What is the difference between covered and noncovered securities?

Covered securities: brokers must report cost basis to the IRS. Covered securities include stocks acquired on or after January 1, 2011; mutual funds and ETFs acquired on or after January 1, 2012; and bonds, options, and other securities acquired on or after January 1, 2014. Noncovered securities: brokers report proceeds but not basis. The taxpayer must track basis independently.

How do I handle a 1099-B with incorrect basis?

If the broker reports incorrect basis (e.g., doesn't account for wash sales, stock splits, or dividend reinvestment), the taxpayer must correct it on Form 8949. Use Code B (noncovered security, basis not reported to IRS) or adjust the reported basis with an explanation. Document the correct basis with brokerage statements, purchase confirmations, and corporate action records.

How are wash sales reported on Form 1099-B?

Brokers are required to report wash sales for covered securities in the same account. The 1099-B will show the disallowed loss amount in Box 1g. However, brokers are NOT required to track wash sales across different accounts or between a taxable account and an IRA. Taxpayers must track these cross-account wash sales themselves.

How is cryptocurrency reported using Form 1099-B?

Cryptocurrency exchanges may issue Form 1099-B or Form 1099-DA (new for 2025). Each crypto transaction (sale, exchange, or use) is reported on Form 8949. The holding period determines short-term vs. long-term treatment. Basis is the FMV at acquisition. Crypto-to-crypto exchanges are taxable events — the FMV of the received crypto is the amount realized.

What is the short-term vs. long-term holding period?

Short-term: held 12 months or less — taxed at ordinary income rates. Long-term: held more than 12 months — taxed at preferential capital gains rates (0%, 15%, or 20%). The holding period begins the day after acquisition and ends on the date of sale. For inherited property, the holding period is automatically long-term. [IRC §1222]

IRS Form — Broker and Barter Exchange Proceeds

Form 1099-B — Proceeds From Broker and Barter Exchange Transactions

Form 1099-B is issued by brokers to report the proceeds from the sale of stocks, bonds, mutual funds, and other securities. It includes the cost basis, acquisition date, and proceeds — the information needed to calculate capital gains and losses on Form 8949 and Schedule D. For tax professionals, Form 1099-B is one of the most complex information returns — covered vs. uncovered securities, wash sale adjustments, and cost basis methods require careful review.

✓ Verified 2026 Form 1099-B Rules

✓ Covered vs. Uncovered Security Rules Confirmed

✓ Wash Sale Reporting Rules Confirmed

✓ Cryptocurrency 1099-B Rules Confirmed

Form 8949

Where 1099-B Data Is Reported

Covered

Broker Reports Basis for Covered Securities

Wash Sale

Box 1g — Disallowed Loss Adjustment

IRC §6045

Broker Reporting Authority

Key Rules and Authority

Rule	Detail
Covered Securities	Acquired after 2011 (stocks); 2012 (mutual funds)
Uncovered Securities	Acquired before covered security dates
Wash Sale Adjustment	Box 1g — adds disallowed loss to basis
Cost Basis Methods	FIFO (default), specific ID, average cost
Short-Term vs. Long-Term	Box 2 — determines tax rate
Crypto 1099-B	Required for digital asset brokers (2025+)

Covered vs. Uncovered Securities — Why It Matters

For "covered" securities (acquired after the applicable effective dates), brokers are required to report the cost basis to the IRS on Form 1099-B. For "uncovered" securities (acquired before the effective dates), brokers report proceeds but not basis — the taxpayer must determine the basis from their own records. When a client has uncovered securities, the tax professional must reconstruct the cost basis from purchase records, dividend reinvestment statements, and corporate action histories. Errors in basis for uncovered securities are common and can result in significant overpayment or underpayment of tax.

Frequently Asked Questions

My client's 1099-B shows a wash sale adjustment in Box 1g. How do I handle this?

A wash sale adjustment in Box 1g means the broker has identified a wash sale — the client sold a security at a loss and repurchased the same or substantially identical security within 30 days before or after the sale. The disallowed loss is reported in Box 1g and is added to the basis of the repurchased security. On Form 8949, the loss is reported in Column (g) as a positive adjustment, which reduces the deductible loss to zero. The disallowed amount is not lost — it increases the basis of the replacement shares, which will reduce the gain (or increase the loss) when those shares are eventually sold outside the wash sale window.

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Form 1099-B — Proceeds From Broker and Barter Exchange Transactions

Key Rules and Authority

Covered vs. Uncovered Securities — Why It Matters

Frequently Asked Questions

Master Capital Gain Reporting for Your Clients

Related Resources

Free Access for Tax Professionals

Form 1099-B — Proceeds From Broker and Barter Exchange Transactions

Key Rules and Authority

Covered vs. Uncovered Securities — Why It Matters

Frequently Asked Questions

Master Capital Gain Reporting for Your Clients

Related Resources