Form 1099-B: Proceeds From Broker and Barter Exchange Transactions (2014)

What Form 1099-B Is For

Form 1099-B is an information return that reports the sale or exchange of securities, commodities, and barter transactions. If you sold stocks, bonds, mutual funds, options, futures contracts, or participated in barter exchanges during 2014, your broker or barter exchange sent you this form—and sent a copy to the IRS.

Think of Form 1099-B as your broker's official record of what you sold and for how much. The form documents critical information including the gross proceeds from your sales (the money you received), and for certain "covered securities," it also reports the cost basis (what you originally paid) and whether your gain or loss was short-term or long-term. This information becomes the foundation for calculating your capital gains taxes when you file your tax return.

Brokers are legally required to issue Form 1099-B for each person for whom they sold stocks, commodities, regulated futures contracts, foreign currency contracts, forward contracts, debt instruments, options, or securities futures contracts for cash. Barter exchanges must also file this form for members who exchanged property or services valued at $1 or more. The form serves as a cross-check mechanism—the IRS uses it to verify that taxpayers correctly report their investment income. IRS.gov

When You’d Use Form 1099-B

You typically receive Form 1099-B by mid-February for the previous tax year. Your broker must provide this statement to you by February 15, 2015 (for 2014 transactions). However, late and corrected forms are common, especially as cost basis reporting rules became more complex in 2014.

Corrected Forms

Brokers may issue corrected Forms 1099-B if they discover errors in the original reporting—such as incorrect cost basis, wrong holding periods, or misreported wash sale adjustments. If you receive a corrected 1099-B before filing your tax return, simply use the corrected version. If you receive it after filing, you'll need to file an amended tax return using Form 1040-X if the correction changes your tax liability. The IRS generally allows three years from your original filing date to amend your return based on corrected information. IRS.gov

Late Forms

Some complex investment products may result in delayed 1099-B forms, particularly those involving partnerships, real estate investment trusts, or international investments. If you haven't received your Form 1099-B by late February, contact your broker. If you must file your return before receiving the form, you can either request a tax filing extension using Form 4868 or estimate the information based on your own records—though the latter approach risks errors if your estimates don't match the broker's reporting.

Key Rules or Details for 2014

The 2014 tax year marked an important transition in Form 1099-B reporting due to expanded cost basis reporting requirements. Understanding these rules helps you make sense of your form and avoid reporting mistakes.

Covered vs. Noncovered Securities

The most significant distinction on your 2014 Form 1099-B is between "covered" and "noncovered" securities. Covered securities are those for which brokers must report not just sale proceeds but also cost basis and holding period. For 2014, covered securities included:

Stock acquired for cash after 2010
Mutual fund shares acquired after 2011
Certain debt instruments and options acquired after 2013
Securities futures contracts entered after 2013

For covered securities, your broker reports the acquisition date (Box 1b), the adjusted cost basis (Box 1e), and whether the gain/loss is short-term or long-term (Box 2). For noncovered securities—typically older investments acquired before the phase-in dates—the broker only reports the sale proceeds. You remain responsible for tracking and reporting the cost basis of noncovered securities. IRS.gov

Form Redesign for 2014

The IRS redesigned Form 1099-B in 2014 to better align with Form 8949, which you use to report capital asset sales on your tax return. A new box at the top center of the form displays a letter code (A, B, D, E, or X) indicating how you should report the transaction on Form 8949. These codes help you categorize transactions as short-term or long-term and whether basis was reported to the IRS.

Wash Sale Reporting

For covered securities, brokers must report wash sale loss disallowances in Box 1g. A wash sale occurs when you sell a security at a loss and purchase substantially identical securities within 30 days before or after the sale. The loss is disallowed for tax purposes and added to the cost basis of the replacement shares.

Short Sales

Short sales entered into after 2010 are not reported until the year you deliver securities to close the short position. This timing rule ensures that the actual gain or loss can be determined. IRS.gov

Step-by-Step (High Level)

Reporting your Form 1099-B information on your tax return involves a multi-step process connecting several tax forms. Here's how the information flows:

Step 1: Gather All Your Forms 1099-B

Collect every Form 1099-B you received from all brokers and barter exchanges. If you had accounts at multiple firms, you'll have multiple forms. Don't overlook small transactions—even selling a few shares triggers reporting requirements.

Step 2: Understand the Letter Code

Check the box at the top center of each 1099-B. The letter code tells you which section of Form 8949 to use:

Code A: Short-term covered security (basis reported to IRS)
Code B: Short-term noncovered security (basis not reported)
Code D: Long-term covered security (basis reported to IRS)
Code E: Long-term noncovered security (basis not reported)
Code X: Unknown holding period

Step 3: Complete Form 8949

Transfer information from each 1099-B to the appropriate section of Form 8949, "Sales and Other Dispositions of Capital Assets." This form requires you to list each transaction separately with details including:

Description of the property sold
Date acquired and date sold
Proceeds from the sale (Box 1d from 1099-B)
Cost basis (Box 1e from 1099-B, or your records for noncovered securities)
Any adjustments (such as wash sale corrections)
Your calculated gain or loss

Form 8949 has separate sections for short-term and long-term transactions, each divided by whether basis was reported to the IRS. Check the appropriate box (A through E) at the top of each section. IRS.gov

Step 4: Transfer Totals to Schedule D

After completing all sections of Form 8949, you'll calculate subtotals for each category. These subtotals then transfer to Schedule D, "Capital Gains and Losses," where you'll:

Combine all short-term gains and losses
Combine all long-term gains and losses
Calculate your overall capital gain or loss
Apply any capital loss limitations

Step 5: Report on Form 1040

The final result from Schedule D—your net capital gain or loss—goes on your Form 1040. Capital gains are taxed at preferential rates (0%, 15%, or 20% depending on your income for long-term gains), while short-term gains are taxed as ordinary income. Capital losses can offset capital gains, and up to $3,000 of excess losses can offset ordinary income each year. IRS.gov

Common Mistakes and How to Avoid Them

Mistake #1: Forgetting to Report Noncovered Securities

Many taxpayers mistakenly believe that if their 1099-B shows blank boxes for cost basis (Box 1e), the transaction doesn't need detailed reporting. Wrong! You must still report the sale and provide the cost basis from your own records. The IRS receives a copy showing the proceeds—if you don't report the sale, their computers will flag a mismatch. Keep purchase confirmations, account statements, and reinvestment records to reconstruct basis for older securities.

Mistake #2: Double-Counting RSU and ESPP Transactions

Employee stock compensation creates a particularly confusing situation. When you receive employer stock through restricted stock units (RSUs) or employee stock purchase plans (ESPPs), the value is typically included in your W-2 as wages. If you sell those shares, the 1099-B may not reflect this compensation already taxed. Failing to adjust means paying tax twice on the same income. Carefully review the cost basis on your 1099-B and adjust it to include any compensation amount already reported on your W-2.

Mistake #3: Ignoring Wash Sale Adjustments

Wash sales reported in Box 1g reduce your deductible loss for the current year, but that loss isn't gone forever—it's added to the basis of the replacement shares. Many taxpayers see the disallowed loss and stop there, failing to track the adjusted basis forward. Keep detailed records of wash sales so you can claim the deferred loss when you eventually sell the replacement shares without triggering another wash sale.

Mistake #4: Mismatching Transaction Categories

The IRS computer matching system expects your Form 8949 totals to reconcile with the 1099-B information they received, sorted by the letter codes (A, B, D, E). If you report a Code A transaction in the Code B section, or mix short-term and long-term gains, you may trigger an IRS notice even though your total gain is correct. Follow the letter codes precisely.

Mistake #5: Using Incorrect Cost Basis Methods

For mutual fund shares, investors can choose among several cost basis methods (FIFO, specific identification, average cost). If you selected a specific method with your broker but report using a different method on your return, the numbers won't match the 1099-B, triggering IRS correspondence. Whatever method appears on your 1099-B is what you must use—you can't change it at tax time.

Mistake #6: Overlooking Corrected Forms

Brokers frequently issue corrected 1099-Bs in late February or March after discovering errors. If you file early using the original form and ignore the correction, your return may be wrong. Wait until mid-March to file if you have complex investment accounts, or monitor your accounts online for corrections.

What Happens After You File

IRS Computer Matching

The IRS operates a sophisticated document matching system that compares the information on your tax return against all the information returns filed by third parties, including Forms 1099-B from your brokers. This automated system runs throughout the year following your filing. If the system detects a discrepancy—such as proceeds reported on a 1099-B that don't appear on your Schedule D, or a mismatch in the amounts—it generates a notice.

CP2000 Notices

The most common outcome of a 1099-B mismatch is receiving a CP2000 notice, typically 12 to 18 months after you file. This "Proposed Changes to Your Tax Return" notice explains the discrepancy the IRS found and proposes additional tax, interest, and sometimes penalties. Don't panic—CP2000 notices are not bills, and you have the right to respond. Many CP2000 notices regarding investment sales result from the IRS only seeing the gross proceeds without understanding your cost basis or the nature of the transaction. You can respond with documentation explaining why your return was correct, request an adjustment if the IRS is partly right, or agree with the proposed changes.

Audit Selection

While most 1099-B reporting issues get resolved through automated matching, consistent problems, large amounts, or suspicious patterns may trigger a full examination. Keeping excellent records—purchase confirmations, transfer statements, dividend reinvestment histories, and adjustment calculations—provides your best protection. The IRS generally has three years from your filing date to audit your return, though this extends to six years if you underreported income by more than 25%.

Correcting Errors

If you discover a mistake in your Form 1099-B reporting after filing, you can file an amended return using Form 1040-X. You have three years from the original filing deadline (or two years from when you paid the tax, whichever is later) to file an amended return claiming a refund. However, if you owe additional tax, file the amendment as soon as possible to minimize interest charges.

State Tax Implications

Don't forget that most states with income taxes also receive copies of federal Forms 1099-B or have information-sharing agreements with the IRS. Your state tax return must also correctly report capital gains and losses. Some states have different holding period requirements or tax rates for capital gains, so check your state's specific rules. IRS.gov

FAQs

Q1: I didn't receive a Form 1099-B for a stock sale. Do I still need to report it?

Yes, absolutely. You must report all capital gains and losses regardless of whether you received a 1099-B. Some transactions are exempt from broker reporting (such as sales of non-exchange-traded securities), but they're not exempt from taxation. If you haven't received a 1099-B by late February for a transaction you believe should have generated one, contact your broker. Otherwise, use your own records to complete Form 8949.

Q2: My 1099-B shows a blank or zero cost basis. What should I do?

This typically means the security is "noncovered"—the broker isn't required to report basis to the IRS. Check Box 5 on your 1099-B; if it's marked, this confirms noncovered status. You're still responsible for determining the correct cost basis from your records. Look for purchase confirmations, old account statements, or contact the broker's cost basis department. If you absolutely cannot determine the basis, the IRS position is that you should use zero—though this results in the maximum tax liability and should be a last resort.

Q3: My broker reported a different cost basis than what I calculated. Who's right?

Start by understanding why there's a difference. Common reasons include: wash sale adjustments, return of capital distributions that reduce basis, stock splits or reorganizations, or different accounting methods. Review the detailed transaction history your broker provides with the 1099-B. If you believe the broker is wrong, you can report the corrected basis on Form 8949 with an adjustment code and explanation, but keep thorough documentation. If you're unsure, contact the broker's tax department—they have specialists who can explain their calculation.

Q4: Can I use tax software if I have Forms 1099-B?

Absolutely—in fact, it's highly recommended. Tax preparation software efficiently handles the tedious process of transferring dozens or even hundreds of transactions from 1099-B forms to Form 8949 and Schedule D. Many programs allow you to import transaction data directly from major brokers, reducing data entry errors. The software automatically performs wash sale calculations, applies the correct holding periods, and ensures proper form categorization. Even if you have complex investment situations, the software guides you through adjustments and explanations.

Q5: I inherited stocks and sold them in 2014. How does the 1099-B reporting work?

Inherited securities receive special tax treatment—your cost basis is generally "stepped up" to the fair market value on the date of the decedent's death (or alternate valuation date). The holding period is automatically long-term regardless of how long you or the decedent held the shares. Your broker may or may not have the correct stepped-up basis. Compare the basis on your 1099-B to the value on the estate's date-of-death appraisal. If they differ, make an adjustment on Form 8949 using code "W" and attach an explanation. Keep copies of the estate documentation proving the stepped-up basis.

Q6: What if I traded frequently and have 50+ transactions on my 1099-B?

You must report each transaction individually on Form 8949—there are no shortcuts based on volume. However, the IRS allows you to attach a statement containing all the required information in the same format as Form 8949 rather than completing dozens of pages of the actual form. Most tax software handles this automatically. Alternatively, many brokers provide a gain/loss summary statement designed to attach to your return. Just ensure whatever method you use clearly identifies each transaction with all required details and matches the totals the IRS will see from your 1099-B forms.

Q7: I made estimated tax payments based on my capital gains. How does this work with Form 1099-B?

Your estimated tax payments aren't directly connected to Form 1099-B—they're just advance payments toward your total tax liability. When you file your return, you'll report your capital gains from Form 8949 and Schedule D, calculate your final tax, and subtract any estimated payments you made. If you paid enough estimates, you may receive a refund. If not, you'll owe the balance. The 1099-B simply provides the information you need to calculate the capital gains that drive your tax obligation. Making estimated payments doesn't change how you report the underlying transactions. IRS.gov

Additional Resources (Government Sources Used)

All information in this article is derived exclusively from official IRS publications:

2014 Instructions for Form 1099-B (IRS Publication)
https://www.irs.gov/pub/irs-prior/i1099b--2014.pdf
2014 Instructions for Form 8949 (IRS Publication)
https://www.irs.gov/pub/irs-prior/i8949--2014.pdf
About Form 1099-B (IRS.gov)
https://www.irs.gov/forms-pubs/about-form-1099-b

Note: This guide provides general information about Form 1099-B for the 2014 tax year based solely on IRS publications and instructions. Tax laws are complex and individual circumstances vary. For specific tax advice regarding your situation, consult a qualified tax professional or CPA.