What is the 'Form 1099-B'
Form 1099-B is a form issued by a broker or barter exchange that summarizes the proceeds of all stock transactions. The sale of a stock is accompanied by a gain or loss, which must be reported to the IRS when you file your taxes. Specifically, figures from form 1099-B are used on IRS Form 1040, Schedule D, and brokers are required to provide you with the form 1099-B by January 31.
BREAKING DOWN 'Form 1099-B'For example, assume you sold several stocks within the last year and the proceeds of the transactions equal a capital gain of $10,000. The amount gained from the sale of the stocks will be reported by your broker on form 1099-B, and this amount must be included when you file your income taxes.
The Internal Revenue Service (IRS) requires the submission of Form 1099-B to function as a record of the taxpayer’s gains or losses associated with the brokered sale or trade of certain securities. The Form 1099-B only records the gains or losses that have occurred within a particular calendar year or tax year. This can include information regarding stocks as well as bonds, and is used to assess the taxpayer’s associated tax liability as it relates to these gains or losses.
The taxpayer must include information contained within the Form 1099-B as part of his annual tax filing, traditionally due on April 1st of the year following the year in which the activities occurred. Along with the totals of any capital gains or losses, the document must include details surrounding the activities.
Transaction Details Contained in the Form 1099-B
The Form 1099-B must have details of the particular investments included within the totals. This includes descriptions of each investment, the purchase date and price, the sale date and price, and the profits derived from each sale, minus any commissions paid.
Capital Losses and Deductions
In cases in which the Form 1099-B reports capital losses that outweigh capital gains, the negative difference may be listed as a deduction in the tax filing. This effectively lowers the amount of income the taxpayer reports, resulting in a lower tax burden. There are limits to the amount of capital loss that can be deducted each year. If the capital loss exceeds the maximum allowed amount, the difference can be carried on to the next tax year.
Additional Uses of the Form 1099-B
If a company participates in certain bartering activities with another commercial entity, it is necessary to file a Form 1099-B. It must contain information regarding the fair market value of the items involved, as this must be included as income by the receiver of the goods for tax purposes.