Understand the ins and outs of the Consolidated 1099
The Consolidated 1099 can be confusing because it combines five separate types of Forms 1099 into a single form. The 1099s cover a broad range of reportable income and transactions, including dividends, nondividend distributions, sales of securities, capital gain distributions and mutual fund income. It’s a lot of information.
Below, you’ll find a few of the top questions from a recent webinar on the topic and their accompanying answers. If you choose to attend the on-demand version of this webinar, you’ll have access to the full recording and the entire list of Q&As.
Q: Do we use the adjustment if the taxpayer passed away and part of the Form 1099-B, Proceeds from Broker and Barter Exchange Transactions, should be reported on Form 1041, U.S. Income Tax Return for Estates and Trusts?
A: Yes, in that case, you will enter the full amount reported, and then add a second entry that is a negative amount representing the amount reported on Form 1041. Include the name and EIN.
Q: Could you please explain the difference between covered lots and non-covered lots?
A: Covered means basis is reported to the IRS; non-covered is not.
Q: For inherited stock, is the cost basis shown?
A: Not always. It depends on whether the broker was made aware of the death and adjusted the basis to FMV at the time of death.
Q: If you have a statement with multiple buys/sells that are normal and have one (or more) with adjustments, can you enter the “normal” on one line and then break out the adjustment transactions separately?
A: Yes, pull out the transactions subject to adjustments and report them separately. If it is a wash sale, add a Code W. Then report the short-term covered and long-term covered transactions as two separate transactions, using Code M. Also, if there are non-covered transactions, enter them as short-term and long-term separately. Then send the statements to the IRS as a PDF or an attachment for Form 8453.
To learn more about the tax implications of reporting sale of stocks, you can watch our on-demand webinar. NATP members can attend for free, depending on membership level! If you’re not an NATP member and want to learn more, join our completely free 30-day trial at natptax.com/explore.