Known Broker 1099-B Reporting Problems

Brokerage 1099-B forms are not consistent across the industry, and many contain serious errors.

1099-B Cost Basis Reporting has created a big mess since 2011. These problems are huge for active traders who may have reports that are hundreds and even thousands of pages long. TradeLog has created this page dedicated to problems reported as taxpayers attempt to reconcile 1099-B with accurate Form 8949 calculations.

PLEASE NOTE: In many cases it will be impossible to perfectly reconcile your 1099-B to TradeLog-generated Form 8949.

TradeLog 1099 Reconciliation Table

The chart below is designed to help you identify how your broker reports options as well as referencing known problems - which are explained in detail below.

Is your broker not listed? We only list brokers that we have been able to confirm by reviewing their reporting. If you have questions about your broker's 1099-B reporting and you have an active TradeLog subscription, then please send your 1099-B and your TradeLog data file with your questions. Click here to submit that information.

Details of 1099-B Problems

• Section 1256 Contracts The IRS directs brokers to separately report options that qualify as Section 1256 contracts on the 1099-B. These are often listed in a section of the reporting titled Regulated Futures Contracts. However, neither the IRS or SEC provide definitive listings of contracts that qualify for Section 1256. Therefore, interpretations may vary between brokers, CPAs, and other tax authorities as to whether a contract should be treated as Section 1256 or not.

  TradeLog uses a default listing of option contracts recognized as Section 1256, this is the Broad-Based Index Options settings in TradeLog. TradeLog's default list is based on information published by Twenty-First Securities Corporation, a recognized authority in taxation.

  Large positive or negative differences in proceeds between the 1099-B and TradeLog may be the result of different identification of Section 1256 contracts. TradeLog users can see which contracts are treated as such by going to the Find menu and choosing Futures. This will display all trades labeled with the type of FUT-XXX. Comparing that listing with the 1099-B should reveal if there are differences.

  Taxpayer options:

  1. Ultimately each taxpayer must make the final determination of which contracts they will report as Section 1256 - the broker is not responsible for those decisions. If in doubt they should consult with their CPA. TradeLog users can customize the settings for Broad-Based Index Options in the software as needed. Click here for instructions.
     
     NOTE: after updating the settings it may be necessary to edit trades already imported in order to change the Type/Multiplier from FUT-100 to OPT-100.
     
     

• Non Reported Options We have seen numerous examples where the broker does not report some options to the IRS on 1099-B for no apparent reason. These are options that are opened and closed in 2014 and typically are considered covered securities. While we cannot state definitively if the broker is in error as they may have some legitimate reason for that reporting, the bottom line is that it will affect reconciliation with TradeLog. A positive reconciliation difference it typically the result.

  Taxpayer options:

  1. If your broker lists a section of trades "Not reported to the IRS" (or categorized as Form 8949 Box C or F, or similar wording), then you should carefully review that section and note any options that are opened and closed in 2014. The proceeds for those options are typically being reported by TradeLog, but not by your broker and thus may account for any reconciliation difference.
     
     Taxpayers may wish to request the broker to explain why they did not report those trades to the IRS as it may be an error on the 1099-B. Brokers should be held responsible for reporting what is required by the IRS.
     
     

• Reporting Date for Short Sales. Brokers are not required to apply the Constructive Sale Rule when reporting short sales on 1099-B. Therefore, brokers will generally report ALL short sales as closed based on the settlement date of the closing position. Since the Constructive Sale Rule does apply to taxpayer reporting on Form 8949 there may be discrepancies between what the taxpayer is required to report and what is reported on Form 8949 if there were short sales that closed at a gain in the last few days of 2024. In this case you may be reporting more sales on form 8949 than are on 1099-B. Click here to learn more about IRS short sale reporting rules.

  This problem may also carry over from previous years. If your 2023 Form 8949 reported a short sale closed in that year, but the broker did not report the same trade closed until 2024, then the 1099-B for 2024 will list short sales that you already reported to the IRS. In this situation the broker may report more sales than are reported on the 8949.

  Taxpayer options:

  1. Brokers are not required to apply the Constructive Sale Rule, therefore the 1099-B will simply not match with Form 8949 in these cases. Taxpayers may choose to include a footnote for the IRS explaining the cause of the difference.
     
     
• Expired Long Options: When a long option position is expired worthless the broker is reporting the loss in the proceeds column with a zero cost basis on the 1099-B. While the resulting gain/loss calculation is correct this reduces the total sales proceeds and is not in harmony with IRS instructions for 1099-B reporting. As a result, TradeLog may report more sales proceeds than the 1099-B. This problem has been confirmed to affect Charles Schwab reporting.
  
  Taxpayer options:
  • We have encouraged taxpayers to report this error to their broker as it does not match the IRS instructions. However, since the problem only affects the 1099-B report it may not be necessary to receive a corrected 1099-B in order to finish tax reporting in TradeLog. TradeLog will properly report the trades on Form 8949 as required by the IRS. Taxpayers may choose to report the error to the IRS using that option on the TradeLog generated statement of differences. Click here to see how to report the error.
    
    
• Wash Sales on Short Options: Some brokers report the net gain/loss in place of sales proceeds for short options on 1099-B. If there is a wash sale adjustment, then the proceeds are decreased rather than increasing the cost basis. The IRS instructions state that wash sale adjustments should increase cost basis.

   

  As a result, the 1099-B will report less gross proceeds (sales) than what should be reported, making reconciling the 1099 almost impossible. This is a strong reason why this method of reporting should not have been allowed by the IRS.

  This problem has been confirmed with Fidelity, ETrade, Robinhood, tastyworks, TDAmeritrade,  Tradestation, Tradier, and Vanguard reporting.
  
  Taxpayer options:

  1. Since the IRS allows the brokers to report short options in this manner there is little that can be done about this problem. Irregardless of the 1099-B, TradeLog will properly report the trades on Form 8949 as required by the IRS. There may be a reconciliation difference for gross proceeds, as a reminder the 1099 Reconciliation report is only a tool for TradeLog use and is not sent to the IRS. Therefore, it is not necessary to eliminate the difference as long as it can be accounted for.
     
     
• Interactive Brokers End of Year Short Sales: Interactive Brokers is reporting all short sales as closed on the trade date of the close position. The IRS instructions for 1099-B reporting state that a short sale is reported as sold on the date the security was delivered to close the short sale, this is generally the settlement date of the close position. The IRS says that the Date of Acquisition is the date the security was acquired to close the short sale, this is the trade date of the close position. IB's reporting of short sales as sold on the trade date is different from most other brokers.
  
  Because IB is reporting by trade date, they may report some short sales as closed in 2023 whereas other brokers would report the sale closed in 2024 because of settlement. TradeLog reports all short sales based on Form 8949 and Publication 550 instructions, which are also different than 1099-B instructions. The 1099-B reconciliation process for reconciling sales in TradeLog is designed to account for the reporting of short sales based on the IRS rules referenced above. Therefore, IB customers who have short sales that close in the last three business days of 2023 may have reconciliation differences in gross sales and cost basis between Form 8949 and the 1099-B.
  
  Taxpayer options:
  1. Interactive Brokers has not changed their position regarding their reporting. TradeLog users who have reconciliation differences for proceeds should examine closely the short sales closed in the final days of the current and previous tax years. Often the differences can be accounted for with that examination. As a reminder the 1099 Reconciliation report is only a tool for TradeLog use and is not sent to the IRS. Therefore, it is not necessary to eliminate the difference as long as it can be accounted for.
     
     
• Exercised Cash Settled 1256 Contracts Some brokers report the exercise of cash settled Section 1256 contracts in the trade history as if shares of the index/fund are received then sold - which is not possible and will be incorrectly reported on TradeLog's tax reporting. Large positive or negative differences in proceeds may indicate this problem. TD Ameritrade is known to report in this way.
  
  Taxpayer options:
  1. An adjustment in TradeLog is required to properly account for exercised cash settled contracts. Click here to see our more extensive details on how to identify and adjust this situation.