So can someone please settle for me what needs to reconcile between the 1099-B issued by my broker and the form 8949 that I file with my Schedule D? I trade only in equities and I have wash sales through the year, some of which do carry over to the next tax year. I'm certain that the total proceeds (8949 column e) needs to match perfectly with 1099-b Box 2. I'm also fairly certain that total cost basis (8949 column f) for covered securities needs to match with 1099-b Box 3. My big question is, does the Adjustments (8949 column g) for covered securities also need to match with 1099-b Box 5 (Wash Sale Loss Disallowed)? To me, it seems that the answer to that question would be "no", and that 8949 column g is used to "reclaim" wash sales that were subsequently disposed of before tax year end and which do not carry over to the following tax year. So, based on my understanding, whatever the 1099-b Box 5 total is, minus the total adjustments in 8949 column g should equal the net wash sale loss disallowed (for covered securities) that should be carried over to the following tax year. The reason I ask this question is that looking at the 8949 generated by my broker (IB), the total 8949 column B for covered securities EQUALS the total Wash Sale Loss Disallowed reported in their 1099-b, which means that there is nothing carried over to the following year. That doesn't make sense to me. Am I interpreting the purpose of 8949 column g correctly? Am I calculating the actual wash sale loss disallowed carryover correctly? And, am I intepreting IB's "error" correctly? Any help would be greatly appreciated!
Come to think of it, I don't see anywhere else in the tax return where 1099-b Box 5 gets reported. So, how does it even affect your reported gains?
It's going to be extra hard to reconcile wash sales, as there are many known reasons why they won't match. Brokers often report potential wash sales, not actual wash sales. Brokers didn't do the cut-offs right at the beginning or end of year. Brokers report wash sales between identical positions only, and taxpayers need to report them between substantially identical positions - that means between stocks and options. You need to do the wash sale analysis across all your accounts, not just one broker's accounts. We suggest you enter the 1099-B totals for proceeds, so the 8949 matches, and show an adjustment for the difference. The rest is hard to reconcile with. See our blog about this problem: An update note to tax preparers and traders about incorrect 1099-Bs and 2011 tax filings http://www.greencompany.com/blog/index.php?postid=163
Thanks for your reply Mr. Green. One follow-up question: In a perfect world where the wash sale loss disallowed is correctly calculated by the broker, should the total adjustments on the 8949 equal the reported 1099-b Box 5 for covered securities (assuming only equities being traded in a single account), or should it just equal a lesser amount with the difference being the EOY wash sale loss disallowed that should be rightfully carried over to the following year?
Regards. I got this answer from one of our CPAs. "I donât believe that would ever happen, but in the perfect world he describes the total adjustments on the F8949 would be equal to the amount on the 1099 since it does include the amounts deferred to next year. The total adjustments are reported per transaction, so you would not reduce it for the year end wash sale deferrals. If they have a Box A cost basis adjustment that would also be included in the adjustment column on Form 8949, so in that case the total would not agree to the 1099 box 5 amount. "