Form 1099-B: Proceeds From Broker and Barter Exchange Transactions (2015)
What Form 1099-B Is For
Form 1099-B is an information return that brokers, barter exchanges, and certain other financial institutions use to report sales of stocks, bonds, commodities, and other securities to both you and the Internal Revenue Service. Think of it as a receipt that documents your investment transactions for the year—every time you sell stocks, bonds, mutual funds, or exchange goods or services through a barter network, this form captures the details.
The form reports the "gross proceeds" (the total amount you received from the sale before considering what you originally paid), and for many securities purchased after 2010, it also reports your "cost basis" (what you paid for the investment). This information helps you and the IRS determine whether you made a profit or loss on your investments, which affects your tax bill. Brokers must provide you with Copy B by February 16, 2016 for 2015 transactions, and they must file Copy A with the IRS by February 29, 2016 (paper) or March 31, 2016 (electronic filing).
When You’d Use Form 1099-B
For Taxpayers (Late or Amended Filing)
As a taxpayer receiving Form 1099-B, you'll use the information to complete Form 8949 (Sales and Other Dispositions of Capital Assets) and Schedule D (Capital Gains and Losses) when filing your income tax return. If you discover errors on your Form 1099-B after receiving it, contact your broker immediately to request a corrected form.
For Brokers and Financial Institutions (Corrections, Penalties, Extensions)
For brokers and financial institutions, if you discover you've reported incorrect information to the IRS, you must file a corrected Form 1099-B within 30 days of discovering the error or receiving information (like a transfer statement) indicating the original form was incorrect. However, if more than 3 years have passed since you filed the original form, you're not required to file a correction. Late filing or failure to file can result in penalties ranging from $50 to $270 per form, depending on how late the filing is, with maximum annual penalties reaching $3,218,500 for large businesses.
If you need more time to file as a broker, you can request an automatic 30-day extension by filing Form 8809 (Application for Extension of Time To File Information Returns) by the original due date. Under hardship conditions, you may request an additional 30-day extension.
Key Rules for 2015
Covered vs. Noncovered Securities
The 2015 tax year included several important reporting distinctions that brokers needed to follow:
Covered vs. Noncovered Securities: This is perhaps the most significant rule for 2015. "Covered securities" are investments for which brokers must report both the proceeds and the cost basis to the IRS. These include stocks acquired for cash after 2010, mutual fund shares acquired after 2011, and certain debt instruments acquired after 2013. "Noncovered securities" are older investments or those that don't meet the covered security criteria—for these, brokers must report the sale proceeds but aren't required to report cost basis. When reporting noncovered securities, brokers could check Box 5 on Form 1099-B and leave boxes for acquisition date, basis, and gain/loss type blank without facing penalties.
Wash Sale Reporting
Wash Sale Reporting: Brokers must report wash sale loss disallowances when a taxpayer sells securities at a loss and then purchases substantially identical securities within 30 days before or after the sale, all within the same account and with the same CUSIP number. The disallowed loss gets added to the basis of the replacement securities. Brokers enter "W" in Box 1f and report the disallowed loss amount in Box 1g. This rule prevents investors from claiming tax losses while maintaining their investment position.
Separate Reporting Requirements
Separate Reporting Requirements: Each transaction must be reported on a separate Form 1099-B unless it involves regulated futures, foreign currency, or Section 1256 option contracts, which can be reported on an aggregate basis. Furthermore, even within a single transaction, if you sold both covered securities with short-term gain/loss and covered securities with long-term gain/loss, these must be reported on separate forms.
Short Sales
Short Sales: For short sales entered into after 2010, reporting occurs only in the year the customer delivers a security to close the short sale position, not when the short position was initially opened. The acquisition date reported is the date of the security delivered to close the short sale.
Step-by-Step (High Level)
For Taxpayers (Recipients)
1. Receive your Form 1099-B
By mid-February following the tax year—your broker must send it to you by February 16, 2016 for 2015 transactions.
2. Review for accuracy
Check that all transactions are listed, amounts match your records, and your personal information is correct.
3. Organize by transaction type
Separate short-term transactions (securities held one year or less) from long-term (held more than one year), and covered from noncovered securities.
4. Transfer information to Form 8949
Enter each transaction in the appropriate section based on whether it's reported as covered or noncovered and whether the holding period is short or long-term.
5. Complete Schedule D
Total your gains and losses from Form 8949 and calculate your net capital gain or loss.
6. Report on Form 1040
Include your net capital gain or loss on your individual income tax return.
For Brokers and Filers
1. Track all customer transactions
Throughout the year, maintain detailed records of dates, amounts, security identifiers (CUSIP numbers), and whether securities are covered or noncovered.
2. Calculate cost basis
For covered securities, take into account any adjustments for wash sales, return of capital, reorganizations, or other events.
3. Determine holding periods
Classify each sale as short-term or long-term based on acquisition and sale dates.
4. Prepare separate forms
For each transaction (except for futures contracts and options that can be aggregated), ensure covered securities with different holding periods are reported on separate forms.
5. Complete Form 1096 (paper filing)
Use as a transmittal document when filing paper forms—you'll need a separate Form 1096 for each type of form you're submitting.
6. File and furnish copies
File with the IRS by February 29 (paper) or March 31 (electronic) and provide copies to recipients by February 16.
Common Mistakes and How to Avoid Them
Mistake #1: Failing to check Box 5 for noncovered securities
When reporting noncovered securities, if you don't check Box 5, you become subject to penalties for any errors in reporting acquisition date, basis, or gain/loss type—even though you weren't required to report this information. Solution: Always check Box 5 when reporting noncovered securities if you're not voluntarily providing complete basis information.
Mistake #2: Incorrectly reporting wash sales or failing to track them
Brokers sometimes fail to identify wash sales when substantially identical securities are purchased within the 30-day window, or they apply wash sale rules when they shouldn't (such as when the replacement security is transferred to another account). Solution: Implement automated systems that track purchases and sales within each account and apply wash sale rules only when both transactions occur in the same account with the same CUSIP number.
Mistake #3: Combining covered and noncovered securities on the same form
Each type must be reported separately—covered securities with long-term gain, covered securities with short-term gain, and noncovered securities (unless you're grouping noncovered with the same gain/loss type). Solution: Create separate forms even when securities are sold in a single transaction if they have different classifications.
Mistake #4: Including accrued interest in Box 1d (Proceeds)
Accrued qualified stated interest on bonds sold between payment dates should be reported on Form 1099-INT, not Form 1099-B. Solution: Separate interest components from sale proceeds and report each on the correct form type.
Mistake #5: Not filing corrected returns when required
When you receive a transfer statement or issuer statement after filing Form 1099-B that changes whether a security is covered, you must file a corrected return within 30 days (unless more than 3 years have passed). Solution: Set up tracking systems to monitor receipt of transfer and issuer statements and calendar reminders for correction deadlines.
Mistake #6: Using substitute forms that don't meet IRS specifications
Some brokers create custom statements that omit required information or don't follow the format specified in Publication 1179. Solution: Review Publication 1179 carefully before creating any substitute statements to ensure compliance with all requirements.
What Happens After You File
For Recipients (Taxpayers)
After your broker files Form 1099-B with the IRS, the information becomes part of your tax record. When you file your income tax return, the IRS matches the information you report on Form 8949 and Schedule D against the Forms 1099-B filed by your brokers. If there are discrepancies—for example, if you fail to report a transaction or report a different amount—the IRS may send you a notice (typically a CP2000) proposing additional tax, penalties, and interest. This matching process usually occurs 12-18 months after you file your return.
If you discover an error on your Form 1099-B after filing your tax return, contact your broker for a corrected form. If the error affects your tax liability, you'll need to file an amended return using Form 1040-X. Keep all Forms 1099-B for at least three years after filing your return (or longer if you have carryover losses).
For Brokers and Filers
The IRS processes your Forms 1099-B and uses the information for matching against taxpayer returns. If you file electronically through the FIRE System (Filing Information Returns Electronically), you'll receive an acknowledgment file indicating whether your submission was accepted or rejected. For accepted files, the process is complete. For rejected files, you'll have a limited time to correct and resubmit.
If you filed incorrect information, the IRS may assess penalties under Sections 6721 (failure to file correct information returns) and 6722 (failure to furnish correct payee statements). However, penalties can be reduced or waived if you can demonstrate reasonable cause for the failure. The IRS also conducts compliance checks and may request additional documentation about specific transactions.
FAQs
Q1: What's the difference between covered and noncovered securities, and why does it matter?
Covered securities are investments purchased after certain dates (generally after 2010 for stocks, 2011 for mutual funds, 2013 for debt instruments) for which your broker must report both the proceeds and your cost basis to the IRS. Noncovered securities are older investments where brokers only report the proceeds. This matters because for covered securities, the IRS knows both what you received and what you paid, making it easier for them to verify your reported gains or losses. For noncovered securities, you're responsible for tracking and reporting your own cost basis—the broker only reports what you received from the sale.
Q2: I received a Form 1099-B showing a much higher amount in proceeds than I actually earned. Is this a mistake?
Not necessarily. The "proceeds" reported in Box 1d represent the total gross amount from selling securities, not your profit. For example, if you invested $10,000 in a stock, it grew to $12,000, and you sold it, the Form 1099-B would show $12,000 in proceeds. Your actual gain is only $2,000 ($12,000 proceeds minus $10,000 basis). For covered securities, the basis should also be shown on the form (Box 1e), but for noncovered securities, you need to track the basis yourself. This is why people sometimes think their 1099-B shows they made more money than they did—they're looking at proceeds rather than gain.
Q3: What should I do if I sold stocks in multiple transactions throughout the year—will I get one form or many?
You'll typically receive a separate Form 1099-B for each transaction, except for regulated futures contracts and certain options which can be reported in aggregate. If you sold 100 shares of Company A in March and 50 shares of Company B in October, you'll receive at least two separate forms. Some brokers provide a consolidated statement that groups all your Forms 1099-B together for convenience, but each transaction is still reported separately on its own form.
Q4: My Form 1099-B shows a wash sale adjustment. What does this mean?
A wash sale occurs when you sell a security at a loss and purchase the same or substantially identical security within 30 days before or after the sale. Tax law prohibits you from claiming the loss in this situation. When your Form 1099-B shows a wash sale (indicated by "W" in Box 1f and an amount in Box 1g), it means the loss is disallowed for now. However, the disallowed loss isn't gone forever—it's added to the cost basis of the replacement securities you purchased. You'll get to claim the loss when you eventually sell the replacement securities without triggering another wash sale.
Q5: I traded stocks in a retirement account (IRA or 401(k)). Will I get a Form 1099-B?
Generally, no. Brokers are not required to file Form 1099-B for sales in retirement accounts like traditional IRAs, Roth IRAs, or 401(k)s because these accounts are tax-deferred or tax-exempt. You'll receive different forms for retirement accounts: Form 5498 (reporting contributions and account value) and Form 1099-R (reporting distributions from the account). Trades within a retirement account aren't immediately taxable events, so they don't require Form 1099-B reporting.
Q6: My broker is showing a different cost basis than what I have in my records. Who is right?
This requires investigation. Several factors could cause discrepancies: your broker may not have received a proper transfer statement when you moved the securities from another broker, corporate actions (like stock splits or mergers) may have been recorded differently, or wash sale adjustments may have been applied. Compare your records line-by-line with the broker's information, checking acquisition dates, share quantities, and any adjustments. If you believe your broker is wrong, contact them with documentation. You can report a different basis on your tax return than what's shown on Form 1099-B, but you must attach an explanation on Form 8949 because the IRS will see the discrepancy.
Q7: I received a Form 1099-B in 2016 for securities I sold in 2015, but I already filed my tax return. What do I do?
If you received a Form 1099-B after filing your return but before the filing deadline, you should file an amended return (Form 1040-X) to include the transaction. If you received it after the deadline, determine whether including it changes your tax liability. If it does, file an amended return as soon as possible—amended returns can be filed within three years of the original return's due date. If it doesn't change your liability (perhaps because you had offsetting losses), you may not need to amend, but it's wise to consult with a tax professional to ensure you're complying with reporting requirements.
Additional Resources & Sources
Sources: All information is derived from official IRS publications:
