If you sell stocks, bonds, derivatives or other securities through a broker, you can expect to receive one or more copies of Form 1099-B. This form is used to report gains or losses from transactions like selling stocks in the preceding calendar year.
Information on the 1099-B
In most cases, a 1099-B form provides information about securities or property involved in a transaction handled by a broker.
This includes:
- A brief description of the item sold, such as “100 shares of XYZ Co”
- The date you bought or acquired it
- The date you sold it
- How much it cost you to acquire it
- How much you received for it when you sold it
- Whether your broker withheld any federal tax
How Form 1099-B is used
The 1099-B helps you deal with capital gains taxes. Usually, when you sell something for more than it cost you to acquire it, the profit is a capital gain, and it may be taxable. On the other hand, if you sell something for less than you paid for it, then you may have a capital loss, which you might be able to use to reduce your taxable capital gains or other income.
- You pay capital gains taxes with your income tax return, using Schedule D.
- The data from Form 1099-B helps you fill out Schedule D and Form 8949 if needed.
Short-term and long-term gains
Box 2 of the form tells whether the gain or loss involved is short-term or long-term.
Generally,
- If you owned an asset, such as stock, for a year or less before selling it, any gain or loss from a sale is short-term.
- If you owned it for more than a year, you would normally have a long-term gain.
- The distinction is extremely important, since tax rates on long-term gains are generally significantly lower than those on short-term gains.
What is a capital gain?
A capital gain is what the tax law calls the profit you receive when you sell a capital asset, which is property such as stocks, bonds, mutual fund shares and real estate. This does not include your primary residence. Special rules apply to those sales.
There is a difference between a short-term and long-term capital gain. The tax law divides capital gains into two different classes determined by the calendar.
- Short-term gains come from the sale of property owned one year or less and are taxed at your maximum tax rate, as high as 37% in 2020.
- Long-term gains come from the sale of property held more than one year and are taxed at either 0%, 15%, or 20% for 2020.
References:
- https://turbotax.intuit.com/tax-tips/investments-and-taxes/what-is-form-1099-b-proceeds-from-broker-transactions/L071oPWkE
- https://turbotax.intuit.com/tax-tips/investments-and-taxes/capital-gains-and-losses/L7GF1ouP8