What is Form 1099-B: Proceeds from Broker Transactions?
If you sell stocks, bonds, derivatives or other securities through a broker, you can expect to receive one or more copies of Form 1099-B in January. This form is used to report gains or losses from such transactions in the preceding year. People who participate in formal bartering networks may get a copy of the form, too.
Key Takeaways
- Form 1099-B is used to report gains or losses from selling stocks, bonds, derivatives, or other securities through a broker, and for barter exchange transactions.
- The form contains details like the description of the item sold, purchase and sale dates, acquisition cost, sale proceeds, and any federal tax withheld by the broker.
- The form helps you calculate capital gains or losses, which you'll report on your tax return. Typically, gains are taxable, while losses can offset gains or reduce taxable income.
- The form also reports the fair market value of goods and services received through barter exchanges, which usually counts as taxable income.
Information on the 1099-B
In most cases, a 1099-B form provides information about securities or property involved in a transaction handled by a broker.
This includes:
- a brief description of the item sold, such as “100 shares of XYZ Co"
- the date you bought or acquired it
- the date you sold it
- how much it cost you to acquire it
- how much you received for it when you sold it
- whether your broker withheld any federal tax
How Form 1099-B is used
The 1099-B helps you deal with capital gains and losses on your tax return. Usually, when you sell something for more than it cost you to acquire it, the profit is a capital gain, and it may be taxable. On the other hand, if you sell something for less than you paid for it, then you may have a capital loss, which you might be able to use to reduce your taxable capital gains or other income.
- You pay capital gains taxes with your income tax return, typically using Schedule D.
- The data from Form 1099-B helps you fill out Schedule D and Form 8949 if needed.
Short-term and long-term gains
Box 2 of the form tells whether the gain or loss involved is short-term or long-term.
Generally,
- If you owned an asset, such as stock, for a year or less before selling it, any gain or loss from a sale is short-term in most cases.
- If you owned it for more than a year, you would normally have a long-term gain.
- The distinction is extremely important, since tax rates on long-term gains can be significantly lower than those on short-term gains.
Some brokerage companies issue a "Composite 1099 Form" that replaces multiple individual 1099 forms such as:
- 1099-B
- 1099-INT
- 1099-DIV
Sometimes, the individual sections of the composite forms do not include all of the information that is available on a standard 1099 form, such as the check boxes for short-term and long-term transactions on the standard 1099-B form. Instead, many of these composite forms simply group the different types of transactions so that you can readily tell which ones are short-term and long-term.
TurboTax Tip:
Form 1099-B shows whether your gain or loss is short-term or long-term, affecting the tax rate. Typically, short-term gains are taxed at ordinary income rates, while long-term gains get lower tax rates.
Barter exchanges
A secondary use of Form 1099-B is to report barter exchange transactions. A barter exchange is a network of people or companies who agree to trade property or services with one another without accepting payment in currency.
Barter exchanges use Box 13 of the form to report the fair market value of all goods and services received by an individual member of the exchange over the course of a year. In general, value received through a barter exchange is considered income and may be taxable.
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