In doing a search on ET I see this has been discussed previously. Has anyone gotten a response from IB on why it continues to include commissions in Form 1099 futures gains/losses, contrary to what other brokerages do? Also doesn't IB's reporting raise a red flag with the IRS where the 1099 doesn't match what you report (net of commssions on Form 6781)? How are you handling this problem on Form 6781?
My 2003 1099 for futures does not include commissions in the amounts on lines 1 and 2. Total commissions are shown separately on line 4. Of course, it's annoying that there wasn't a line 4a and 4b to split out post 05/05 :-|
After going back and reading all the past notes on the subject of IB and commissions, and what to put on the 6781, I still don't have a straight answer in my head. So, let's say I have a (2200) realized futures LOSS per my IB 1099. Let's also say I have a COMMISSIONS PAID ON FUTURES amount of $800. What number do I report to the IRS? Is it -3000 or -2200? What number is the IRS going to get from IB? Thanks for any reply that answers this question definitively.
-3000. The IRS will see the gain/loss before commissions in boxes 1 and 2, and the commissions in box 4. The total of box 1/2 and 4 (always a negative number for your calculations) will add to the sum you report on Form 6781. alanm raises another issue -- the break-down of the commissions into pre- and post- 5/05. I think we have to calculate (or estimate) how much commissions are pre and post.
Sorry I didn't say it right the first time. I meant to say that commissions have to be added back in to calculate your gain/loss. I still question whether the number your report on 6781 raises a red flag for the IRS and if they will get the commission number from IB.
A difference between the 1099 gross proceeds figures and your figures for gross proceeds on schedule D will trigger an electronic audit. That's where the IRS's computer catches that difference and requests a statement from you about it. Electronic audits are up this past year because it's easier now for the IRS to handle it this way. If there's a discrepency in the amounts, and the difference is plainly attributable to commissions included/not included in the figure, the IRS rep I spoke to said to state so on the schedule itself. Of course, always have the itemized transactions to back it up in the event they want proof.
Simple..... You must report the exact number from the 1099. If it does not include commission, that is added to the Schedule C as a business expense. I have two brokers. One of my 1099 includes my Data fees. It is not itemized anywhere. I am not backing it out. Bottom line you have to report the number exactly as it reads on the 1099, or be audited. The same goes for reporting "Proceeds" on Schedule D. ebo
I put down two lines on my 6781. I list the IB gross proceeds exactly as the 1099 shows and then I also put a "commission expense for Interactive Brokers not included in line 1" number. I figure the IRS will have less of a problem with an "extra" number on the 6781 than they will with not being able to find an amount reported to them. I haven't been audited since I started doing this. I was, however, audited several years ago when I didn't realize the commissions weren't included and had to amend my return. Amending my return triggered the audit. I went through a lot of grief because IB doesn't report the net profit. It seems silly to me that IB doesn't just report the net profit like every other futures broker.
If one electronically files where would the note go? Michael B. P.S. I am assuming use the number without commish to avoid electronic audits? (if your a scalper then you get audited, otherwise pay them a little to avoid the hassle)
Hi Aaron! I just found out I am related to one of the original Turtles! (One of Richard Dennis students.) Does that make me a second generation Turtle by proxy?