What is IRS Form 1099-B?

Erich J. Ruth
October 17, 2012 — 1,354 views  
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Form 1099-B is an information return that the Internal Revenue Service requires to be filed for the gross proceeds of the sales of option shares in non-retirement accounts minus or including a contingent deferred sales charge (CDSC) and redemption fees.  Most commonly, mutual fund withdrawals and stock sales are reported with Form 1099-B.  However, several other stock related transactions should be reported on Form 1099-B.  Form 1099-B is not used however to report capital gains or losses.  The 1099-B information return is used to complete Schedule D on Form 1040 which requires the reporting of option shares.

Generally an employee's broker will complete the 1099-B after the sale of option shares and send it to the payment recipient.  The broker may choose to report the transaction amount including transaction fees or excluding transaction fees.  If the broker chooses to report the proceeds including transaction costs, the person receiving the 1099-B form should add the fees to their cost basis on their Schedule D.

IRS Form 1099-B consists of 3-pages with 2 forms per page.  Copy A is a red-ink form that the broker can paper file with the IRS.  Do not download Copy A from the Interal Revenue Service website and print and submit.  Even if your printer can print in a red-colored ink, it's not the same ink that the IRS uses to create Copy A.  The official printed version of the IRS form is scannable, but the online vrsion of it, printed from a website, is not. A penalty may be imposed for filing forms that can't be scanned. Copy B can be printed on plain paper with black ink and is sent to the recipient.  Copy C is retained by the broker.

For brokers, each recipient of option shares must receive a 1099-B.  The form must be sent by the broker to the payment recipient by January 31 of the year after the calendar year in which the transactions being reported occurred.

Form 1099-B must be paper filed to the IRS by the end of February along with Form 1096, Annual Summary and Transmittal of U.S. Information Returns.  If you file electronically, you have until the end of March.  You can go online and file for an extension taking the due date to the end of April if you need more time.

If the recipient of the proceeds is a nonresident alien, you may have to withhold federal income tax.

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Erich J. Ruth