Form 1099-B: Proceeds From Broker and Barter Exchange Transactions (2020)

What the Form Is For

Form 1099-B is an official IRS tax document that reports sales of stocks, bonds, mutual funds, and other investments, as well as barter exchange transactions. If you sold stocks, bonds, commodities, or participated in a barter exchange during 2020, your broker or barter exchange must send you this form—and send a copy to the IRS as well.

Think of Form 1099-B as your broker's official record-keeper for the IRS. It documents what you sold, when you sold it, how much you received, and in many cases, what you originally paid for it (your “cost basis”). This information helps the IRS verify that you're accurately reporting your investment gains and losses on your tax return. Without this form, the IRS wouldn't know whether you properly reported your capital gains—a crucial detail since these transactions can significantly affect your tax bill.

Brokers include traditional brokerage firms, banks, online trading platforms, and even corporations that redeem their own stock. Barter exchanges are organizations that facilitate the trading of goods and services among members. Both must file Form 1099-B for transactions they handle on your behalf, subject to certain exceptions.

When You’d Use It (Late or Amended Filings)

For Recipients (Investors)

You typically receive your Form 1099-B by February 16, 2021 (for tax year 2020). If you discover errors on your form, contact your broker immediately to request a corrected form. Don't file your tax return with incorrect information—wait for the corrected version, which will be clearly marked as “CORRECTED” in a checkbox at the top.

For Brokers and Payers

The original Form 1099-B must be filed with the IRS by March 1, 2021 for paper filing, or March 31, 2021 if filing electronically. If you discover an error after filing, you must file a corrected Form 1099-B.

Special Rules

If you receive new information from an issuer about a security's basis after filing, you must file a corrected Form 1099-B within 30 days of receiving that information.
However, you don't need to file a corrected form if you receive this information more than 3 years after filing the original.
You can request a 30-day extension to file by submitting Form 8809 by the original due date.
Under hardship conditions, an additional 30-day extension may be available.

Note: Forms 1099-B reporting nonemployee compensation are subject to different rules and earlier deadlines.

Key Rules for 2020

Covered vs. Noncovered Securities

This critical distinction affects reporting requirements. “Covered securities” are investments acquired after specific dates (generally after 2010 for stocks, 2011 for mutual funds, and later dates for other securities) where brokers must report detailed cost basis information.

For “noncovered securities” (older investments), brokers can check Box 5 and leave basis information blank without penalty.

Multiple Forms Rule

You may receive multiple 1099-B forms for a single transaction if you sold both short-term and long-term holdings, or both covered and noncovered securities, in what seemed like one sale. Brokers must separate these on different forms.

Box Codes Matter

Each Form 1099-B includes a one-letter code (A, B, D, E, or X) indicating which section of Form 8949 you should use when filing your taxes.

A and D: Covered securities with basis reported.
B and E: Noncovered securities without basis reported.
X: Holding period unknown.

Backup Withholding

If you haven't provided your broker with a valid taxpayer identification number (TIN or Social Security Number), they may withhold 24% of your proceeds for backup withholding. This amount appears in Box 4 and can be claimed as a credit on your tax return.

Qualified Opportunity Funds

For 2020, special reporting applies to dispositions of interests in Qualified Opportunity Funds (QOFs). Brokers must check the QOF box in Box 3 for all such transactions, regardless of the identity of the person disposing of the investment.

Step-by-Step: How to Use Form 1099-B (High Level)

Step 1: Receive and Review

Expect your Form 1099-B by mid-February. Carefully review all information, especially the description of property sold, dates, proceeds, and cost basis.

Step 2: Verify Accuracy

Compare the form against your own records. Common errors include incorrect purchase dates, wrong basis amounts, or missing transactions. Contact your broker immediately if you spot discrepancies.

Step 3: Organize by Code

Group your Forms 1099-B according to the box code letter (A, B, D, E, or X). This makes the next step easier.

Step 4: Transfer to Form 8949

Report each transaction on IRS Form 8949 (Sales and Other Dispositions of Capital Assets), using the section that matches your 1099-B code.
For example, transactions with code A go in Part I with Box A checked.

Step 5: Calculate Adjustments

Make any necessary adjustments in column (g) of Form 8949. This includes correcting basis errors, adding wash sale losses disallowed, or reporting accrued market discount.

Step 6: Transfer to Schedule D

Totals from Form 8949 flow to Schedule D (Capital Gains and Losses), which ultimately affects your Form 1040.

Step 7: Retain Documentation

Keep your Forms 1099-B with your tax records for at least three years, or longer if you have carryover losses.

Common Mistakes and How to Avoid Them

Mistake #1: Ignoring “Noncovered” Securities

Many taxpayers assume their broker reported complete information and simply transfer amounts as-is. For noncovered securities, you may need to manually calculate and enter your cost basis on Form 8949, even if the 1099-B shows nothing in Box 1e.

Mistake #2: Forgetting to Reduce Proceeds

The amount in Box 1d already includes reductions for commissions and transfer taxes. Don't subtract these again when calculating your gain or loss.

Mistake #3: Missing Wash Sales

If you sold a security at a loss and repurchased substantially identical securities within 30 days before or after, the loss is disallowed as a wash sale. This appears in Box 1g and must be added back to your basis.

Mistake #4: Filing with Missing Forms

If you know you sold securities but didn't receive a 1099-B by late February, contact your broker. Don't skip reporting the sale simply because you lack the form—you're still required to report it.

Mistake #5: Truncation Confusion

Your Social Security Number may appear truncated (partially hidden) on your copy of the form for security purposes. This is normal and doesn't indicate an error.

Mistake #6: Wrong TIN

Ensure your broker has your correct taxpayer identification number. An incorrect TIN can trigger backup withholding and IRS notices.

What Happens After You File

For Recipients

Once you file your tax return including the Form 1099-B information on Form 8949 and Schedule D, the IRS will match the amounts against the 1099-B forms your broker submitted. Discrepancies can trigger automated notices (CP2000) proposing additional tax if the IRS believes you under-reported income. Respond promptly to any such notices with documentation supporting your position.

Your capital gains or losses affect your tax liability.

Short-term gains (securities held one year or less) are taxed at ordinary income rates.
Long-term gains receive preferential tax rates.
Capital losses can offset capital gains, and up to $3,000 of excess losses can offset ordinary income annually.

For Brokers

The IRS processes your Forms 1099-B and adds them to its matching system. You may receive penalty notices if:

Forms are filed late (penalties under section 6721 can be $50–$280 per form, depending on how late).
Required information is missing or incorrect.
You fail to furnish statements to recipients (penalties under section 6722).

If you need to correct errors, file corrected Forms 1099-B as soon as you discover mistakes. Prompt voluntary corrections can reduce or eliminate penalties.

FAQs

Q1: Do I need to file anything if my Form 1099-B shows a loss?

Yes. All transactions reported on Form 1099-B must be reported on your tax return, regardless of whether they resulted in a gain or loss. Reporting losses is actually beneficial—they can offset capital gains and reduce your taxable income by up to $3,000 annually, with excess losses carried forward to future years.

Q2: What if my Form 1099-B shows a different cost basis than what I actually paid?

You must report the correct basis on Form 8949, even if it differs from the 1099-B. Make the adjustment in column (g) with code “B” and attach a statement explaining the discrepancy. Common reasons include: inherited securities (step-up in basis), gifts (carryover basis), or incorrect broker records.

Q3: I received multiple 1099-B forms from the same broker. Do I need all of them?

Yes. Keep and report all Forms 1099-B. Brokers issue separate forms for different types of transactions (short-term vs. long-term, covered vs. noncovered). Each form represents different reporting requirements and must be included on your tax return.

Q4: What's the difference between Box 1d (proceeds) and Box 1e (cost basis)?

Box 1d shows what you received from the sale (minus commissions). Box 1e shows what you originally paid (your cost or adjusted basis). Your capital gain or loss equals Box 1d minus Box 1e (plus any adjustments). If Box 1e is blank, you must determine your basis from your own records.

Q5: Can I avoid getting a Form 1099-B by keeping my gains below a certain amount?

No. Form 1099-B reporting is transaction-based, not threshold-based. Brokers must report sales regardless of the gain or loss amount. However, there are limited exceptions (such as sales of fractional shares under $20).

Q6: My brokerage account is in joint names. Who reports the income?

Generally, the person whose Social Security Number appears first on the account receives the Form 1099-B and reports the transaction. However, if ownership is split differently, you may need to use nominee reporting procedures to allocate income correctly between joint owners.

Q7: I just received a corrected 1099-B after filing my return. What should I do?

If the correction changes your tax liability, file an amended return (Form 1040-X) including the corrected information. You typically have three years from the original filing deadline to amend. If the correction doesn't affect your tax, no action may be needed, but review carefully to be certain.

Source

All information derived from official IRS publications: 2020 Instructions for Form 1099-B and 2020 General Instructions for Certain Information Returns.

For the latest information and updates, visit IRS.gov/Form1099B.