Form 1099-B: What to Know for 2023
Tax season is right around the corner which means you should start receiving important documents – like your W2 – in the coming weeks. If you bought and sold stocks or other assets throughout the year you can also expect to receive a from your brokerage firm, such as a 1099-B.
This article will cover what a 1099-B is, the current deadline, and what you need to know to file your taxes.
The Short Version
- A 1099-B Form is sent to you by your brokerage firm when you sell securities in a given tax year
- The information in a 1099-B Form tells you if you’ve had gains or losses during the year and whether or not you’ll owe taxes on your sales
- Many brokerage firms issue a consolidated 1099 Form rather than individual ones, like 1099-B
1099-B Due Date: February 15, 2023
The deadline for your broker to send Form 1099-B to you is February 15, 2023. This is a slight change from previous years when financial institutions were required to postmark it to you by January 31.
Despite this change, you’re still on the hook to file your taxes on time. The deadline for this coming tax season is April 18, 2023
What is Form 1099-B?
Form 1099-B is a tax form used by the IRS to record investor gains and losses throughout the year. Brokerage firms and barter exchanges are required to report their customers’ gains and losses each tax year. The IRS uses this information to assess taxes on gains or validate that the appropriate deduction was taken for losses. Taxpayers receive Form 1099-B from their brokerage firm and are expected to file it with their annual tax return.
Many firms now provide their clients with a consolidated Form 1099. Unlike the 1099-B, the consolidated form includes all reportable income – such as earnings from dividends – as well as trades made in a given year. The consolidated form makes it easier for brokerage firms to report client information and for taxpayers to include that information in their annual tax filing.
In the past, your brokerage had to have this information postmarked to you by January 31. Consolidated 1099s are becoming more complicated, especially when you factor in keeping track of new assets like crypto. Because of that, the IRS is giving your brokerage a little bit more time this coming year to get a record of your earnings and transactions to you.
The reason the IRS is extending the deadline is to give your brokerage firm more time to prepare the correct forms and avoid errors. That’s important because errors can impact your return or put you at risk of underreporting your income for a year.
Who Should Receive a 1099-B?
Anyone who sells stocks, options, commodities, or other securities during the tax year can expect to receive Form 1099-B from their broker. This includes things like short sales or certain types of contracts like options and foreign currency.
You can expect to receive a 1099-B if you made trades throughout the year because the government will want to assess the right amount of taxes from you. A 1099-B form lets the IRS know whether or not you made a gain (or had a loss) during the year. If you had a gain you’ll be expected to pay taxes on your earnings. If you had some losses, however, the IRS needs a record of it to make sure you are claiming the correct deductions.
> Related: Tax Loss Harvesting – Capitalize on Your Investment Losses
Do Crypto Exchanges Send 1099-Bs?
There currently isn’t any formal guidance on which form crypto exchanges are expected to provide to their customers. Crypto exchanges will be required to provide Form 1099-Bs starting in tax year 2023. This change is in response to the American Infrastructure Bill, signed into law in 2021, which gave the IRS more authority over crypto transactions. As a result, brokerage firms and crypto exchanges will need to adhere to improved reporting requirements.
Until then, exchanges still have to report information like capital gains and losses just like other securities. This information is provided to their customers and the IRS. At the moment they aren’t required to report transactions via Form 1099-B. They can report this information via other 1099 forms such as 1099-MISC and 1099-K.
Some platforms that offer stocks, in addition to crypto, may send a 1099-B regardless. They are already required to use that form to report stock trades so adding crypto assets into their reporting process. Firms that facilitate both crypto and regular stock trades would have the information readily available to produce a 1099-B, regardless of a formal reporting requirement. Exchanges without an existing reporting obligation, such as Coinbase, may opt to send a different 1099 form instead of Form 1099-B.
In addition to selling crypto, crypto holders can also be taxed on earnings generated from activities like staking or mining. These types of earnings or any type of payment received in crypto have to be reported on your taxes as income. Form 1040 Schedule D and Form 8949 are used to report crypto gains and losses while Schedule C is used to report income paid in crypto.
Just like stocks, crypto is taxed once it is sold. If you purchased crypto during the year and hold it in a wallet or as part of your investment portfolio you won’t have to pay taxes on it (and shouldn’t receive a 1099 form from your exchange).
How to Report Your 1099-B to the IRS
The information found on Form 1099-B should be reported on Form 1040 Schedule D and Form 8949 as capital gains (or losses). Box 2 of that form is where you’ll indicate whether the gain/loss was short-term or long-term. If you owned an asset for less than a year expect to pay short-term capital gains taxes. For assets held for a year or more, you’ll pay long-term capital gains taxes.
It’s become common practice for brokerages to submit a consolidated 1099 Form rather than individual forms. A consolidated form can include the information reported on forms like 1099-B, 1099-INT, and 1099-DIV. All of this is used on Form 1040 and Form 8949.
Most tax prep software like TurboTax and H&R Block include Form 1099-B in their filing process. They also work with a number of financial institutions to enable direct integration between your brokerage firm and the tax prep software. TurboTax, for example, provides a list of its partners you can check out here.
When you indicate you need to include stock trades or income derived from securities on your taxes, the tax prep software you use will guide you through how to correctly enter the information provided to you by your brokerage firm.
> Further reading: Long-Term vs Short-Term Capital Gains Tax
If you sold stock, crypto, or other assets this year you should expect to receive a 1099 form from your brokerage or exchange. The form might be a 1099-B or a consolidated form grouping information from several different 1099 forms together.
This information is important for tax time because it will tell the IRS whether or not you owe them money on your sales and if so how much. The good news is you won’t have to report capital gains – and shouldn’t expect to receive a 1099-B – unless you sold assets during the year.
If you earned income from your assets a 1099 Form will likely be heading your way. Expect to receive this information no later than February 15, 2023. If you haven’t received a form by then, follow up with your brokerage.