Form 1099-B: Proceeds From Broker and Barter Exchange Transactions (2013)

What Form 1099-B Is For

Form 1099-B is an information return that brokers and barter exchanges use to report sales of stocks, bonds, commodities, and other investments you made during the year. Think of it as a receipt from your broker showing what you sold and for how much—information the IRS needs to ensure you properly report capital gains or losses on your tax return.

If you sold 100 shares of Apple stock through your brokerage account in 2013, your broker sent you (and the IRS) a Form 1099-B showing the sale date, proceeds, and possibly the cost basis. Similarly, if you traded services through a barter exchange—say, exchanging accounting services for plumbing work—that exchange would issue you a Form 1099-B reporting the fair market value of what you received.

The form serves two audiences: individual taxpayers who receive Copy B to prepare their tax returns, and the IRS, which receives Copy A to verify that investment income gets properly reported. For 2013, this form became increasingly important as new rules required brokers to report more detailed information about certain securities, including cost basis and whether gains or losses were short-term or long-term.

When You’d Use Form 1099-B

Filing Deadlines (Late Filing/Amended Returns)

If you're a broker or barter exchange, you were required to file Form 1099-B with the IRS by February 28, 2014 (for paper filers) or March 31, 2014 (for electronic filers). You also had to furnish Copy B to recipients by February 18, 2014—a special extended deadline for Forms 1099-B compared to other 1099 forms.

Late or Missed Filings

Late or missed filings aren't hopeless. If you realized you needed to file additional forms after the deadline, you could submit them with a new Form 1096 transmittal. Just don't include information from previously filed returns—only the new ones. If you were required to file 250 or more forms electronically but didn't, you could have requested a hardship waiver using Form 8508, though this had to be submitted at least 45 days before the due date.

Corrected Returns

Corrected returns follow specific rules. If you discovered an error after filing—perhaps you reported the wrong proceeds amount or incorrect taxpayer identification number—you must file a corrected Form 1099-B marked "CORRECTED" at the top. The IRS required corrections within 30 days of discovering certain errors, particularly when receiving new information like transfer statements or issuer statements. However, if you discovered the error more than three years after filing the original form, corrections generally weren't required. Recipients should receive corrected statements showing what changed, helping them amend their own tax returns if necessary.

Extensions

Extensions were available through Form 8809, which granted an automatic 30-day extension with no explanation required. Under certain hardship conditions, an additional 30-day extension could be obtained, giving filers up to 60 extra days total.

Key Rules or Details for 2013

Covered vs. Noncovered Securities

The 2013 tax year represented a transition period in investment reporting, with several critical distinctions between "covered" and "noncovered" securities shaping how brokers reported transactions.

Covered vs. Noncovered Securities: The most important concept for 2013 was understanding covered securities—generally, stocks purchased for cash in an account after 2010, or mutual fund shares acquired after 2011. For covered securities, brokers had to report detailed information including acquisition date (Box 1b), whether the gain/loss was short-term or long-term (Box 1c), cost basis (Box 3), and any wash sale loss disallowances (Box 5). For noncovered securities (older stocks or those falling outside coverage rules), brokers could check Box 6a and leave those detailed boxes blank, avoiding penalties for incorrect reporting of that information.

Multiple Forms for Single Transactions

Multiple forms for single transactions: If you sold shares bought on different dates in a single transaction, your broker might have issued multiple Forms 1099-B—one for short-term covered securities, another for long-term covered securities, and possibly a third for noncovered securities. This ensured proper tax treatment for each lot.

Short Sale Reporting

Short sale reporting: Short sales entered into after 2010 weren't reported until the year you delivered securities to close the position. The form showed the delivery date as the sale date, the acquisition date of the security delivered, and whether the gain/loss was short-term or long-term based on that delivered security's holding period.

Who Must File

Who must file: Brokers had to file for customers who sold stocks, bonds, commodities, futures contracts, foreign currency contracts, or received cash/property from certain corporate restructurings. Barter exchanges filed for members exchanging property or services worth $1 or more. Notable exceptions included sales for corporations (with some exceptions for S corporations selling covered securities acquired after 2011), sales for exempt recipients like charities and IRAs, and certain small fractional share sales under $20.

Electronic Filing Threshold

Electronic filing threshold: Any broker or exchange filing 250 or more Forms 1099-B had to file electronically through the IRS Filing Information Returns Electronically (FIRE) system—paper filing those returns could trigger penalties. The 250-return threshold applied separately to each form type and to original versus corrected returns.

Step-by-Step (High Level)

For Brokers and Barter Exchanges (the Filers)

1. Gather transaction data throughout the year for each customer, tracking sales dates, proceeds, basis information, and identifying whether securities are covered or noncovered.
2. Separate transactions appropriately: For covered securities sold in a single transaction but with different holding periods, prepare separate forms for short-term and long-term positions. Report each non-futures transaction on a separate form.
3. Complete the form boxes: Enter the payer (broker) and recipient (customer) information, including taxpayer identification numbers. Fill in Box 1a (date of sale), Box 2a (gross proceeds), and for covered securities, Boxes 1b (acquisition date), 1c (short-term or long-term), Box 3 (cost basis), and Box 5 (wash sale losses if applicable). For noncovered securities, check Box 6a.
4. Apply for electronic filing if needed using Form 4419 at least 30 days before the due date, or request a waiver using Form 8508 at least 45 days ahead if electronic filing poses hardship.
5. File with the IRS by February 28, 2014 (paper) or March 31, 2014 (electronic), using Form 1096 as a transmittal for paper returns. Group forms by type—all 1099-Bs together with one Form 1096.
6. Furnish recipient copies by February 18, 2014, giving customers Copy B for their tax records.

For Investors (the Recipients)

1. Receive your Form 1099-B from each broker or barter exchange by mid-February 2014.
2. Review for accuracy: Check that your name, taxpayer identification number, transaction details, and amounts match your records.
3. Transfer information to your tax return: Use the data to complete Form 8949 (Sales and Other Dispositions of Capital Assets) and Schedule D (Capital Gains and Losses) on your Form 1040. Box 2a proceeds go in one column, Box 3 basis in another, with the difference being your gain or loss.
4. Handle wash sales carefully: If Box 5 shows a wash sale loss disallowance (you sold at a loss and repurchased substantially identical securities within 30 days), that loss cannot be claimed currently—it gets added to the basis of the replacement shares.
5. Request corrections if you spot errors, contacting your broker to issue a corrected form. This helps you file an accurate return or amend a previously filed one.

Common Mistakes and How to Avoid Them

Mistake #1: Incorrectly handling the "CORRECTED" box

Many filers confuse "CORRECTED" and "VOID." If you haven't submitted a form yet and make a typing error, mark it "VOID"—don't use "CORRECTED." The CORRECTED box is only for fixing forms already sent to the IRS. Send the entire page to the IRS even if some forms are void; just don't cut or separate multi-form sheets.

Mistake #2: Failing to check Box 6a for noncovered securities

If you're reporting a noncovered security and don't check Box 6a, you become subject to penalties under IRC sections 6721 and 6722 for any errors in Boxes 1b, 1c, 3, or 5—even though those boxes aren't required for noncovered securities. Always check Box 6a when reporting noncovered securities if you're leaving those boxes blank or are unsure of their accuracy.

Mistake #3: Missing the 30-day correction window

When brokers receive transfer statements or issuer statements after filing showing they reported incorrectly, they must file corrections within 30 days. Missing this window can mean penalties for late correction. Set up systems to track when new information arrives and calendar the 30-day deadline immediately.

Mistake #4: Taxpayer identification number (TIN) errors

Name/TIN mismatches are among the most common errors. Always verify TINs using Form W-9 from customers. If the IRS notifies you twice within three calendar years of an incorrect TIN, mark the "2nd TIN not." box on subsequent forms to avoid continued notices—but keep trying to get the correct TIN.

Mistake #5: Improper form format for paper filing

Handwritten forms must be completely legible in block print—script causes scanning errors. Never photocopy forms; only use official IRS forms or approved substitutes. Don't cut or separate forms printed two or three to a sheet. Remove pinfeed strips but don't tear the forms. Type in 12-point Courier font in black ink, entering money amounts without dollar signs but with decimals (e.g., "5000.00" not "$5,000").

Mistake #6: Using the wrong tax year form

Always use the 2013 form for 2013 transactions. Scanners read the year on the form, so using an old or future year form causes processing errors even if you write the correct year elsewhere.

What Happens After You File

For Brokers and Filers

After you file, the IRS processes forms through scanning technology that reads Copy A. Any format problems, missing required information, or TIN mismatches generate notices. You might receive CP2100 or CP2100A notices about TIN mismatches, requiring you to solicit correct TINs from customers and possibly begin backup withholding (withholding 28% of proceeds) on future payments if customers don't provide valid TINs.

The IRS matches reported information against tax returns filed by recipients. If a taxpayer's Schedule D doesn't reflect proceeds shown on Forms 1099-B, this triggers computerized matching notices (CP2000) to the taxpayer, questioning the underreported income. These notices can come 12-18 months after filing—long after tax season ends.

Penalty Assessments

Penalty assessments may arrive if you filed late, incorrectly, or not at all. The IRS generally has three years from the filing date to assess penalties for information return failures. For 2013, penalties ranged from $50 to $100 per form depending on when corrections were made (within 30 days, within August 1, or later), up to annual maximums.

For Investors

For investors: After receiving your Form 1099-B, you incorporate the information into your tax return. The IRS compares what your broker reported against what you claim. Mismatches generate correspondence notices asking you to explain discrepancies or pay additional tax. Having organized records—keeping Forms 1099-B with confirmation statements and cost basis documentation—makes responding easier.

If you receive a corrected Form 1099-B after filing your return, you may need to file Form 1040X (Amended U.S. Individual Income Tax Return) to correct your reported capital gains or losses. Generally, you have three years from the original filing deadline to amend and claim refunds from overpaid taxes.

FAQs

1. What's the difference between gross proceeds and net proceeds in Box 2a?

For 2013 sales, brokers could choose to report either gross proceeds or gross proceeds reduced by commissions and transfer taxes, as long as their approach was consistent with their books. A checkbox in Box 2a indicates which method was used. If "Gross proceeds" is checked, you'll need to separately account for commissions when calculating your gain or loss. If "Gross proceeds less commissions and option premiums" is checked, those costs are already subtracted. This distinction changed after 2013, with standardized requirements phasing in.

2. Do I get a Form 1099-B for every stock sale?

Generally yes, with exceptions. Brokers don't have to report sales for corporations, tax-exempt organizations, retirement accounts (IRAs, HSAs), or government entities. They also skip reporting fractional share sales under $20, certain foreign person sales, and transactions by dealers acting as principal. But if you sold stocks as an individual through a regular brokerage account, you should receive a Form 1099-B for each transaction (or group of transactions for futures contracts).

3. What is a wash sale, and why does Box 5 matter?

A wash sale occurs when you sell a security at a loss and buy substantially identical securities within 30 days before or after the sale. The loss is disallowed currently—you can't claim it to reduce your taxes this year. Instead, Box 5 shows the disallowed amount, which gets added to the basis of the replacement shares you bought. This defers the loss until you eventually sell those replacement shares without triggering another wash sale. For 2013, brokers only had to track wash sales for covered securities within the same account—they weren't required to track across different accounts or related accounts.

4. My Form 1099-B shows a cost basis, but I know it's wrong. What should I do?

First, verify whether the security was covered or noncovered by checking Box 6a. If it's noncovered (box checked), the broker wasn't required to report basis accurately—you're responsible for determining correct basis using your records. If it's a covered security and Box 6b is checked (indicating basis was reported to the IRS), you should still use the correct basis on your tax return, but attach an explanation to Form 8949 describing the adjustment. Contact your broker to request a corrected form if the error significantly affects their records.

5. Can I report all my investment sales on one Form 1099-B that I create myself?

No. Only brokers and barter exchanges file Forms 1099-B with the IRS. As an investor, you report the information from Forms 1099-B you receive onto your own tax forms (Form 8949 and Schedule D). Don't create or file Form 1099-B yourself. If your broker failed to issue you a form, contact them for the required documentation. If they've gone out of business, reconstruct your records from trade confirmations and account statements.

6. What if I receive Form 1099-B in 2014 for a sale I made in 2012?

The form should show 2012 in the tax year box, indicating this is late reporting for the 2012 tax year. If you already filed your 2012 return without including this transaction, you may need to file Form 1040X to amend that return. You generally have three years from the original return's due date to amend, so a 2012 return filed in April 2013 could be amended until April 2016. Late Forms 1099-B from brokers don't extend your amendment deadline—the clock started when you filed your original return.

7. My broker is based overseas. Should I still get Form 1099-B?

It depends. Foreign brokers generally aren't required to file U.S. Forms 1099-B unless they have U.S. operations or the sale occurred through a U.S. office. However, you're still required to report all sales and capital gains on your U.S. tax return regardless of whether you receive a Form 1099-B. Keep detailed records of all foreign investment transactions. You may also need to file FinCEN Form 114 (FBAR) or Form 8938 if you have significant foreign financial accounts or assets.

Additional Resources

For more information and official instructions, visit the IRS website at IRS.gov or refer to the 2013 Instructions for Form 1099-B available at https://www.irs.gov/pub/irs-prior/i1099b--2013.pdf.