered security is delivered upon the exercise of an put option and the put option was purchased prior to 2011.

T: The type of gain or loss (short-term or long-term) shown in box 8 of Form 1099-B is incorrect. For example a wash sale is unreported on Form 1099-B, because the original purchase was a noncovered security and the replacement purchase is a covered security. The covered security is held for one year or less, but the sum of the holding period for the covered security and the holding period for the noncovered security subject to the wash sale disallowance is greater than one year. The gain or loss will be reported as short-term on Form 1099-B, but the transaction will be reported on Part II (Long-Term)of the Form 8949 Worksheet with Code T in column B.

W: You have a nondeductible loss from a wash sale.

Circular 230 Notice: These statements are provided for information purposes only, are not intended to constitute tax advice which may be relied upon to avoid penalties under any federal, state, local or other tax statutes or regulations, and do not resolve any tax issues in your favor.

 

Tax Reporting: Form 1042-S Availability

The form will be available to you by March 15th and is located in the Tax Forms section of Account Management.

Circular 230 Notice: These statements are provided for information purposes only, are not intended to constitute tax advice which may be relied upon to avoid penalties under any federal, state, local or other tax statutes or regulations, and do not resolve any tax issues in your favor.

Tax Reporting: Where Tax Withheld is Sent

Interactive Brokers remits the tax withheld to the U.S. Treasury.

Circular 230 Notice: These statements are provided for information purposes only, are not intended to constitute tax advice which may be relied upon to avoid penalties under any federal, state, local or other tax statutes or regulations, and do not resolve any tax issues in your favor.

 

Tax Reporting: Availability of K-1s from Publicly Traded Partnerships (PTP) and Royalty Trusts

K-1s are prepared and distributed by the individual partnership or trust.  IB does not have access to these documents.  Most PTPs and Royalty Tusts have investor contact phone lines through which you can obtain this information; additionally many have investor websites from which you can download your information.

Circular 230 Notice: These statements are provided for information purposes only, are not intended to constitute tax advice which may be relied upon to avoid penalties under any federal, state, local or other tax statutes or regulations, and do not resolve any tax issues in your favor.

Tax Reporting: Tax Consequences of a Wash Sale

Losses from wash sales are not deductible when they occur.  Any disallowed loss should be added to the cost basis of the newly acquired security.  The disallowed loss will be reflected in the calculation of gain or loss when these shares are sold.  If you think you may have entered a wash sale, please consult your tax professional for more information.

Circular 230 Notice: These statements are provided for information purposes only, are not intended to constitute tax advice which may be relied upon to avoid penalties under any federal, state, local or other tax statutes or regulations, and do not resolve any tax issues in your favor.

Tax Reporting: Long-Term Capital Gains

Long-term capital gains are capital gains earned on the sale of securities held for more than 1 year.  The date a security is acquired is the trade date +1 and the date of sale is the trade date.  Net long-term capital gains are eligible to be taxed at favorable tax rates.

Circular 230 Notice: These statements are provided for information purposes only, are not intended to constitute tax advice which may be relied upon to avoid penalties under any federal, state, local or other tax statutes or regulations, and do not resolve any tax issues in your favor.

Tax Reporting: Short-term Capital Gains

Short-term capital gains are capital gains earned on the sale of securities held for up to 1 year.  The date a security is acquired is the trade date +1 and the date of sale is the trade date.

Circular 230 Notice: These statements are provided for information purposes only, are not intended to constitute tax advice which may be relied upon to avoid penalties under any federal, state, local or other tax statutes or regulations, and do not resolve any tax issues in your favor.

Tax Reporting: Foreign Tax Paid as a Foreign Tax Credit or as a Deduction

Treatment of foreign tax withheld as a foreign tax credit or as a deduction depends upon the tax situation of each shareholder. IRS Publication 514, “Foreign Tax Credit for Individuals” and the instructions for Schedule A “Itemized Deductions” and Form 1116 “Foreign Tax Credit” provide more specific guidance. We also recommend that you consult IRS Publication 514, “Foreign Tax Credit for Individuals”, for additional information on this subject. Please consult your tax professional for any additional information and determination of the appropriate treatment for your tax situation.

Circular 230 Notice: These statements are provided for information purposes only, are not intended to constitute tax advice which may be relied upon to avoid penalties under any federal, state, local or other tax statutes or regulations, and do not resolve any tax issues in your favor.

Tax Reporting: Return of Capital (ROC) in an Account

IB will report ROC distributions to shareholders as nontaxable distributions on Form 1099-DIV, "Dividends and Distributions". Please note that this information is often not available until after the initial 1099 forms are made available to you. Once the information is available IB will issue corrected 1099s to you. We suggest that you check your tax forms in Account Management – Tax Forms prior to filing your return to verify that you have used the most current information.

Circular 230 Notice: These statements are provided for information purposes only, are not intended to constitute tax advice which may be relied upon to avoid penalties under any federal, state, local or other tax statutes or regulations, and do not resolve any tax issues in your favor.

Tax Reporting: What is the purpose of the Forms 1099?

Forms 1099 are a series of U.S. tax information returns which report income earned such as interest, dividends, proceeds from securities and commodities sale transactions, and other reportable payments posted to your account during a calendar year. These reports, which are supplied to the IRS, provide information, which should be used in preparing your tax return. For example, dividends and interest, are reported on IRS Form 1040, "U.S. Individual Income Tax Return", Schedule B. Sales transactions are to be reported on IRS Form 1040, "U.S. Individual Income Tax Return", Schedule D.  The information from these forms is included in your consolidated Form 1099.

Information on reporting gains and losses, including determining the cost basis can be obtained by reading IRS Publications 544, "Sales and Other Dispositions of Assets", and 551, "Basis of Assets". We recommend you consult your tax professional with specific questions.

All of the IRS forms and publications referenced above are available on line at www.IRS.gov/formspubs.

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.

 

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