Reported 1099-B Reconciliation Challenges and Solutions for 2011 - by Broker
Below is a list of known issues or facts that we have had reported about various broker 1099-B reports. Please be aware of these factors if you are having difficulties reconciling your trade history. Remember, brokers have been asked to do something almost impossible in what they have to report, therefore there are many differences and some areas are matters of interpretation. Our goal is to help you be aware of why your 1099-B may report things they way it does, and try to help resolve reconciliation challenges.
Charles Schwab
- Charles Schwab does not segregate trades by covered and non-covered on the 1099-B. Nor do they provide totals of the reported cost basis for covered securities. This was not required by the IRS for 2011 reporting. Therefore you may need to go line by line through the sections to total up only covered security cost basis in order to get reconciliation totals. Schwab recommends that you export their RGL data from schwab.com into an Excel spreadsheet and manually add the covered/uncovered indicator from your 1099-B. You can then sort the data and subtotal it. Starting with tax year 2012, Schwab will segregate trades by covered and non-covered on the Form 1099-B.
- Schwab is also adjusting wash sale adjustments to the Sale price of short sales which triggered the wash. According to the guidance we have received - see references at the end of this note. IRS instructions for Form 8949 say wash sales always adjust the cost basis of a trade. This difference in adjustment may cause gross proceeds to not reconcile in TradeLog. (See Internal Revenue Code Section 1091, IRS Publication 550 p.60, and IRS 1099-B Instructions.) Unless the broker amends the 1099-B you will not be able to reconcile gross sales in TradeLog, it may be wise to file a footnote with your return explaining the difference to the IRS or to speak with a tax advisor on possibly adjusting the sales on Form 8949. Charles Schwab is aware of this matter and is reviewing their guidance. At this point in time we remind users that you are responsible for your final tax reporting being accurate, so please make needed decisions and adjustments accordingly.
- Schwab reports short sales that were entered into prior to 2011 and includes the sale amounts in the gross proceeds. When reconciling 1099-B TradeLog subtracts short sales prior to 2011 because most brokers do not report those (it was not required by the IRS). Therefore if you have a large negative discrepancy in gross proceeds/sales, check the amount of open short sales from the previous year that are being adjusted and that may account for the difference.
Etrade
- Etrade reports short sales that are closed at a loss as closed on the settlement date. This is correct according to IRS Publication 550. If you have a short sale that closed in the last few days of the year, it likely didn't settle until the next year. If the close created a loss, then you need to adjust the close date in TradeLog to match the settlement date.
- Etrade is adjusting sales for option premiums. However we have seen where they did not do this if the sale was an uncovered trade. This may cause some discrepancy in gross proceeds reconciliation (usually a positive difference).
Fidelity
- Fidelity does not segregate trades by covered and non-covered or short-term and long-term, rather they report in one combined section. Nor do they provide totals of the reported cost basis for covered securities. This requires clients to manually go through reporting line by line to total up the reported cost basis numbers for reconciliation purposes. We recommend clients contact Fidelity and ask if they can provide them with the total cost basis numbers reported to the IRS for short-term and long-term securities. Otherwise you will need to go line-by-line to add these up in order to be able to reconcile the cost basis with TradeLog.
- Fidelity is also adjusting wash sale adjustments to the Sale price of short sales which triggered the wash. This is incorrect based on all guidance we have received from the IRS. The IRS says wash sales always adjust the cost basis of a trade. This causes gross proceeds to not reconcile in TradeLog. (See Internal Revenue Code Section 1091, IRS Publication 550 p.60, and IRS 1099-B Instructions.) Unless the broker amends the 1099-B you will not be able to reconcile gross sales in TradeLog, it may be wise to file a footnote with your return explaining the difference to the IRS.
- Some ETFs are reported as both covered and non-covered by Fidelity as a result of CUSIP changes. This may require users to force code some of the trades to report on the correct form.
Interactive Brokers
- Interactive Brokers adjusts gross sales for option premiums, if you had exercised options please make sure and check that box in the 1099-B Details in TradeLog.
- For Interactive Brokers clients who have trades in foreign currencies, we are not clear how IB is reporting currency conversion for each trade on the 1099-B. We have seen small differences that can affect reconciliation.
- Interactive Brokers appears to be reporting the date of short sales as the same date of the buy to cover, this can make it difficult to understand their 1099-B and may also affect wash sales and holding period.
OptionsXpress
- We have seen examples where OptionsXpress has duplicated all or many of the trades reported on the 1099-B. A new 1099-B needs to be requested in such cases.
- In some cases OptionsXpress is also adjusting wash sale adjustments to the Sale price of short sales which triggered the wash. This is incorrect based on all guidance we have received from the IRS. The IRS says wash sales always adjust the cost basis of a trade. This causes gross proceeds to not reconcile in TradeLog. (See Internal Revenue Code Section 1091, IRS Publication 550 p.60, and IRS 1099-B Instructions.) Unless the broker amends the 1099-B you will not be able to reconcile gross sales in TradeLog, it may be wise to file a footnote with your return explaining the difference to the IRS.
Penson
- We have seen examples where Penson reported securities as not-covered which, by all IRS definitions, should be covered. We are not sure why. If you have this occur please contact Penson or your broker and have them check if the 1099-B is correct and why.
- For some accounts Penson reported short sales incorrectly - listing the sale amounts in the cost basis column, and the cost basis in the sale price column, this causes the resulting wash sale adjustments they make to be incorrect also. If this occurs you must request your broker to amend the 1099-B or else their reporting to the IRS will not correctly represent either your sales or cost basis.
TD Ameritrade
- TD Ameritrade reports most ETFs as covered, however some ETFs may be reported as uncovered and thus should be adjusted in TradeLog.
TradeStation
- Many TradeStation users have reported that they had major discrepancies on the 1099-B and after contacting TradeStation they were informed that they are scheduled to receive an amended 1099-B. Before spending too much time reconciling discrepancies you may want to contact TradeStation to see if you are scheduled for such an amendment.
- TradeStation is adjusting wash sale adjustments to the Sale price of short sales which triggered the wash. This is incorrect based on all guidance we have received from the IRS. The IRS says wash sales always adjust the cost basis of a trade. This causes gross proceeds to not reconcile in TradeLog. (See Internal Revenue Code Section 1091, IRS Publication 550 p.60, and IRS 1099-B Instructions.) Unless the broker amends the 1099-B you will not be able to reconcile gross sales in TradeLog, it may be wise to file a footnote with your return explaining the difference to the IRS. Typically if this is occurring in your account you will see more sales reported in TradeLog than on the 1099-B.
- TradeStation is often reporting all short sales as covered on the settlement date regardless of whether the trade closed at a gain or a loss. The IRS says that only short sales that close at a loss are reported on the settlement date. If you have short sales that were covered in the last few days of the year it is possible that TradeStation did not report them for that tax year and this can cause TradeLog to report more sales than TradeStation. (See IRS Publication 550 p. 59).
