Gross Proceeds….1099-B

We have another year before the IRS requires brokerage firms to report your cost basis when you sell stock. 

Update March 2011:  Brokers are NOT required to report basis for any securities you’ve acquired before 2011.

In the meantime, we haven’t found too many people who understand the term “cost basis”. 

If you receive a Form 1099-B in January for the year before, it means you’ve sold an investment through a brokerage firm. 

The total sale price of the investment is reported to the IRS on Form 1099-B.

You need to report the sale on your tax return on Schedule D.  You get to subtract your cost of the investment from the gross proceeds, to determine your gain or loss on the sale.  That gain will be taxed, or your loss will be subtracted from other gains, or up to $3,000 will be subtracted from your other income on your Federal tax return.  Any losses greater than $3,000 will be carried forward to future years.

If there is ever anything missing from the tax return information we receive to prepare tax returns, it is the cost basis of the investments sold during the year! 

Remember to keep the “BOT” statements from buying your investments.  They are your best proof of your investment cost down the road when you sell those investments!