Tried to search for "wash sales" to see if this was covered already, but all I get is the "Searching..." screen. Nothing comes back. I think I have a handle on wash sales - you can't take a loss and buy back "substantially identical shares" in 30 days, or the loss is dissallowed. For traders who close out all trades before the end of the year, or don't buy the same stocks in January that they sold in Dec last year, etc., it is of no consequence. Cost basis is just added to the new stock, so that when you sell it (in the same year in our case) you then get the loss anyway. But here comes the new 1099B rules. Section 5 is Wash Sale Disallowed. I ended up with about $7000 there. So now IRS gets col 2- Gross Proceedes, col 3 - Cost or Basis, and col 5 - Disallowed Wash Sales. Turbo Tax is just taking that out of Gross Proceeds and not even considering the sales were all year long and they were all netted out and all sold within the CY. And Interactive Brokers is of course just adding up all the stocks I bought and sold, and if they were the same and bought within 30 days they get added to the Disallowed amount. So anyway, I think I just need to add the disallowed $7K to the section 3 Basis. But then of course the numbers won't match what the IRS gets and they may decide to fu#k with me. Any words of wisdom on these new 1099s? Thanks.
Dammit... I think you can only buy and sell a stock twice in 30 days, then if you don't wait 31 days after the last sell to buy again, the Disallowed amount keeps piling up. I may have to elect M to M and Trader status. I kind of just ignored this stuff for the last 12 years. Can't anymore. My head hurts...
Ok I downloaded mine from IB and panicked a little but looked it over and think I figured it out. To calculate your net proceeds for the year you subtract your wash sales disallowed from your cost basis. I assume, if you get flat before EOY and stay flat for 30 days the wash sale amount is added back into the cost basis. So the wash sale value will keep accumulating throughout the year, but so will your cost basis by the amount of the wash sale if you get flat and stay flat for 30 days. 1099 Net proceeds = 2 - (4-5)
Thanks. I think you are right. Seems like most info about wash sales online just state how terrible it is to buy back shares after taking a loss. They rarely discuss what happens when you sell AGAIN and are flat on the year (and don't buy back within 30days next year). I'm just worried that the IRS will get numbers on my return that don't exactly match what IB sent them. Then I would get a letter much later in the year wanting me to detail every single stock trade (several thousand!) and to explain the discrepency. Just a time-wasting hassle. I know I am supposed to, anyway, on Sched D. But I just net everything and pay what I owe. Maybe the new 1099 will show the details enough that the IRS won't hassle us small time traders...I hope...
Unless something else has changed this year (I don't think so), wash sales don't change the total sales proceeds that you report. You subtract the wash sale loss from your original basis to bring that trade to a zero P/L. You then add that amount to the basis of the newly purchased shares. You should also mark those shares on your Schedule D details sheet to show that the basis has been adjusted.