1099-B & SchedD discrepancies. ok?

Discussion in 'Retail Brokers' started by jackpearson, Mar 16, 2012.

  1. If multiple brokers are used, there'll always be a discrepancy between costs on the 1099-B & your SchedD due to wash sales being done across brokers that each individual broker doesn't know about.

    So, how can the IRS use the costs on the 1099-B as anything except a generalized number as far as audits go? It seems like going strictly by the 1099B's would generate A TON of useless audits for the IRS due to the wash sales across brokers.

    Does the Sched D data override the 1099-B? It seems like it would.
  2. miya888


    hopefully you know sched-d is out and 8949 is in.

    regardless, the essence of your question holds, the answer is the IRS wont care if the cross-broker washes net out at the end of the year, however if any such washes affect open positions at the end of the fiscal year, then that would be a problem. furthermore scale is of consideration, the irs wont be looking at small potatoes, but if your trades are in the 6 figs+ per transaction, that obviously merits more of their time, all the above IMHO

  3. How about this scenario?

    Broker A: 11/1/11 Buy & Sell IBM for a loss.
    Broker B: 11/15/11 Buy & Sell IBM for a loss.
    Broker B: 12/10/11 Buy & Sell IBM for a loss.
    Broker B: 12/31/11 Buy & Sell IBM for a loss.
    Broker B: 1/15/12 Buy & Sell IBM for a loss.

    On the Broker A 1099-B, it would show the loss from 11/1/11 when it really shouldn't because of the 11/15/11 trade that was done 2 weeks later in Broker B & the continued trades in Broker B thru the end of the year.

    Therefore, wouldn't the totals on the 8949's correctly NOT match the combined Broker A & Broker B 1099-B's?
  4. sprstpd


    If it were me, I would produce an 8949 that is correct according to tax law and then add footnotes to it describing why your totals and your broker's 1099Bs differ.
  5. I think this is the right approach but be sure to use the adjustment codes the IRS provides for form 8949. There are a few like T and W but I can't remember all of them or exactly what they're for. It's in my tax software (Taxactonline.com) so must be in the IRS instructions. Clarify with footnotes if you want. But basically, the IRS allows to to report something different than brokers are reporting on 1099s but wants you to categorize the differences. This doesn't make it audit proof but it has to be better than reporting the "correct" numbers without showing the adjustments.
  6. miya888


    yes the wash sale would be carried into 2012 as you already figured and yes the 8949's would not match so you have to do a manual entry for the wash sale that neither broker identified. Don't forget to adjust your cost basis for next years return.

    as long as you do your numbers correctly, i wouldn't be too concerned about footnotes, explanations, etc. *unless* we are talking about 6 figure+ transactions. remember at the end of the day, if you get audited, you will only be penalized for underpayment/failure to pay, not for not putting a footnote. all above IMHO.