Form 1099-B: Proceeds From Broker and Barter Exchange Transactions (2021)

Understanding tax forms can feel overwhelming, but Form 1099-B is simply a record-keeping document that helps you report investment sales and barter exchanges on your tax return. This guide breaks down everything you need to know about the 2021 version of this important form.

What the Form Is For

Form 1099-B serves as an official notification from your broker or barter exchange documenting transactions you completed during the 2021 tax year. Think of it as a receipt from your investment account or barter network that shows the IRS you sold something—whether stocks, bonds, mutual funds, cryptocurrencies, commodities, or exchanged services through a barter network.

Your broker (such as Fidelity, Charles Schwab, E*TRADE, or Robinhood) is required to send you this form if they sold securities on your behalf during the year. Barter exchanges—organizations that facilitate the trading of services or goods among members—must also issue Form 1099-B when you exchange property or services with a fair market value of $1 or more.

The form contains critical details about each transaction: what you sold (Box 1a), when you bought it (Box 1b), when you sold it (Box 1c), how much you received (Box 1d), what you originally paid for it or its cost basis (Box 1e), and whether the gain or loss is short-term or long-term (Box 2). This information is essential because the IRS receives a copy too, and they'll match it against what you report on your tax return.

Covered vs. Noncovered Securities

Understanding “covered” versus “noncovered” securities is important for 2021. Covered securities are those acquired after specific dates (stocks purchased after 2010, mutual funds after 2011, bonds and options after 2013) where brokers must report complete basis information to the IRS. For noncovered securities, you're responsible for tracking and reporting your own cost basis.

When You'd Use It (Late/Amended Filing)

You'll typically receive Form 1099-B from your broker by February 15, 2022 (the deadline for the 2021 tax year). However, many brokers send corrected or amended versions later if they discover errors or receive updated information from companies about corporate actions. This is particularly common with mutual funds, master limited partnerships (MLPs), and complex securities.

If you've already filed your 2021 tax return (which was due April 18, 2022, or October 17, 2022, if you requested an extension) and then receive a corrected 1099-B showing different amounts, you'll need to file an amended return using Form 1040-X. The general rule is that you have three years from the original filing deadline to amend your return, which means you have until April 18, 2025, to amend your 2021 return if necessary.

Common Scenarios for Amended Filings

Common situations requiring amended filings include:

• Receiving a late or corrected 1099-B after filing
• Discovering you forgot to report one of multiple 1099-B forms from different brokers
• Finding cost basis errors
• Realizing wash sale adjustments weren't properly calculated

When you receive a corrected Form 1099-B, it will be clearly marked “CORRECTED” at the top. Don't ignore these—the IRS receives the corrected version too, and mismatches can trigger notices or audits.

Handling Broker Errors

If your broker made an error and refuses to issue a corrected form, document your communication attempts and file your return with the correct information. Attach a statement explaining the discrepancy and showing your calculations. Keep all records, including brokerage statements and correspondence, in case the IRS questions the difference.

Key Rules for 2021

Several important rules governed Form 1099-B reporting for the 2021 tax year.

Cost Basis and Holding Period

Cost basis reporting requirements meant brokers had to report not just your sales proceeds but also your original purchase price for covered securities. The holding period distinction is crucial for tax purposes:

• Short-term: Held for one year or less — taxed at ordinary income rates (up to 37% in 2021)
• Long-term: Held for more than one year — taxed at preferential rates (0%, 15%, or 20%)

Your 1099-B shows this with specific codes in Box 2.

Wash Sale Rules

Wash sale rules prevent taxpayers from claiming losses if they repurchased “substantially identical” securities within 30 days before or after a sale. When this happens, your broker reports the disallowed loss in Box 1g, and it gets added to the cost basis of your replacement shares.

Cryptocurrency Reporting

For cryptocurrency and digital asset transactions in 2021, reporting was transitioning. While brokers weren't yet required to issue 1099-Bs for crypto sales (that changed later), if you received one, you must report it.

IRS Form 8949 Reporting

The IRS required separate reporting for different transaction types on Form 8949:

• Short-term transactions in Part I
• Long-term transactions in Part II
• Covered and noncovered securities separately

No minimum threshold exists for 1099-B reporting—brokers must report every sale regardless of amount.

Step-by-Step: How to Handle Your 1099-B (High Level)

Step 1: Collect All Forms

If you have multiple brokerage accounts, you'll receive a separate 1099-B from each. Wait until all forms arrive, typically by mid-February.

Step 2: Review Each Form

Check that your personal details and transaction data match your records. Look at Box 2 to identify transaction codes and holding periods.

Step 3: Organize by Category

Group transactions as:

• Covered short-term
• Covered long-term
• Noncovered

Step 4: Transfer to Form 8949

List each transaction with details: description, acquisition/sale dates, proceeds, cost basis, and adjustments. Follow your 1099-B Box 2 codes.

Step 5: Make Adjustments

Add broker commissions or correct basis info for noncovered securities using adjustment codes on Form 8949.

Step 6: Summarize and Transfer to Schedule D

Form 8949 totals flow into Schedule D, which combines all capital gains/losses to determine your net amount.

Step 7: Report on Form 1040

Schedule D totals flow to your main Form 1040. Up to $3,000 in excess losses can offset ordinary income.

Common Mistakes and How to Avoid Them

Mistake #1: Not Reporting Transactions

Even losses must be reported, or the IRS will flag a mismatch.

Mistake #2: Incorrect or Missing Cost Basis

Noncovered securities may show zero basis; report your actual purchase price using trade records.

Mistake #3: Misreporting the Holding Period

Count days accurately to avoid being taxed at higher short-term rates.

Mistake #4: Double-Counting Wash Sales

Don’t manually adjust if your broker already included wash sale info in Box 1g.

Mistake #5: Overlooking Multiple Accounts

Cross-account wash sales can occur if you trade the same stock in separate accounts.

Mistake #6: SSN/TIN Errors

Always verify that identification numbers match exactly between your return and the 1099-B.

Mistake #7: Ignoring Corrected Forms

Always amend your return with Form 1040-X when you receive a corrected 1099-B.

What Happens After You File

IRS Matching Process

The IRS automatically matches your 1099-B with your Schedule D and Form 8949. If all aligns, you won’t hear from them.

CP2000 Notices

If discrepancies exist, the IRS issues a CP2000 notice proposing changes to your return. You can respond within 30 days.

Tax Impact

• Gains: Increase your tax due
• Losses: Offset gains and up to $3,000 of income
• Carryforward: Excess losses carry forward indefinitely

State Tax Implications

Most states require similar capital gain reporting and follow federal rules.

Future Planning

Keep your 1099-B and related records for at least three years (seven years recommended).

Frequently Asked Questions

Q1: What if I never received a Form 1099-B but I know I sold investments?

Contact your broker immediately and use your statements to report sales. You’re still responsible for reporting the transactions.

Q2: Can I just report the net gain or loss total instead of each transaction?

No. The IRS requires transaction-level reporting, typically on Form 8949.

Q3: How do I handle a 1099-B that shows a different cost basis than what I actually paid?

Report the proceeds as shown, but adjust the basis and use code “B” for corrections, with documentation.

Q4: I sold stocks in both my taxable brokerage account and my IRA. Do I need to report both?

No. Only taxable brokerage sales are reported on Form 1099-B.

Q5: What if I inherited stock and sold it in 2021?

Use a stepped-up basis equal to the fair market value on the date of death. All inherited securities are considered long-term.

Q6: Does Form 1099-B report my cryptocurrency transactions?

In 2021, only some exchanges voluntarily issued 1099-Bs. Report all crypto sales on Form 8949 regardless.

Q7: I received multiple 1099-B forms from the same broker. Is this an error?

Not necessarily. Brokers often issue separate forms by transaction type (short-term, long-term, noncovered).

Final Note

While this guide provides comprehensive information about Form 1099-B for the 2021 tax year, tax situations can be complex. When in doubt, consult with a qualified tax professional, particularly if you have complicated transactions, large amounts at stake, or received multiple corrected forms. The IRS also provides free resources at IRS.gov/Form1099B.

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Sources: All information sourced from IRS.gov official publications including Form 1099-B instructions for 2021, IRS Form 8949 instructions, and IRS Schedule D guidance.