Form 1099-B: Proceeds From Broker and Barter Exchange Transactions (2018)

Form 1099-B is one of the most common tax forms investors receive, yet it often causes confusion. This guide breaks down everything you need to know about the 2018 version in plain English, using official IRS guidance.

What Form 1099-B Is For

Form 1099-B is an information return that reports proceeds from the sale of stocks, bonds, mutual funds, commodities, and other investments you sold during the tax year. Think of it as a receipt that your broker or barter exchange sends to both you and the IRS documenting your investment sales.

Who receives this form? You'll get a Form 1099-B if a broker sold securities on your behalf, if you exchanged property or services through a barter exchange, or if you received cash or stock from a corporate acquisition or restructuring that your broker knew about. According to IRS.gov, brokers must file this form for anyone who sold stocks, commodities, regulated futures contracts, foreign currency contracts, debt instruments, options, or participated in barter exchanges.

What information does it contain? The form shows the description of what you sold, when you bought it, when you sold it, how much you received (the proceeds), what you originally paid for it (the cost basis), and whether any taxes were withheld. Each sale typically appears on a separate form unless the transactions involve regulated futures or similar contracts, which can be aggregated.

The 2018 form distinguishes between "covered securities" (where your broker must report detailed cost basis information) and "noncovered securities" (where basis reporting is optional). This distinction, introduced in phases starting in 2011, helps ensure accurate tax reporting and reduces errors.

When You’d Use Form 1099-B

Regular Filing

Brokers must send you Form 1099-B by February 15, 2019 (for the 2018 tax year), though some complex transactions involving mutual funds or trusts may arrive by March 15, 2019. You use this information when filing your personal tax return by April 15, 2019.

Late/Amended Filing

If you discover an unreported 1099-B after filing your tax return, you should file an amended return using Form 1040-X. According to IRS guidelines, you generally have three years from the date you filed your original return or two years from when you paid the tax (whichever is later) to claim a refund through an amendment.

Corrected Forms

Brokers sometimes issue corrected 1099-B forms after the initial filing. If your broker discovers an error—such as incorrect cost basis, wrong sale date, or missing transactions—they'll send you a corrected form marked "CORRECTED" at the top. According to the 2018 Form 1099-B instructions, brokers must file corrected forms within 30 days of receiving information that changes whether a security is covered or noncovered. When you receive a corrected form, you must incorporate that information into your tax return. If you've already filed, you'll need to amend your return if the correction changes your tax liability.

Important Note

Even if you didn't receive a 1099-B but should have, you're still required to report all investment sales on your tax return. The IRS receives copies of all 1099-B forms, and their computers automatically match them to your return.

Key Rules or Details for 2018

Covered vs. Noncovered Securities

This critical distinction affects what information your broker must report. According to the 2018 Form 1099-B instructions, covered securities include:

Stock acquired for cash after 2010
Mutual fund shares acquired after 2011
Bonds and other debt instruments acquired after 2013
Options and securities futures contracts acquired after 2015
Securities received through stock splits, dividends, or mergers if the original security was covered

For covered securities, brokers must report not just the sale proceeds but also your cost basis (what you paid), acquisition date, and whether gains or losses are short-term or long-term. For noncovered securities (generally anything acquired before these dates), brokers may report only the proceeds, leaving you responsible for tracking basis.

Reporting Codes

The 2018 form uses letter codes to help you report transactions correctly:

Code A: Short-term transactions with basis reported to IRS
Code B: Short-term transactions without basis reported
Code D: Long-term transactions with basis reported to IRS
Code E: Long-term transactions without basis reported
Code X: Transactions where the holding period is unknown

Wash Sale Rules

If you sell a security at a loss and buy substantially identical securities within 30 days before or after the sale, the loss is "disallowed" under wash sale rules. Your broker should note this in Box 1g and adjust your basis accordingly. This prevents you from claiming artificial losses while maintaining your investment position.

Backup Withholding

If you didn't provide your broker with a correct taxpayer identification number (TIN), the broker must withhold 24% of the proceeds as backup withholding. This amount appears in Box 4 and can be claimed as a credit on your tax return.

Penalty Relief for Noncovered Securities

According to the official instructions, when selling a noncovered security and reporting it on a separate Form 1099-B, brokers may check box 5 and leave certain boxes blank. If they choose to report the information in those boxes, they will not be subject to penalties under sections 6721 and 6722 for failure to report that information correctly.

Step-by-Step (High Level)

Step 1: Organize Your Forms

When your 1099-B forms arrive (by February or March 2019), gather all copies. If you use multiple brokers, you'll receive separate forms from each. Sort them by the codes in the applicable checkbox section—this determines where they'll go on your tax forms.

Step 2: Review for Accuracy

Check each 1099-B against your own records. Verify that sale dates, quantities, and proceeds match your expectations. If something looks wrong (wrong acquisition date, incorrect cost basis, missing sales), contact your broker immediately to request a corrected form.

Step 3: Transfer Information to Form 8949

According to IRS instructions, you must use Form 8949, Sales and Other Dispositions of Capital Assets, to reconcile amounts that were reported to you and the IRS on Form 1099-B with the amounts you report on your return. The form has different parts based on whether transactions are short-term or long-term, and different boxes based on whether basis was reported to the IRS. Match the code from your 1099-B to the correct box on Form 8949.

Step 4: Make Adjustments if Needed

On Form 8949, you can adjust the amounts shown on your 1099-B. Common adjustments include correcting cost basis your broker didn't know about, adding non-deductible wash sale losses, or accounting for gifts or inheritances. Document your adjustments in column (g).

Step 5: Calculate Totals

After listing all transactions on Form 8949, total each section and carry those subtotals to Schedule D (Form 1040), Capital Gains and Losses. Schedule D combines all your capital gains and losses to arrive at your net capital gain or loss.

Step 6: Report on Your 1040

The final net capital gain or loss from Schedule D transfers to your Form 1040. Capital gains increase your taxable income, while capital losses can offset gains and up to $3,000 of ordinary income per year.

Common Mistakes and How to Avoid Them

Mistake #1: Not Reporting All Transactions

Some taxpayers think they can skip reporting sales that resulted in losses, or small transactions. The IRS receives copies of all 1099-B forms and their computers will flag missing reports. Solution: Report every transaction shown on your 1099-B forms, regardless of whether you had a gain or loss.

Mistake #2: Using the Wrong Cost Basis

This is especially common with inherited or gifted securities, or stock purchased through employee stock purchase plans. Your broker may not know the correct basis and might report zero or an incorrect amount. The 2018 instructions note that brokers are "not required to consider other transactions, elections, or events occurring outside the account when determining basis." Solution: Keep detailed records of all security purchases, including documentation of gifts, inheritances, and special purchase programs. Correct any basis errors on Form 8949.

Mistake #3: Double-Reporting Transactions

If you transfer securities between brokers mid-year, you might receive 1099-B forms from both institutions for the same sale. Solution: Carefully review dates and descriptions. Only report each sale once, using the form from the broker who actually handled the sale.

Mistake #4: Ignoring Wash Sale Adjustments

Some taxpayers try to claim losses that their broker correctly disallowed under wash sale rules shown in Box 1g. Solution: Accept the wash sale adjustment—your disallowed loss isn't gone forever; it's added to the basis of your replacement shares.

Mistake #5: Mismatching Short-Term and Long-Term

Mixing up holding periods can significantly affect your tax bill since long-term gains (over one year) receive preferential tax rates while short-term gains are taxed as ordinary income. Solution: Pay close attention to Box 2 on your 1099-B, which indicates whether the gain or loss is short-term or long-term.

Mistake #6: Incorrect Form 8949 Reporting

The 2018 Form 1099-B states: "See the instructions for your Schedule D and/or Form 8949" because proper categorization is essential. Reporting a covered security transaction in the wrong box can trigger IRS matching notices. Solution: Always use the exact code shown on your 1099-B to determine which Form 8949 box to check.

What Happens After You File

IRS Matching Process

After you file your tax return, the IRS computers automatically match the amounts reported on your Schedule D and Form 8949 against all the 1099-B forms filed by brokers. This matching typically occurs several months to over a year after filing.

If Everything Matches

You'll hear nothing from the IRS—which is good news! Your return is processed normally, and any refund is issued (or payment is applied to your account).

If There’s a Discrepancy

You may receive a CP2000 notice, which is a "proposed" tax change, not a bill. This notice explains what the IRS computers found that differs from your return. Common triggers include:

Missing 1099-B forms (you didn't report a sale that was reported to the IRS)
Incorrect cost basis (the IRS records show a different basis than you claimed)
Math errors in totaling gains and losses

How to Respond

If you receive a CP2000 notice, review it carefully against your tax records. If the IRS is correct, you'll need to pay the additional tax plus interest and possibly penalties. If you're correct, respond with documentation explaining the discrepancy (such as proof of cost basis the broker didn't report). You typically have 30 days to respond.

Refund Implications

If you filed an amended return after discovering an unreported loss on a 1099-B, it generally takes the IRS 8-12 weeks to process the amendment and issue any additional refund.

FAQs

1. Do I have to report a 1099-B that shows a loss?

Yes, absolutely. The IRS receives a copy of every 1099-B regardless of whether it shows a gain or loss. Their computers will flag your return if you're missing any forms they received. Additionally, reporting losses benefits you because they can offset other capital gains and up to $3,000 of ordinary income annually, with excess losses carrying forward to future years.

2. What if the cost basis on my 1099-B is blank or wrong?

If Box 1e (cost basis) is blank, your broker isn't required to report it—often because the security is noncovered. According to the 2018 instructions, you should "Enter the adjusted basis of any securities sold unless the security is not a covered security and you check box 5." You're responsible for determining the correct basis from your records and reporting it on Form 8949. If the basis shown is incorrect, correct it on Form 8949 in column (e) and explain the adjustment in column (g).

3. Can I just summarize all my transactions instead of listing each one?

In most cases, no. The 2018 instructions state: "Report each transaction (other than regulated futures, foreign currency, or Section 1256 option contracts) on a separate Form 1099-B." Similarly, the IRS Form 8949 instructions require line-by-line reporting to reconcile with the 1099-B forms the IRS received. However, there's a limited exception for certain transactions that can be reported as summary totals on Schedule D.

4. I didn't receive a 1099-B, but I know I sold investments. What should I do?

Report the sales anyway on Form 8949. You might not receive a 1099-B if the broker had an incorrect address, you're exempt (like certain corporations), or the transaction wasn't reportable under certain exceptions listed in the 2018 instructions. Regardless, you're legally required to report all capital gains and losses.

5. What's the difference between Form 1099-B and Form 8949?

Form 1099-B is an information return your broker files with the IRS and sends to you—it reports what they paid you. Form 8949 is part of your tax return. According to IRS guidance, "Use Form 8949 to reconcile amounts that were reported to you and the IRS on Form 1099-B or 1099-S (or substitute statement) with the amounts you report on your return."

6. Are barter exchange transactions really reported on Form 1099-B?

Yes! The 2018 instructions state that "A barter exchange must file Form 1099-B for each person who exchanged property or services through a barter exchange." If you participate in a barter exchange where you trade services or property instead of paying cash, the exchange must report the fair market value of what you received on Form 1099-B.

7. How long should I keep my 1099-B forms?

The IRS recommends keeping all tax records, including 1099-B forms, for at least three years from the date you filed the return—the standard audit period. However, it's wise to keep investment records (including purchase confirmations, statements showing cost basis, and 1099-B forms) for at least three years after you sell the investment, or longer if you have complex situations like inherited property or carried-forward losses.

Additional Resources

All information in this article comes from official IRS sources:

IRS Form 1099-B Information: IRS.gov/forms-pubs/about-form-1099-b
2018 Instructions for Form 1099-B: IRS.gov/pub/irs-prior/i1099b--2018.pdf
2018 Form 1099-B: IRS.gov/pub/irs-prior/f1099b--2018.pdf
File an Amended Return: IRS.gov/filing/file-an-amended-return
About Form 8949: IRS.gov/forms-pubs/about-form-8949
Instructions for Form 8949: IRS.gov/instructions/i8949

Conclusion

Understanding Form 1099-B doesn't have to be overwhelming. The key is organizing your forms early, reviewing them carefully, and reporting every transaction—even if it seems small or resulted in a loss. When in doubt, consult with a tax professional who can help you navigate complex situations like wash sales, inherited securities, or large volumes of transactions. Accurate reporting now prevents IRS notices and headaches later.

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