Key Takeaways
- Form 1099-B reports proceeds from the sale or exchange of investment property, including stocks, ETFs, mutual funds, bonds, options, and certain barter transactions, and is sent to both you and the IRS.
- The IRS uses Form 1099-B for automated income matching, so missing, incomplete, or incorrect reporting is a common trigger for IRS notices, penalties, and audits.
- Amounts shown on Form 1099-B are not automatically taxable in full; taxes are based on your capital gain or loss after subtracting your correct cost basis.
- Cost basis accuracy is critical, especially for noncovered securities, inherited or gifted assets, transferred brokerage accounts, and assets affected by corporate actions.
- Form 1099-B information flows to Form 8949 and Schedule D, where gains and losses are classified as short-term or long-term and calculated for your tax return.
- For cryptocurrency, Form 1099-B is being replaced by Form 1099-DA, and 2025 crypto forms may lack cost basis, making independent recordkeeping essential.
Form 1099-B is one of the most important tax documents for investors, yet it’s also one of the least understood. If you sold stocks, mutual funds, ETFs, bonds, options, or other securities during the year, your broker is required to report those transactions to the IRS using Form 1099-B. A copy is also sent to you, and the information on that form plays a direct role in how your capital gains or losses are calculated on your tax return.
Because the IRS receives the same information your broker sends you, errors or omissions involving Form 1099-B frequently trigger IRS notices. Understanding how the form works, what it reports, and how to use it correctly is essential for accurate tax filing and audit risk reduction.
What Is Form 1099-B?
Form 1099-B exists to report proceeds from certain financial transactions, primarily those involving the sale or exchange of investment property.
Definition of Form 1099-B
Form 1099-B, formally titled Proceeds from Broker and Barter Exchange Transactions, is an IRS information return used by brokers and barter exchanges to report sales or dispositions of property. In most cases, the property involved is a capital asset, such as publicly traded stock or a mutual fund, but the form can also apply to other transactions where value is exchanged.
When a broker issues a Form 1099-B, they send one copy to you and another directly to the IRS. This allows the IRS to independently verify that the transactions reported on your tax return match what the broker reported.
Why the IRS Requires Form 1099-B
The IRS relies heavily on third-party reporting to enforce tax compliance. Form 1099-B helps the IRS confirm that taxpayers are reporting capital gains and losses correctly and consistently. If a sale appears on Form 1099-B but does not appear on your tax return, the IRS’s automated systems may flag the discrepancy and issue a notice assessing additional tax.
Form 1099-B and Cryptocurrency: What Changed in 2025
Form 1099-B is still used to report traditional investments like stocks, bonds, mutual funds, and ETFs. However, it was never designed to handle the complexity of cryptocurrency transactions. To address this gap, the IRS introduced Form 1099-DA, which standardizes reporting for digital assets such as cryptocurrencies and NFTs.
For the 2025 tax year (with forms issued in 2026), crypto brokers are only required to report gross proceeds. Reporting cost basis is optional during this transition year. Starting with the 2026 tax year and beyond, cost basis reporting becomes mandatory for covered digital assets acquired on or after January 1, 2026.
Who Must File Form 1099-DA?
Form 1099-DA must be issued by custodial crypto exchanges, hosted wallet providers, digital asset kiosks, and certain payment processors. However, DeFi platforms and non-custodial wallets are exempt from these reporting requirements through at least 2027.
Important Warning for Crypto Investors in 2025
Most Form 1099-DA forms issued in 2026 for 2025 transactions may be incomplete or inaccurate because brokers are not yet required to report cost basis. As a result, taxpayers should not rely solely on Form 1099-DA when preparing their returns. Keeping your own transaction records and calculating gains and losses independently is still essential.
Finally, if a digital asset qualifies as both a security and a digital asset (often referred to as a dual-classification asset), brokers will generally file Form 1099-DA instead of Form 1099-B.
What Does Form 1099-B Report?
Form 1099-B focuses on transactions involving the sale or disposition of property, rather than income you receive simply by holding an investment.
Investment Transactions Commonly Reported
Most Form 1099-B forms come from brokerage activity. When you sell stock, redeem a mutual fund, close an ETF position, or dispose of a bond, the broker reports the transaction on this form. Options trading, short sales, and certain debt instruments are also commonly included.
The form generally reports the gross proceeds from the transaction and, in many cases, your cost basis and whether the gain or loss is considered short-term or long-term.
Barter Exchange Transactions
In addition to investment sales, Form 1099-B is used to report barter exchange transactions. When goods or services are exchanged without cash, the fair market value of what you receive is treated as taxable income. Barter exchanges are required to report this value on Form 1099-B, even though no money changes hands.
For example, if you provide consulting services in exchange for office equipment through a barter exchange, the value of the equipment received is typically reported on Form 1099-B and may be taxable.
Who Receives Form 1099-B?
Not every taxpayer will receive Form 1099-B, but it is very common among investors.
Investors and Brokerage Account Holders
You will usually receive Form 1099-B if you sold securities through a brokerage account during the tax year. Even a single sale can trigger reporting. Active traders may receive lengthy 1099-B forms with dozens or hundreds of transactions listed.
Other Situations That Trigger Form 1099-B
Form 1099-B may also be issued in less obvious situations. These include sales of inherited securities by an estate, transactions processed through a barter exchange, or certain corporate actions that result in a reportable disposition.
When a Form 1099-B Is Not Issued
There are cases where no Form 1099-B is issued, even though investment income exists. For example, dividends and interest are reported on different forms and unrealized gains are not reported at all. However, the absence of a Form 1099-B does not mean a transaction is non-taxable. Taxpayers are still responsible for reporting all taxable sales.
When Is Form 1099-B Issued?
Understanding the timing of Form 1099-B is important, especially for taxpayers who file early.
Broker Deadlines and Delivery Timing
Brokers are generally required to furnish Form 1099-B to taxpayers by February 15 following the end of the tax year. The 2026 deadline is February 17 since the 15th falls on a weekend and the 16th is a federal holiday. In addition, they must also file 1099-Bs with the IRS by March 2, 2026 if paper filing and by March 31 if e-filing.
In practice, taxpayers can expect their 1099-B in late February or early March, particularly when mailed. Because brokerage firms often issue multiple tax forms, Form 1099-B may be bundled with Forms 1099-DIV and 1099-INT in a consolidated statement. It might be tempting to file early in 2026, but it’s critical to wait until you receive all necessary tax forms, otherwise you risk penalties, interest, and the need for amended returns.
Corrected Form 1099-B
It is not uncommon for brokers to issue corrected Forms 1099-B. Corrections often involve cost basis reporting, wash sale adjustments, or transaction classifications. Filing before all corrected forms are received can lead to amended returns or IRS correspondence later.
What Information Is Included on Form 1099-B?
Form 1099-B contains detailed transaction-level data that feeds directly into your tax return.
Property Description and Transaction Dates
Each reported transaction includes a description of the property sold, along with the date the asset was acquired, and the date it was sold or disposed of. These dates determine whether the gain or loss is treated as short-term or long-term for tax purposes.
Gross Proceeds and Cost Basis
The form reports gross proceeds, which represent the amount received from the sale before accounting for commissions or fees. For many securities, the broker also reports cost basis, which is the amount you paid for the investment.
Securities are categorized as covered or noncovered, depending on whether the broker is required to report basis to the IRS. Even when basis is reported, taxpayers are responsible for verifying its accuracy.
Adjustments, Withholding, and Special Codes
Form 1099-B may also reflect wash sale adjustments, disallowed losses, or federal income tax withholding. These details can significantly affect the final taxable amount reported on your return.
How Form 1099-B Is Used When Filing Your Taxes
Form 1099-B itself is not attached to your return, but the information it contains is essential.
IRS Matching and Reporting
The IRS uses Form 1099-B to match reported proceeds against what appears on your tax return. When proceeds are reported but not accounted for on Schedule D or Form 8949, the IRS may assume the entire amount is taxable, even if your actual gain was much smaller.
Where the Information Appears on Your Return
Most taxpayers report Form 1099-B transactions on Form 8949, which then flows to Schedule D. Tax software often imports this data automatically, but manual review is critical to ensure accuracy.
Do You Have to Pay Taxes on Amounts Reported on Form 1099-B?
The amounts shown on Form 1099-B are not automatically taxable in full.
Capital Gains and Capital Losses
If you sell an investment for more than its cost basis, the difference is generally a capital gain. If you sell for less, the result is a capital loss. Capital losses can offset capital gains and, in some cases, reduce ordinary income.
For example, assume you bought 100 shares of XYZ stock for $5,000 in 2023 and then sold them in 2025 for $7,500. Your Form 1099-B would show:
- Box 1d (Proceeds): $7,500
- Box 1e (Cost basis): $5,000
Your capital gain is $2,500 ($7,500 – $5,000), taxed at long-term rates because you held the stock for more than one year.
Holding Period and Tax Rates
The holding period determines whether a gain or loss is short-term or long-term. Short-term gains are taxed at ordinary income tax rates, while long-term gains may qualify for preferential rates.
Situations Where Proceeds Are Not Fully Taxable
Certain transactions involve adjustments that reduce or eliminate taxable gain, such as prior return-of-capital distributions or basis increases from reinvested dividends. This is why relying solely on gross proceeds without reviewing basis can lead to overpaying tax.
Cost Basis Reporting Rules Explained
Cost basis reporting is one of the most complex aspects of Form 1099-B.
Covered and Noncovered Securities
Covered securities are those for which brokers must report cost basis to the IRS, generally based on when the asset was acquired. Noncovered securities require the taxpayer to supply basis information, making accurate recordkeeping essential.
Common Sources of Basis Errors
Errors often arise after transfers between brokers, inherited assets, gifted securities, or corporate actions such as mergers and spin-offs. Even when a broker reports basis, the taxpayer remains responsible for correcting inaccuracies.
Special Situations That Affect Form 1099-B Reporting
Certain transactions require extra attention when reviewing Form 1099-B.
Barter Exchanges
Barter exchanges must report the fair market value of exchanged goods or services, and this value is generally taxable. These transactions are often misunderstood because no cash is received.
Corporate Actions and Basis Adjustments
Corporate actions can significantly affect cost basis. While brokers may report issuer-provided adjustments, taxpayers should retain documentation to support any corrections.
Qualified Opportunity Funds and Transfers
Dispositions involving Qualified Opportunity Funds or transfers between brokers introduce additional reporting complexity, particularly when basis reporting responsibilities shift.
What to Do If You Don’t Receive Form 1099-B
If you believe you should have received Form 1099-B but didn’t, you are still required to report the transaction.
Missing forms often result from late-year transactions, closed accounts, or administrative delays. Brokerage statements and trade confirmations can be used to report accurate figures when necessary.
What to Do If There’s an Error on Your Form 1099-B
Common issues include incorrect cost basis, wrong acquisition dates, or misreported wash sales. In most cases, the best solution is to request a corrected Form 1099-B from the broker. When corrections are not issued in time, adjustments can be made on Form 8949 with proper documentation.
Form 1099-B Mistakes That Trigger IRS Audits
The IRS receives copies of every Form 1099-B issued and automatically flags tax returns when reported income doesn’t match those records. The following mistakes are among the most common audit triggers.
- Leaving 1099-B transactions off your return: If the IRS receives a 1099-B showing a sale you didn’t report, it triggers an immediate mismatch—even for small or forgotten transactions.
- Reporting incorrect proceeds: Amounts in Box 1d must match what’s reported on Schedule D. Rounded or estimated numbers often signal errors.
- Assuming a zero cost basis: When cost basis isn’t reported, the IRS may assume it’s zero and tax the full proceeds. This frequently affects inherited assets, transferred accounts, and crypto.
- Ignoring wash sale adjustments: Claiming losses that are not allowed under wash sale rules (shown in Box 1g) creates a guaranteed mismatch.
- Filing before corrected forms arrive: Filing early and later receiving a corrected 1099-B can result in inconsistent IRS records. Waiting until mid-February or even early-March reduces this risk.
- Missing one of multiple 1099-B forms: Forgetting to report a brokerage account when you have multiple brokers creates an obvious reporting gap.
- Crypto reporting gaps in 2025: Transactions reported on Form 1099-B or Form 1099-DA that don’t appear on your return are now easily flagged, giving the IRS increased visibility into crypto activity.
How to Avoid These Audit Triggers
Make sure you’ve received all expected 1099 forms before filing, request corrected forms when needed, and reconcile every transaction on Form 8949 to your 1099-B statements. Keep detailed cost basis records, especially for inherited assets, transferred accounts, and cryptocurrency. Finally, retain supporting documents for at least three years.
Frequently Asked Questions
What is the purpose of a 1099-B form?
The purpose of Form 1099-B is to report proceeds from broker and barter exchange transactions, such as the sale of stocks, bonds, and mutual funds. Brokers send this form to both the taxpayer and the IRS so investment sales can be accurately reported and matched on tax returns.
Is 1099-B considered earned income?
No, income reported on Form 1099-B is generally not earned income. It is usually classified as investment income, such as capital gains or losses, which is taxed differently than wages or self-employment income.
Do you have to pay taxes on all amounts reported on Form 1099-B?
No, you do not automatically owe tax on the full amount reported on Form 1099-B. Taxes are based on your capital gain or loss, which is calculated by subtracting your cost basis from the sale proceeds.
How does Form 1099-B affect your tax return?
Form 1099-B information is used to complete Form 8949 and Schedule D, where capital gains and losses are calculated. The IRS uses this data to verify that investment sales are reported correctly.
Tax Help for People Who Owe
Accurate reporting starts with reconciling Form 1099-B against your brokerage records. Pay close attention to wash sales, especially across multiple accounts, and retain long-term records for assets that may be sold years later.
Because Form 1099-B data is shared directly with the IRS, careful review before filing can prevent notices, penalties, and unnecessary stress. Optima Tax Relief is the nation’s leading tax resolution firm with over $3 billion in resolved tax liabilities.
If You Need Tax Help, Contact Us Today for a Free Consultation