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.
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Information included in this article is accurate as of the publish date. This post is not reflective of tax law changes or IRS guidance that may have occurred after the date of publishing.