This discussion was started on another on the "IB tax record keeping" thread, but I believe it deserves its own thread. IB's 1099 does not include commissions when reporting the "Gross Proceeds" from trades. All of my other broker's include the cost of commissions, ie., commissions are deducted from the proceeds. I feel that IB's version is wrong because what we report for total sales for 2001 will NOT match what IB is reporting to the IRS. And there is no way for the IRS to know how much we paid for commissions on each transaction. Thus, the IRS would be led to believe that we are UNDERreporting our profits (or overreporting our losses).
Last weekend, I went over all my trades from all my different accounts and matched them. The only numbers that didn't match were from IB. I used: http://www.ingenit.com/tradepair/ Imported my trades and confirmed the totals for every month before I combined them all together for the whole year. My Sales total did not match my IB 1099. My example is posted in this page: http://www.elitetrader.com/vb/showthread.php?s=&threadid=2259&perpage=6&pagenumber=6 Either IB fixes its accounting practices to follow the standards of all OTHER brokerages or the IRS will have to investigate why all IB customer's schedule D doesn't match. BTW - I love the cheap commissions and fast execution at IB.
From the IB Website: "The 1099B form is not a reflection of capital gains or Profit & Loss (P&L). It is the customer's responsibility to calculate gains or losses. No option trade information is included on the 1099B. Commissions are not included on the 1099B." I believe other brokerages like Datek do include commissions, so we do have a problem here.
By the way, my other accounts are at TradeStation (1099 issued by Bear Stearns), TD Waterhouse and Schwab. Not exactly fly-by-night operations. IB is the only broker that does not include the cost of commissions in computing Gross Proceeds on the 1099. Either BS, TDW and Schwab is wrong and IB is right or the other way around. Both sides cannot be right. Obviously, there needs to be consistency in reporting to the IRS. If no standards existed in this regard, another broker, for instance, could decide to compute commissions for Gross Proceeds only if commissions were greater than $20 -- and so forth. Since the other brokers' method is time-tested and makes sense to the IRS (it can easily see the taxpayer accurately reported his sales), I can't see how IB's method is correct.
Guys, I really don't think any of this is a problem. Simply add the commission cost into your basis and problem solved. It's no different than a real estate transaction reported on a sched. D. You sell the property and add the cost(s) of the transaction to your basis, then figure your profit by subtracting basis from proceeds. It's just a book keeping variation, not some kind of major accounting blunder.
Since IB does not include the commissions in the cost for futures, and since Form 6781, "Gains and Losses from Section 1256 Contracts", only requires one to show the gain or loss, if I report the IB value, then I need to adjust the 1099-B for the commissions on line 4, by subtracting out the value of the commissions. This way the IRS will be happy since my 1099-B value agrees with IB, and I remove the commissions as an adjustment as shown on line 4. Hope this works ok?
From IB communique on 30 Jan, 2002: "1099s (1099-B, 1099-Int, and 1099-Div) will be mailed to US residents within the next few days. In addition, we are making electronic copies of your 1099s available on our website under Account Access/Statements." Does anyone know if the electronic versions are actually available? I've checked the usual repository of recent daily and monthly statements (where the 1099 is supposed to be) but haven't seen anything. I've also looked around without any luck. Has anyone found them?
I had no problem accessing my 1099 under Account Access/Account Statements section of the site. The link was at the bottom of the statements page, underneath the daily and monthly statement portion. Hope this helps. IRAF
*** Guys, I really don't think any of this is a problem. Simply add the commission cost into your basis and problem solved. It's no different than a real estate transaction reported on a sched. D. You sell the property and add the cost(s) of the transaction to your basis, then figure your profit by subtracting basis from proceeds. It's just a book keeping variation, not some kind of major accounting blunder. *** In the example: Does that mean I should just add $25 to both the Sales and the Cost basis so the Gain/Loss is still -$355.50 and the Sales matches the 1099? If not, can someone give me an example what I'm suppose to do?
jsmith, that is exactly what I have always done. Seeing as I am not yet in jail this shouldn't present you with any problems. I have been in a position to be privy to a lot of tax returns and have seen people do incredible things. Really, the IRS seems more concerned with form than function, so if you do something with an explainable rationale it won't cause you any trouble, even in the event of an audit. Even tax attourneys and IRS agents do things differently than one another. As an aside: If tiny little descrepancies bothers anyone that much, I strongly suggest you don't study the law in too much detail, you'll find out just how many of them you're breaking each and every day. It's just part of our overcomplicated society. The person with the most flexibility in dealing with the the little daily bumps in the road will turn up as the winner.