1099-B

If you’ve sold a security in a taxable Invest account this year, your Consolidated 1099 will contain a 1099-B. Form 1099-B provides a summary of your gains and losses, as well as the individual sales that occurred within your account.

1099-B sale categories

Causes for noncovered classification

Determining cost basis of noncovered tax lots

Reporting cost basis of noncovered tax lot sales

1099-B sale categories

On a 1099-B, sales are categorized based on:

  • Holding period is determined by how long the security was held in your account prior to being sold.
    • Short term
    • Long term
    • Undetermined
  • Covered status determines whether cost basis for the sold securities is reported to the IRS.
    • Covered
    • Noncovered

You’ll see the following sections on your 1099-B:

  • Short term transactions for covered tax lots: the security was held for one year or less 
  • Short term transactions for noncovered tax lots: the security was held for one year or less 
  • Long term transactions for covered tax lots: the security was held for greater than one year 
  • Long term transactions for noncovered tax lots: the security was held for greater than one year
  • Undetermined transactions for noncovered tax lots: the holding period for your security is unknown 

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Causes for noncovered classification

A tax lot may be reported as “noncovered” for multiple reasons:

  • You purchased securities at a different brokerage and your previous brokerage did not provide cost basis following your account transfer to M1
  • You purchased employer stock under an employer stock ownership or purchase plan (ESOP or ESPP) 
  • You purchased securities prior to 2011 and your brokerage was not responsible for tracking your cost basis

Determining cost basis of noncovered tax lots

If your 1099-B includes sales for noncovered tax lots, it means that you are responsible for reporting cost basis for those securities when reporting the sales to the IRS. The cost basis provided on your 1099-B is provided by Apex Clearing for informational purposes only.

If you do not report your cost basis for these sales, the IRS considers the sale as 100% capital gain which may result in higher tax liability than necessary.

For assistance finding your cost basis:

  • Cost basis can be found on M1 trade confirmations or account statements if the security was purchased at M1
  • If the impacted security was transferred into M1, you can contact your previous brokerage for cost basis records

Reporting cost basis of noncovered tax lot sales

Once your cost basis has been retrieved, it can be provided on Form 8949 when filing your tax return. Instructions on completing Form 8949 can be found here. 

An updated 1099-B is unable to be issued to adjust cost basis for noncovered shares as it is provided on your 1099-B for informational purposes only.

 

M1 and its affiliates do not provide tax, legal, or accounting advice. This material has been prepared
for informational purposes only. It is not intended to provide, and should not be relied on for, tax,
legal or accounting advice. You should consult your own tax, legal, and accounting advisors before
engaging in any transaction.

 

20240124-3280386-10626479

M1 disclosures here.

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