Form 1099-B: Proceeds From Broker and Barter Exchange Transactions (2017)

When you’ve sold stocks, bonds, mutual funds, or participated in a barter exchange, understanding this form is crucial for accurate tax reporting. This guide breaks down everything you need to know about the 2017 version of Form 1099-B in plain language.

What Form 1099-B Is For

Form 1099-B serves as an official record of proceeds from the sale of securities and barter exchange transactions. Think of it as a receipt that your broker or barter exchange sends to both you and the IRS whenever you sell investments or trade goods and services.

Who Receives This Form?

You'll get a Form 1099-B if:

Your broker sold stocks, bonds, commodities, mutual funds, or other securities on your behalf
You participated in regulated futures or foreign currency contracts
You traded goods or services through a barter exchange (when the fair market value exceeds $1)
You received cash, stock, or property from certain corporate reorganizations

The form reports critical information including the description of what you sold, the date sold, the proceeds you received, and—for certain securities—your cost basis and holding period. 2017 Instructions for Form 1099-B

When You’d Use Form 1099-B (Late/Amended)

For the 2017 tax year, brokers and barter exchanges must send Form 1099-B to recipients by February 15, 2018. They must file copies with the IRS by February 28, 2018 for paper filing or March 31, 2018 for electronic filing. 2017 General Instructions for Certain Information Returns

Receiving a Corrected Form After Filing

If you receive a corrected Form 1099-B after you've already filed your taxes, don't panic. This happens more often than you might think. Brokers sometimes need to revise forms due to late-arriving information about corporate actions, cost basis adjustments, or classification errors.

Should You File an Amended Return?

If the correction increases your tax liability: File an amended return (Form 1040-X) promptly to avoid potential penalties and interest.
If the correction decreases your tax liability: You have up to three years from your original filing date to file an amended return and claim a refund.
If the change is minimal: Consider whether the correction materially affects your tax liability.

Remember, there's no hard deadline for brokers to file corrected Forms 1099-B, though the IRS generally expects corrections within three years of the original filing date.

Key Rules or Details for 2017

The 2017 tax year continued the IRS's multi-year rollout of enhanced reporting requirements that began in 2011. Understanding the distinction between "covered" and "noncovered" securities is essential.

Covered Securities

Covered Securities are transactions where your broker must report additional details to the IRS, including:

Stock acquired for cash after 2010 (after 2011 for certain mutual funds using average basis)
Debt instruments and options acquired after 2013
Securities acquired through corporate actions (like stock splits or mergers) if the original security was covered

For covered securities, brokers must report:

Date acquired (Box 1b)
Cost or other basis (Box 1e)
Whether the gain or loss is short-term or long-term (Box 2)
Accrued market discount (Box 1f)
Wash sale loss disallowances (Box 1g)

Noncovered Securities

Noncovered Securities are older securities that don't fall under these enhanced reporting rules. For noncovered securities, brokers may check Box 5 on the form and omit the detailed basis information. This doesn't mean the transaction isn't taxable—you're still responsible for reporting it correctly on your tax return, but you'll need to determine the cost basis yourself using your own records.

Special Reporting Requirements for 2017

Each transaction (except certain futures and options contracts) must be reported on a separate Form 1099-B.
Short sales aren't reported until the year the security is delivered to close the position.
Foreign currency amounts must be converted to U.S. dollars using appropriate spot rates.
Barter exchange transactions involving corporate members may be reported on an aggregate basis. 2017 Instructions for Form 1099-B

Step-by-Step (High Level)

Step 1: Wait for All Forms to Arrive

By mid-February for most recipients. Don't rush to file your taxes if you know you had investment sales—you might receive multiple 1099-B forms from different brokers.

Step 2: Review Each Form Carefully

Check that:

Your name and Social Security number are correct
The transactions listed match your records
The cost basis looks reasonable (if reported)
The dates align with your recollection of when you bought and sold

Step 3: Organize by Covered vs. Noncovered

Many brokers will clearly mark which transactions involve covered securities and which don't. Keep these separated as they'll be reported differently on your tax return.

Step 4: Gather Missing Information

For noncovered securities where Box 5 is checked, you'll need to determine:

Your original purchase date
Your cost basis (what you paid, including commissions)
Any adjustments for corporate actions or return of capital

Step 5: Transfer Information to Your Tax Return

Most transactions are reported on Form 8949, which flows to Schedule D of your Form 1040. The specific box you check on Form 8949 depends on the code in Box 2 of your 1099-B:

Code A or D: Covered securities with basis reported to IRS
Code B or E: Noncovered securities or covered securities where basis wasn't reported
Code X: Transactions where the holding period can't be determined

Step 6: Double-Check for Wash Sales

If you sold a security at a loss and repurchased the same or substantially identical security within 30 days before or after the sale, the loss may be disallowed under wash sale rules. Box 1g shows disallowed losses already calculated by your broker.

Step 7: Consider Professional Help

If you have complex transactions—options, futures contracts, straddles, or sales of securities inherited from a decedent—consider getting professional help. These situations involve special rules that can significantly affect your tax liability.

Common Mistakes and How to Avoid Them

Mistake #1: Not Reporting Transactions at All

Some taxpayers mistakenly believe that if they don't receive a 1099-B or if the form shows "noncovered" in Box 5, they don't need to report the sale. Wrong! All securities sales must be reported, even if your broker didn't send you a form. The IRS receives a copy of every 1099-B, and automated matching programs will flag unreported transactions. This can result in an IRS notice (CP2000) proposing additional tax and penalties.

Mistake #2: Accepting Incorrect Cost Basis Without Question

Brokers make mistakes, especially with:

Securities transferred from other brokers
Inherited securities
Gifted securities
Reinvested dividends purchased over many years

How to avoid it: Compare the basis on your 1099-B with your own purchase records. If you spot an error, contact your broker immediately to request a corrected form.

Mistake #3: Forgetting to Adjust Basis for Return of Capital Distributions

Mutual funds and other investments sometimes make return of capital payments that reduce your basis. If your broker's records don't reflect these adjustments, your reported gain could be overstated.

How to avoid it: Keep annual statements showing return of capital distributions and provide this information to your broker when you sell.

Mistake #4: Misunderstanding Wash Sale Adjustments

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 temporarily disallowed and added to the basis of the replacement shares. Many taxpayers incorrectly think they've permanently lost the tax benefit.

How to avoid it: If Box 1g shows a wash sale adjustment, don't try to claim the disallowed loss again. The adjustment has already been factored into your basis when you eventually sell the replacement shares.

Mistake #5: Using the Wrong Form 8949 Box

Each transaction must be reported in the correct section of Form 8949 based on whether it's short-term or long-term and whether basis was reported to the IRS. Using the wrong box can trigger IRS matching problems.

How to avoid it: Use the code shown in Box 2 of your 1099-B to determine which Form 8949 box to check (A, B, D, E, or X). 2017 Instructions for Form 1099-B

What Happens After You File

Normal Processing

In most cases, if your 1099-B information matches what the IRS received from your broker and your calculations are correct, your return processes smoothly. You'll receive your refund (if applicable) or your payment will be credited to your account.

IRS Matching Program

The IRS uses automated systems to compare the information on your tax return with Forms 1099-B filed by brokers. This matching typically happens 12–18 months after you file. If there's a discrepancy, you'll receive a CP2000 notice proposing changes to your return.

If You Receive a Corrected 1099-B

Brokers must file corrected Forms 1099-B within 30 days of discovering an error or receiving corrected information from an issuer (unless more than three years have passed since the original filing). When this happens:

You'll receive a corrected form marked "CORRECTED" at the top
Review the changes carefully
Determine if the correction materially affects your tax liability
File an amended return (Form 1040-X) if necessary

Record Retention

Keep your Forms 1099-B and supporting documentation (purchase confirmations, statements showing cost basis, records of corporate actions) for at least three years after filing your return, or longer if you have complex situations like carryover losses or inherited securities.

State Tax Implications

Remember that most states require reporting of capital gains and losses on state tax returns. Your Form 1099-B information will generally flow through to your state return, though some states have different rules for determining gain or loss.

FAQs

Q1: I sold stock in 2017 but my broker account shows I had a loss. Why do I owe taxes?

Even if you had an overall loss in your portfolio, you might still owe taxes if you had some winning trades mixed with losing trades. Capital losses are limited to $3,000 per year against ordinary income (or $1,500 if married filing separately), with excess losses carried forward to future years. Additionally, wash sale rules might disallow some losses if you repurchased similar securities within 30 days.

Q2: Box 5 is checked on my 1099-B and no cost basis is shown. What do I do?

This indicates a noncovered security. You're responsible for determining and reporting your cost basis. Check your purchase confirmations, historical brokerage statements, or contact your broker for help reconstructing your basis. Be thorough—the IRS expects you to have documentation if questioned. 2017 Instructions for Form 1099-B

Q3: I received stock as a gift. How do I handle the 1099-B?

For gifted securities, your basis is generally the donor's basis (the amount they originally paid), and your holding period includes the time the donor held the security. However, if the fair market value when you received the gift was lower than the donor's basis, special rules apply. You may need to request this information from the donor.

Q4: I inherited stock and sold it. Does the 1099-B reflect the stepped-up basis?

Not always. Brokers often don't have accurate information about inherited securities. For most inherited securities, your basis is "stepped up" to the fair market value on the date of death (or alternate valuation date). You should verify that Box 1e reflects this stepped-up value, not the decedent's original basis.

Q5: What's the difference between a short-term and long-term transaction on Form 1099-B?

Short-term transactions involve securities held for one year or less, while long-term involves securities held for more than one year. This distinction is crucial because long-term capital gains receive preferential tax rates (0%, 15%, or 20% depending on your income), while short-term gains are taxed at your ordinary income tax rate (up to 39.6% in 2017). Box 2 of your 1099-B shows this classification.

Q6: I participated in a barter exchange and received Form 1099-B. Is this really taxable?

Yes! The fair market value of goods or services received through barter exchanges is taxable income. For example, if you're a graphic designer who traded design work for plumbing services, the value of the plumbing work you received is taxable income, typically reported on Schedule C (not Schedule D). The Form 1099-B from the barter exchange helps track these transactions.

Q7: My broker sent me multiple 1099-B forms with different dates. Which one is correct?

Always use the most recent form you received. Forms dated later supersede earlier versions—even if not explicitly marked "CORRECTED." If you're unsure, contact your broker to confirm which version is final before filing your taxes. Filing with an outdated form can create discrepancies with IRS records.

Additional Resources

For the most current information and additional resources, visit IRS.gov Form 1099-B.

Government Sources Used:

2017 Instructions for Form 1099-B — IRS, November 29, 2016
2017 General Instructions for Certain Information Returns — IRS, January 11, 2017
About Form 1099-B, Proceeds from Broker and Barter Exchange Transactions — IRS.gov