Form 1099-B: Proceeds From Broker and Barter Exchange Transactions (2010)

What Form 1099-B Is For

If you sold stocks, bonds, or participated in a barter exchange during 2010, you likely received Form 1099-B in the mail. While this tax form might seem intimidating at first glance, understanding what it means and how to use it can help you file your taxes accurately and avoid costly mistakes. This guide breaks down everything you need to know about Form 1099-B for the 2010 tax year using plain language and authoritative information from the IRS.

Form 1099-B is an information return that reports the sale proceeds from investment transactions. Think of it as a receipt that documents what you received when you sold certain financial assets or exchanged goods and services.

Who sends it? Your broker (such as a brokerage firm, bank, or online trading platform) or a barter exchange must send you this form if they handled transactions for you during 2010. These entities act as middlemen, and the IRS requires them to report these transactions to ensure accurate tax reporting.

What transactions does it cover? The form reports several types of transactions:

• Sales of stocks, bonds, and other securities
• Sales of commodities and regulated futures contracts
• Sales of foreign currency contracts
• Forward contracts
• Property or services exchanged through barter exchanges
• Corporate events where you received cash or property due to a change in corporate control or capital structure

The 2010 context: For the 2010 tax year, Form 1099-B primarily reported gross proceeds (the amount you received from the sale). Unlike later years when cost basis reporting became mandatory, brokers in 2010 generally were not required to report your cost basis—what you originally paid for the investment—on this form. This means you had more responsibility to track and report your own cost basis when calculating gains or losses.

When You’d Use Form 1099-B (Including Late and Amended Filings)

Normal filing: You'll use Form 1099-B when preparing your 2010 tax return, which was originally due April 15, 2011 (or October 17, 2011, with an extension). The information from Form 1099-B typically gets transferred to Schedule D (Capital Gains and Losses) on your Form 1040.

When you receive the form: Brokers and barter exchanges were required to send you Copy B of Form 1099-B by February 15, 2011. If you didn't receive your form by late February, you should have contacted your broker to request it.

Missing or late forms: If you never received a Form 1099-B but had qualifying transactions, you're still required to report the income. Contact your broker to obtain the information, or use your own transaction records (confirmation statements, account statements) to report the sales accurately.

Amended or corrected forms: Sometimes brokers discover errors after sending the original form. If your broker sends you a corrected Form 1099-B (which has the "CORRECTED" box checked), you may need to file an amended tax return using Form 1040X if you've already filed. The IRS allows you to amend your return within three years from the date you filed your original return or within two years from the date you paid the tax, whichever is later. IRS General Instructions

Key Rules or Details for 2010

Reporting thresholds and requirements:

• Brokers must file Form 1099-B for non-exempt individuals regardless of the transaction amount
• For barter exchanges with fewer than 100 transactions during the year, reporting is not required
• Individual barter transactions under $1 in fair market value don't need to be reported

Important 2010-specific rules:

Short sales: The IRS announced transitional rules for short sales opened in 2010. Under expected regulations, if you opened a short sale in 2010 but didn't close it until 2011, your broker would not report it on your 2010 Form 1099-B. Instead, it would be reported in 2011 when the transaction closed. This represented a change from previous reporting practices. IRS Instructions 2010

Precious metals: Not all precious metal sales required reporting. Your broker only had to file Form 1099-B if the sale involved metals in a form approved for regulated futures contracts AND the quantity met or exceeded the minimum required to satisfy such a contract. For example, selling a single gold coin typically didn't trigger reporting requirements, even if the coin could technically satisfy a futures contract, because contracts require delivery of at least 25 coins.

Agricultural commodities: Spot sales and forward sales of agricultural commodities (grain, livestock, timber, etc.) were generally exempt from Form 1099-B reporting, with specific exceptions for regulated futures contracts and designated warehouse receipts.

Backup withholding: If you didn't provide your correct Social Security Number or taxpayer identification number to your broker, they were required to withhold 28% of your proceeds as backup withholding. This amount appears in Box 4 of Form 1099-B and can be claimed as a credit on your tax return.

Step-by-Step (High Level)

Step 1: Receive and review your Form 1099-B

When your form arrives (by mid-February 2011 for the 2010 tax year), carefully review all the information. Verify that your name, Social Security Number, and address are correct. Check that the transactions listed match your records.

Step 2: Understand the key boxes

• Box 1a: Date of sale or exchange (the trade date)
• Box 1b: CUSIP number (security identifier)
• Box 2: Gross proceeds—the amount you received from the sale
• Box 3: Bartering income (if applicable)
• Box 4: Federal income tax withheld (backup withholding)
• Box 7: Description of the security or property sold
• Boxes 8-11: Information for regulated futures contracts (if applicable)

Step 3: Gather your cost basis information

Since 2010 Forms 1099-B typically don't include cost basis, you need to determine what you originally paid for the investment. Look for purchase confirmations, brokerage statements from when you bought the security, or previous tax records. Your cost basis may need adjustments for stock splits, dividends reinvested, or commissions paid.

Step 4: Calculate your gain or loss

Subtract your cost basis from the proceeds shown in Box 2. If the result is positive, you have a capital gain. If negative, you have a capital loss. Determine whether the gain or loss is short-term (held one year or less) or long-term (held more than one year) based on your holding period.

Step 5: Report on your tax return

Transfer the information to Form 8949 (Sales and Other Dispositions of Capital Assets) and then to Schedule D of your Form 1040. Form 8949 requires you to list each transaction separately with the description, dates, proceeds, cost basis, and gain or loss.

Step 6: Keep records

Retain your Form 1099-B and supporting documentation for at least three years from the date you file your return. The IRS recommends keeping investment records for even longer to help establish cost basis for future sales.

Common Mistakes and How to Avoid Them

Mistake #1: Not reporting transactions because cost basis isn't shown
Many taxpayers mistakenly believed that if the form didn't show a cost basis, they didn't need to report the transaction. Wrong! Even though 2010 forms generally didn't report cost basis, you're still required to report all sales proceeds and determine the basis yourself. Failure to report can result in the IRS treating the entire proceeds as taxable gain with a zero cost basis.
How to avoid it: Report every transaction shown on Form 1099-B, even if determining cost basis requires digging through old records. If you truly cannot determine the cost basis, consult a tax professional rather than omitting the transaction.

Mistake #2: Confusing proceeds with profit
The amount in Box 2 is the gross proceeds—what you received from the sale—not your taxable profit. Your actual gain or loss depends on subtracting your cost basis from the proceeds.
How to avoid it: Always calculate your gain or loss by finding records of what you paid for the investment. Don't simply report the Box 2 amount as taxable income.

Mistake #3: Incorrectly matching forms to the IRS copy
The IRS receives a copy of your Form 1099-B directly from your broker. If the amounts on your tax return don't match what the IRS has on file, you may receive a notice. Some taxpayers make errors when transcribing information or fail to report all forms received.
How to avoid it: Double-check that the proceeds you report on Schedule D match the Form 1099-B exactly. If you need to make adjustments (such as for wash sales), clearly indicate the adjustment on Form 8949.

Mistake #4: Ignoring wash sale rules
If you sold a security at a loss and purchased substantially identical securities within 30 days before or after the sale, the wash sale rule disallows the loss. For 2010, brokers were not required to calculate wash sales across different accounts, so you needed to track this yourself.
How to avoid it: Review all your investment accounts for wash sales and adjust your cost basis accordingly. The disallowed loss gets added to the cost basis of the replacement security.

Mistake #5: Missing or incorrect Social Security Numbers
If your SSN is missing or incorrect on the form, you may face backup withholding or processing delays. Some taxpayers also fail to check the "2nd TIN Not." box, which indicates the IRS previously notified the broker of a TIN mismatch.
How to avoid it: Provide accurate information to your broker using Form W-9. If you receive a form with an incorrect SSN, request a corrected form immediately.

What Happens After You File

IRS matching process:
After you file your return, the IRS uses automated systems to match the information you reported with the Forms 1099-B they received from brokers. This matching typically occurs several months after the filing deadline.

If everything matches:
You likely won't hear anything from the IRS regarding your Form 1099-B transactions. Your return will be processed normally, and you'll receive any refund due or confirmation that your payment was received.

If there's a discrepancy:
If the IRS finds differences between what you reported and what appears on the Forms 1099-B they received, you'll receive a notice—typically a CP2000 (Proposed Changes to Your Tax Return). This notice shows the discrepancy and proposes additional tax, penalties, and interest if you underreported income.

Responding to notices:
If you receive a CP2000 or similar notice, don't panic. You have the right to respond with an explanation and documentation. Common explanations include: reporting the correct cost basis that wasn't on the form, accounting for wash sales, or demonstrating that you did report the income but it was aggregated differently on your return. Respond by the deadline shown on the notice with copies (not originals) of supporting documents.

Statute of limitations:
Generally, the IRS has three years from the date you file to assess additional tax related to underreported income. However, if you omitted more than 25% of your gross income, this period extends to six years. There's no statute of limitations if you didn't file a return or filed a fraudulent return.

Audit possibilities:
While receiving a Form 1099-B doesn't automatically increase audit risk, significant capital gains or losses, frequent trading activity, or discrepancies between your return and information returns can attract IRS attention. Keep thorough documentation to support your reported figures.

FAQs

Q1: I received multiple Forms 1099-B from the same broker. Do I need to report each one separately?

A: Yes. Each Form 1099-B typically represents a separate transaction or, in some cases, an aggregate of similar transactions (such as regulated futures contracts). Each transaction generally needs to be reported separately on Form 8949, though you may be able to report similar transactions in summary form. The proceeds amounts from all your forms must match what you report on your tax return. IRS Form 1099-B Instructions

Q2: My Form 1099-B shows proceeds from a sale, but I lost money on the investment. Do I still have to pay tax?

A: Not necessarily. While you must report the transaction, you'll calculate a capital loss by subtracting your cost basis from the proceeds. Capital losses can offset capital gains and up to $3,000 of ordinary income. Any excess loss can be carried forward to future tax years. The key is properly documenting your cost basis.

Q3: I participated in a barter exchange and received Form 1099-B. Where do I report this on my tax return?

A: Bartering income shown in Box 3 of Form 1099-B represents the fair market value of goods or services you received. This is generally reported as business income on Schedule C if you're self-employed, or as "Other Income" on your Form 1040 if it was a personal transaction. Consult IRS Publication 525 for detailed guidance on bartering income. IRS Topic 420

Q4: My broker sent me a corrected Form 1099-B after I already filed my tax return. What should I do?

A: Review the corrected form carefully to understand what changed. If the changes affect your tax liability, you should file Form 1040X (Amended U.S. Individual Income Tax Return) to correct your original return. Attach an explanation and include the corrected Form 1099-B information. You have three years from the original filing deadline to file an amendment.

Q5: The amount in Box 2 says "Gross proceeds less commissions." What does this mean?

A: Brokers have the option to report proceeds either as the full gross amount before commissions, or as the gross amount minus commissions and option premiums. The form will indicate which method was used. This doesn't change your ultimate tax calculation because commissions are part of your cost basis adjustment, but you need to ensure you don't double-count the commission deduction.

Q6: I inherited stock and sold it in 2010. How do I determine the cost basis if it's not on Form 1099-B?

A: For inherited property, your cost basis is generally the fair market value of the stock on the date of the decedent's death (or the alternate valuation date if the executor chose that option). You'll need to look at historical stock prices for the date of death or consult the estate's records. Most inherited stock qualifies for long-term capital gains treatment regardless of how long you held it. Consult IRS Publication 559 (Survivors, Executors, and Administrators) for detailed guidance.

Q7: I had backup withholding taken (shown in Box 4). How do I get credit for this on my tax return?

A: The backup withholding amount from Box 4 should be included in the total federal income tax withheld on Line 62 of your 2010 Form 1040 (or the corresponding line for Form 1040A). This withholding is treated the same as tax withheld from wages and will either reduce your tax liability or increase your refund. To prevent future backup withholding, make sure your broker has your correct taxpayer identification number.

Conclusion

Form 1099-B for 2010 serves as a critical bridge between your investment activities and your tax return. While the form itself is issued by brokers and barter exchanges, you as the taxpayer bear the ultimate responsibility for accurately reporting these transactions and calculating your gains or losses. The 2010 tax year represented a transitional period before comprehensive cost basis reporting became mandatory, making record-keeping particularly important.

By understanding what Form 1099-B reports, maintaining thorough records of your cost basis, avoiding common mistakes, and responding promptly to any IRS notices, you can navigate the tax implications of your investment transactions with confidence. When in doubt, consulting with a qualified tax professional can help ensure compliance and potentially identify tax-saving opportunities related to your capital transactions.

For official forms and detailed guidance, visit IRS.gov or call the IRS information reporting customer service at 1-866-455-7438.