Form 1099-B: Proceeds From Broker and Barter Exchange Transactions (2019)

If you sold stocks, bonds, mutual funds, or other investments through a brokerage account in 2019—or participated in a barter exchange—you should have received Form 1099-B. This essential tax document reports the proceeds from these transactions to both you and the IRS. Understanding how to read and properly report this form can save you from costly mistakes and potential audits.

What Form 1099-B Is For

Form 1099-B is an information return that brokers and barter exchanges must file to report proceeds from various financial transactions. Think of it as your broker's official record of what you sold and how much money changed hands.

Who Must File This Form

Brokers and barter exchanges are required to file Form 1099-B for each customer who engaged in qualifying transactions during the tax year. This includes traditional brokerage firms, online trading platforms, investment companies, and even corporations that redeem their own stock. IRS.gov

Transactions Covered

The form reports sales of stocks, commodities, regulated futures contracts, foreign currency contracts, debt instruments, options, securities futures contracts, mutual fund shares, and even property or services exchanged through a barter exchange. For 2019, there was a significant addition: Qualified Opportunity Funds (QOFs) were required to report dispositions of QOF investments, regardless of whether the fund operated as a broker. IRS 2019 Instructions for Form 1099-B

Important Distinction—Covered vs. Noncovered Securities

One of the most crucial concepts for 2019 returns is the difference between "covered" and "noncovered" securities. Covered securities are those for which your broker must report cost basis information to the IRS. Generally, stocks purchased in 2011 or later, mutual funds acquired in 2012 or later, and certain debt instruments purchased in 2014 or later are considered covered. Noncovered securities—typically older holdings—don't require brokers to report basis information, meaning you're responsible for tracking and reporting your own cost basis. Your Form 1099-B will clearly indicate whether each transaction involves covered or noncovered securities.

When You’d Use Form 1099-B

Standard Filing Timeline

Most taxpayers don't file Form 1099-B themselves—instead, you receive copies from your broker and use the information to complete your personal tax return. For the 2019 tax year, brokers were required to send Copy B to recipients by February 17, 2020, and file Copy A with the IRS by February 28, 2020 (or March 31, 2020 if filing electronically). IRS Form 1099-B

When You Receive a Late 1099-B

Sometimes brokers issue corrected or additional 1099-B forms after you've already filed your tax return. This often happens when there are adjustments to cost basis, corrections to holding periods, or previously unreported transactions come to light. If this occurs, you must file an amended return using Form 1040-X to report the correct information. The IRS matches 1099-B data against your return, so failing to amend can trigger automated notices and potential penalties.

Amending Your Return

If you discover errors in how you reported your 1099-B transactions—such as incorrect cost basis, wrong holding periods, or missing transactions—you should file an amended return. You'll need to prepare a corrected Form 8949 (Sales and Other Dispositions of Capital Assets) and Schedule D (Capital Gains and Losses) along with Form 1040-X. The deadline for amending returns is generally three years from the original filing date, though for 2019 returns, the COVID-19 pandemic extended some deadlines.

Key Rules or Details for 2019

The Qualified Opportunity Fund (QOF) Reporting Change

The biggest change for 2019 was the new requirement for QOFs to report dispositions of QOF investments on Form 1099-B. These special investment vehicles, created by the Tax Cuts and Jobs Act to encourage investment in economically distressed communities, now had to file regardless of whether they typically operated as brokers. The form was also modified with a new checkbox in Box 3 to indicate QOF dispositions. IRS 2019 Instructions for Form 1099-B

Covered Securities Reporting Requirements

For covered securities sold in 2019, brokers were required to report detailed information including the date of acquisition (Box 1b), cost or adjusted basis (Box 1e), any accrued market discount (Box 1f), wash sale loss disallowances (Box 1g), and whether the gain or loss is short-term or long-term (Box 2). This comprehensive reporting helps ensure accurate tax calculations and reduces taxpayer burden.

Multiple Forms for Single Transactions

When you sell stock acquired on different dates in a single transaction, your broker must issue separate Forms 1099-B based on holding periods. For example, if you sold 100 shares—50 held long-term and 50 held short-term—you'd receive two separate forms. This separation is crucial for proper tax treatment since long-term capital gains receive preferential tax rates.

Short Sales

For short sales entered into after 2010, brokers don't report the transaction until the year you deliver the security to close the short sale. The form reports information about the security delivered to close the position, not the original short sale opening.

Exempt Recipients

Certain entities don't receive 1099-B forms, including IRAs, charitable organizations, health savings accounts, corporations (with exceptions for S corporations selling covered securities acquired after 2011), and government entities.

Step-by-Step (High Level)

Step 1: The Transaction

Throughout 2019, whenever you sold securities or exchanged property/services through a barter exchange, your broker tracked each transaction's details—what you sold, when you sold it, how much you received, and (for covered securities) your cost basis.

Step 2: Year-End Processing

After December 31, 2019, your broker compiled all transactions and prepared Form 1099-B for each customer. They separated transactions by type (covered long-term, covered short-term, noncovered) and prepared the appropriate number of forms.

Step 3: You Receive the Forms

By mid-February 2020, you should have received all 1099-B forms in the mail or electronically through your broker's secure portal. Each form shows critical information in numbered boxes: description of property (Box 1a), dates acquired and sold (Boxes 1b and 1c), proceeds (Box 1d), cost basis for covered securities (Box 1e), adjustments (Boxes 1f-1g), and a checkbox indicating the appropriate reporting category (short-term or long-term, covered or noncovered).

Step 4: Transfer to Your Tax Return

You'll report each transaction from Form 1099-B on IRS Form 8949, which calculates your capital gains and losses. Form 8949 has different sections depending on whether the security is covered or noncovered and whether it's short-term or long-term. The totals from Form 8949 then flow to Schedule D, which is filed with your Form 1040. Most tax software automates this process by allowing you to import 1099-B data directly.

Step 5: IRS Matching

The IRS receives copies of all 1099-B forms and uses sophisticated computer systems to match the reported proceeds against amounts shown on your tax return. Discrepancies trigger automated notices, so accuracy is essential.

Common Mistakes and How to Avoid Them

Mistake #1: Missing or Incorrect Taxpayer Identification Numbers

One of the most frequent errors is incorrect Social Security numbers or taxpayer identification numbers on the form. This prevents proper IRS matching and can trigger backup withholding. Solution: Verify your SSN or TIN is correct on all broker accounts by reviewing your Form W-9 on file with the broker.

Mistake #2: Forgetting to Report Noncovered Securities

When you sell noncovered securities, the broker reports proceeds but not cost basis. Many taxpayers forget to manually enter their cost basis, resulting in the IRS assuming a zero basis and assessing taxes on the entire proceeds. Solution: Maintain detailed records of purchase prices for all investments. When reporting noncovered securities on Form 8949, carefully enter your actual cost basis even though it's not on the 1099-B.

Mistake #3: Misreporting Cost Basis or Sales Proceeds

Typographical errors when transferring numbers from Form 1099-B to Form 8949 are surprisingly common and can significantly affect your tax liability. Solution: Double-check all entries, use tax software that imports 1099-B data electronically, and reconcile totals before filing.

Mistake #4: Ignoring Wash Sale Adjustments

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 and added to the basis of the replacement security. Box 1g shows wash sale loss disallowances, but taxpayers sometimes overlook this adjustment. Solution: Pay close attention to Box 1g and ensure these adjustments are properly reflected on Form 8949. If you traded actively, consider reviewing all transactions for wash sales your broker may have missed.

Mistake #5: Not Reporting All Forms Received

If you had accounts with multiple brokers or received late or corrected 1099-B forms, you must report all of them. Missing even one form will cause IRS computer matching to fail. Solution: Create a checklist of all financial institutions where you had accounts during 2019 and verify you've received and reported forms from each one.

Mistake #6: Incorrect Holding Period Classification

Confusing short-term gains (assets held one year or less) with long-term gains (held more than one year) can result in paying higher tax rates than necessary or understating your tax liability. Solution: Verify the holding period indicated on Form 1099-B matches your records, especially for noncovered securities where you're responsible for determining the holding period.

Mistake #7: Filing Too Early

Many taxpayers file their returns in January, before all 1099-B forms have been issued. Brokers have until mid-February to send these forms, and corrected forms can arrive even later. Solution: Wait until at least late February or early March to file, ensuring you've received all tax documents.

What Happens After You File

IRS Matching Process

Within months of filing, the IRS's automated systems begin matching the proceeds amounts from your Form 8949 and Schedule D against the Forms 1099-B submitted by brokers. This process typically occurs throughout the year following your tax filing.

Potential IRS Notices

If discrepancies are detected, you'll receive one of several automated notices:

CP2000 Notice

This proposes additional tax, penalties, and interest based on unreported income or mismatched amounts. You have 30 days to respond, either agreeing with the changes or explaining why the notice is incorrect.

CP2501 Notice

Similar to CP2000 but not yet proposing a change—it's essentially a warning that information doesn't match and asking you to review.

Responding to Notices

If you receive a notice, don't panic. Review your return carefully, gather supporting documentation, and respond by the deadline. Many discrepancies result from legitimate differences (such as reporting basis adjustments that the IRS hasn't yet processed) and can be resolved with proper explanation.

Audits

While receiving a 1099-B doesn't increase audit risk per se, significant discrepancies or patterns of errors can. High-volume traders, those with large gains or losses, and taxpayers with complex investment strategies may face higher scrutiny.

Refund Processing

If your return is accepted without issues, refunds are typically issued within 21 days for electronically filed returns. However, if the IRS needs to verify 1099-B information, this timeline may extend.

FAQs

1. Do I need to report transactions from my Form 1099-B even if I had a loss?

Yes. All transactions reported on Form 1099-B must be reported on your tax return, whether you had gains, losses, or broke even. The IRS's computers match proceeds amounts, and failing to report will trigger notices even if you owe no additional tax. Furthermore, reporting losses allows you to deduct them (subject to capital loss limitations), potentially reducing your tax liability. IRS.gov

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

If you believe the cost basis reported for a covered security is incorrect, you should report the correct basis on Form 8949 and attach an explanation. Common reasons for discrepancies include transferred securities where basis information wasn't properly communicated between brokers, gifts where the donor's basis applies, or inherited securities using stepped-up basis. Keep documentation supporting your claimed basis in case of IRS inquiry.

3. I received a 1099-B after filing my return. What should I do?

You must file an amended return (Form 1040-X) to report the additional transactions. Include a corrected Form 8949 and Schedule D showing all transactions, including those from the late 1099-B. File the amendment as soon as possible to minimize potential penalties and interest.

4. What's the difference between Box 1d (proceeds) and Box 1e (cost basis)?

Box 1d shows the gross proceeds from selling the security—essentially what you received from the sale before any deductions. Box 1e shows your cost basis (what you originally paid plus adjustments). The difference between these two amounts generally represents your capital gain or loss. Note that Box 1e may be blank for noncovered securities, requiring you to determine and report basis yourself.

5. How long should I keep Forms 1099-B?

The IRS generally recommends keeping tax returns and supporting documents for three years from the filing date. However, for investment records, it's wise to keep Forms 1099-B and related documentation (purchase confirmations, transfer statements) for at least three years after selling the investment. If you have noncovered securities, retain purchase records indefinitely until you sell the asset and file your return.

6. Can I use average cost basis for all my investments?

Average cost basis is only available for mutual fund shares and certain other regulated investment company shares. For individual stocks and most other securities, you must use specific identification (choosing which shares to sell) or first-in-first-out (FIFO) method. Once you've chosen a method for a particular fund, you generally must continue using it for future sales from that fund.

7. What if I traded cryptocurrency in 2019?

For the 2019 tax year, cryptocurrency transactions were generally not reported on Form 1099-B (this changed in later years). However, you're still required to report all cryptocurrency sales on Form 8949. You'll need to maintain your own records of purchase dates, amounts, and basis to properly report these transactions. The absence of a 1099-B doesn't eliminate your reporting obligation.

Additional Notes & Resources

Important Reminder: While this guide provides general information about Form 1099-B for the 2019 tax year, individual circumstances vary widely. For complex investment situations, significant trading activity, or questions about specific transactions, consider consulting a qualified tax professional or CPA.

For the most current forms and instructions, always visit the official IRS website at IRS.gov or call the IRS helpline at 1-800-829-1040.