Form 1099-B and Cost-Basis Reporting Explained

Key Takeaways

Form 1099-B arrives in February and looks straightforward — a list of what you sold and for how much. But the document contains details that directly affect how you complete Form 8949, which tax rate applies to each gain, and whether the IRS's copy of your data matches yours. Getting it right means reading more than just the proceeds column.

Direct answer: Form 1099-B reports each securities sale you made during the year: proceeds, acquisition and sale dates, and — for covered securities — your cost basis, which the broker also transmits to the IRS. You use it to complete Form 8949, matching each line to the correct check box (A–F) based on whether basis was reported and whether the gain is short- or long-term. When the broker's basis is wrong — because of gifts, inheritance, DRS transfers, DRIP reinvestments, or legacy account history — you report the broker's figure and then correct it with adjustment code B in Column (f) of Form 8949, not by silently substituting your own number.

• Box 3 ("Basis reported to IRS") is the key flag: checked means the IRS already has the broker's basis figure and will compare it to your return — accuracy is more consequential, not less.
• Cost basis defaults to FIFO for stocks; specific identification must be elected before or at the time of sale, not after the fact.
• ACATS transfers between brokers should carry basis data; DRS transfers to transfer agents often do not — verify records after every move and before any sale.
• Box 1g reports wash sale loss disallowed; your broker tracks only within your account at that firm — cross-broker and IRA wash sales are your responsibility.
• Adjustment codes B (incorrect basis), W (wash sale), and H (holding period) are the three most common corrections on Form 8949.

What Is Form 1099-B?

Form 1099-B, Proceeds from Broker and Barter Exchange Transactions, is an IRS information return that your brokerage firm must send you by February 15 following any tax year in which you had a reportable transaction. The most common trigger is a sale of stocks, bonds, options, or mutual fund shares, but the form also covers certain derivatives, barter exchange transactions, and options exercises that result in a closing transaction.

A copy goes to the IRS at the same time it goes to you. That parallel filing is what makes 1099-B accuracy legally consequential rather than just administratively helpful. For covered securities, the IRS receives not only your proceeds but also your cost basis, and it runs automated matching comparisons against your tax return. A return that silently differs from the 1099-B — even when your number is actually correct — is likely to generate a CP2000 notice asking you to explain the discrepancy.

The information on your 1099-B flows to two places on your return: Form 8949 (Sales and Other Dispositions of Capital Assets), where each sale becomes a line entry, and then Schedule D, where the Form 8949 totals feed into your capital gain and loss calculation. Every sale listed on your 1099-B must appear on Form 8949, including sales at a loss.

Not receiving a 1099-B does not eliminate your obligation. If a broker failed to send one, or if the sale was through a channel that doesn't generate a 1099-B, you are still required to report the gain or loss on Schedule D using your own records.

Reading the Key Boxes on Your 1099-B

A 1099-B contains more fields than most investors realize. These are the boxes that directly affect your tax return.

Box 1a — Description of property

Identifies what was sold: typically the ticker symbol or security name, the number of shares, and sometimes a brief descriptor. This is what you enter in Column (a) of Form 8949. Brokers abbreviate heavily — "500 AAPL" means 500 shares of Apple Inc. For options, you'll see the underlying, expiry, and strike price. When multiple lots of the same security are sold on the same date, each lot gets a separate line.

Box 1b — CUSIP

The Committee on Uniform Security Identification Procedures number is a nine-character alphanumeric code that uniquely identifies a security. Brokers include it so the IRS can match the transaction to a specific instrument regardless of how the description is abbreviated. You generally don't enter the CUSIP on your return, but it's useful when reconciling records across brokers where the same security may be described differently.

Box 1c — Date acquired

The date you purchased (or otherwise acquired) the shares. Together with Box 1d, it establishes your holding period. When you sell shares from a position built up across multiple purchases, each lot has its own acquisition date; the broker will list them separately. For inherited shares, the date entered here is typically the date of death, which triggers a stepped-up basis rule discussed below.

Box 1d — Date sold or disposed

The trade date of the sale — not the settlement date. The combination of Box 1c and Box 1d is what establishes whether a gain or loss is short-term (twelve months or less from acquisition to sale) or long-term (more than twelve months). Short-term gains are taxed as ordinary income; long-term gains receive preferential capital-gains rates. The single day on either side of the twelve-month line can produce a material tax difference on a large gain.

Box 1e — Proceeds

The gross proceeds received from the sale before any adjustments. For most retail brokerage trades today, where commissions are zero, gross proceeds equal net proceeds. When a commission was charged, it typically either reduces the proceeds shown or is added to your cost basis — check your trade confirmation to see how your broker handled it, since the treatment affects your reported gain or loss.

Box 1f — Accrued market discount

Relevant primarily for bonds purchased at a discount to face value on the secondary market after original issuance (market discount bonds). Accrued market discount is treated as ordinary income rather than capital gain, even though it arises in a sale transaction. If Box 1f is non-zero, you must separate this amount from your total gain and report it on the correct income line. For most equity-focused investors, Box 1f will be blank.

Box 1g — Wash sale loss disallowed

If you sold a security at a loss and purchased a substantially identical security within the 30-day window before or after that sale, the IRS wash sale rules disallow the loss in the current year. Box 1g shows the dollar amount your broker has identified as disallowed within your account. That amount is not lost permanently — it adds to the cost basis of your replacement shares — but it cannot be claimed as a loss in the year of sale.

The critical limitation: your broker only tracks wash sales within the same account at that firm. If you sold at a loss in a taxable brokerage account and bought the same security in your IRA, in a spouse's account, or at a different broker within the 30-day window, the wash sale still applies under IRS rules — but Box 1g will show nothing, and the adjustment is your responsibility.

Box 2 — Short- or long-term

Explicitly states whether the transaction is short-term or long-term based on the holding period. Some 1099-Bs also have an "ordinary" classification for transactions like certain ESPP sales where the gain is treated as ordinary income despite being a securities sale. Box 2's value determines which section of Form 8949 you use — the short-term page or the long-term page — and ultimately which part of Schedule D the totals go to.

Box 3 — Basis reported to IRS

When Box 3 is checked, the broker transmitted your cost basis directly to the IRS as part of covered-securities reporting. The IRS has your broker's basis figure and will compare it to your Form 8949. Any discrepancy — even if your number is the correct one — must be documented through the adjustment process on Form 8949 rather than silently substituted. When Box 3 is unchecked (an uncovered security), the broker reported proceeds only; the IRS has no basis figure to compare, but you are still required to report the accurate basis yourself.

Covered vs. Uncovered Securities

The distinction between covered and uncovered securities comes from legislation enacted in 2008 that required brokers to begin tracking and reporting cost basis to the IRS in phases:

• Stocks acquired on or after January 1, 2011 — covered; broker must report basis to IRS
• Shares of mutual funds and most ETFs acquired on or after January 1, 2012 — covered
• Certain debt securities, options, and other specified instruments acquired on or after January 1, 2014 — covered

Securities acquired before the applicable date are uncovered. For uncovered securities, brokers send your proceeds to the IRS but are not required to report cost basis. The practical consequence is that the IRS has no parallel basis figure to compare against — but you remain legally obligated to report the correct basis yourself, typically reconstructed from original purchase confirmations, brokerage statements, or transfer records that may be years old.

For covered securities, accuracy carries additional weight: the IRS is performing automated matching. An error that goes undocumented through the adjustment process on Form 8949 will likely surface as a CP2000 notice. Correcting an error on a covered security requires using the adjustment codes described below, not silently entering a different number.

See also: Covered vs. Uncovered Securities — a full guide to the phased rollout and its reporting implications.

Transfer of Cost Basis Between Brokers

Moving shares between brokers does not automatically guarantee that cost basis records travel with them. The outcome depends entirely on how the transfer is structured.

ACATS transfers

The Automated Customer Account Transfer Service is the standard electronic method for moving brokerage accounts between U.S. broker-dealers. ACATS was designed to move positions, cash balances, and associated account records — including cost basis and acquisition dates — as an integrated package. For covered securities in straightforward accounts, basis data typically arrives at the receiving broker within a few business days of the transfer completing.

However, ACATS is not infallible. Complex lot histories are the most common failure point: fractional shares from dividend reinvestment plans (DRIPs), positions acquired through mergers or spin-offs, shares that went through corporate name changes, and positions that were themselves previously transferred from a different firm all arrive with incomplete or incorrect data more frequently than simple purchases do. After any ACATS transfer, compare your new broker's displayed cost basis against your own records for every position you plan to sell before you sell it.

DRS transfers

The Direct Registration System allows investors to hold shares registered directly with the issuer rather than through a broker in street name. Moving shares to a transfer agent via DRS — and later moving them back to a broker — does not carry the same basis-transfer guarantees as ACATS. Transfer agents are not required to relay cost basis information to receiving brokers in the same way broker-dealers are required to do under IRS regulations. When you DRS shares out of a broker to a transfer agent, your cost basis frequently does not follow. When you later DRS back into a broker, the broker may show your entire position as uncovered or show a zero cost basis, because it received no basis data from the transfer agent.

This is one of the most common sources of large apparent taxable gains at tax time for investors who use DRS extensively. Always document your cost basis records independently of where shares are held, and verify broker records immediately after any DRS movement.

Cost-Basis Methods

The IRS permits several methods for accounting for cost basis when you sell part of a position built up through multiple purchases over time. The choice of method can meaningfully affect your tax liability in a given year.

FIFO (first in, first out)

FIFO is the IRS default for stocks, ETFs, and most other securities. When you sell shares without specifying which lot, the broker assumes you are selling the oldest shares first. FIFO often results in selling long-term lots (which carry preferential tax rates), but it may also mean selling the lowest-basis lots accumulated earliest — producing larger taxable gains than necessary when newer lots have higher bases.

Specific identification

Specific identification lets you designate exactly which lots — by purchase date and price — you are selling before or at the time of the trade. This is the most flexible method: you can select high-basis lots to minimize gain, prefer lots that qualify for long-term treatment when newer lots would be short-term, or optimize which year a gain falls in. Most brokers allow lot selection through their web interface at order entry.

The requirement is that the election must happen before the sale settles. You cannot retroactively designate lots after a sale is complete. If you forget to elect and the broker defaults to FIFO, that's the method of record for that trade.

Average cost (mutual funds)

Average cost calculates a single per-share basis equal to the total amount invested divided by the total number of shares held. It is available for mutual fund shares and is the default for many fund companies. Average cost simplifies recordkeeping for funds held through years of reinvested dividends, but it eliminates the flexibility to select specific high-basis lots. Once you begin using average cost for a fund position, switching to specific identification requires adhering to IRS rules on how to do so without creating a phantom income event.

Practical rule

Set your cost-basis method preference in your broker's account settings before your first sale of any position held in multiple lots. Changing it retroactively for a sale already executed is generally not possible.

How to Reconcile Your 1099-B and Correct Errors

When your 1099-B arrives — typically in February, sometimes amended through mid-March — compare each line against your own records before filing.

1. Verify proceeds. Cross-reference each sale's gross proceeds against your trade confirmation or brokerage statement. For zero-commission trades, proceeds on the 1099-B and your statement should match exactly.
2. Verify cost basis. For each lot shown, check the basis against your original purchase confirmation for that specific lot, adjusted for any corporate actions, stock splits, or merger-related basis changes.
3. Check the holding period. Confirm that Box 2's short/long-term classification matches the dates in Boxes 1c and 1d. Errors are rare but do occur, particularly after corporate actions that reset the acquisition date.
4. Identify discrepancies early. Contact your broker immediately if you find an error. Brokers can issue corrected 1099-Bs through the original filing deadline and sometimes later.
5. If a corrected form is not possible before you file, report the broker's figures exactly as shown on Form 8949, then use the adjustment process — code B for incorrect basis — to document the correction. Do not silently substitute your own number without the adjustment code.

When Broker Cost Basis Is Wrong

Several situations reliably produce incorrect or missing broker cost basis. Each requires documentation and a specific approach on Form 8949.

Gifts

Gifted shares carry the donor's original cost basis (with special rules when the fair market value on the gift date was lower than the donor's basis). Brokers receiving gifted shares through ACATS often receive basis data from the donor's broker, but gaps are common. Verify the received basis against the donor's original purchase records.

Inherited shares

Inherited securities generally receive a stepped-up basis equal to the fair market value on the date of the decedent's death (or an alternate valuation date elected by the estate). Brokers frequently show the original pre-death basis for inherited shares — especially when shares transferred from an estate account without explicit documentation of the step-up. You must supply documentation of the date-of-death value, typically from the executor's records, the estate account statement, or a financial institution's valuation letter.

DRIPs

Each dividend reinvested through a dividend reinvestment plan creates a separate lot with its own basis and acquisition date. Positions with years of quarterly DRIP reinvestments may have dozens or hundreds of individual lots. Legacy DRIP accounts held through transfer agents, particularly those predating covered-securities rules, may have incomplete or aggregated records. If the broker received a lump-sum basis figure rather than a lot-by-lot breakdown, specific identification may not be available without reconstructing the lot history yourself.

Legacy accounts and repeated transfers

Positions that have passed through multiple brokerage firms over many years — particularly those including pre-2011 uncovered lots — frequently arrive at a current broker with zero basis or a partial basis record. Original purchase confirmations are the primary documentation, supplemented by statements from former brokers that may be obtainable by request.

How to Enter 1099-B Data on Form 8949

Form 8949 has two pages, each organized around a set of check boxes that define how the transactions on that page were reported to the IRS:

Match the 1099-B's Box 3 (checked = basis reported; unchecked = basis not reported) and Box 2 (short- or long-term) to select the correct check box for each transaction. A single 1099-B may require entries under multiple check boxes if you sold both covered and uncovered lots, or both short-term and long-term lots.

Completing each line

For each transaction, fill in the Form 8949 columns as follows:

• Column (a): Description from Box 1a — security name/ticker and number of shares
• Column (b): Date acquired from Box 1c (MM/DD/YYYY)
• Column (c): Date sold from Box 1d (trade date)
• Column (d): Proceeds from Box 1e
• Column (e): Cost basis as reported by the broker
• Column (f): Adjustment code if applicable (see below)
• Column (g): Adjustment amount (negative reduces gain; positive increases it)
• Column (h): Gain or loss = Column (d) − Column (e) + any Column (g) adjustment

Common adjustment codes

• B — Basis not reported to IRS, or broker basis is incorrect. Use when the broker sent no basis to the IRS (uncovered security with Box 3 unchecked) or when you are correcting a covered security's basis. Enter the adjustment amount in Column (g) — a negative number reduces the gain when your correct basis is higher than the broker's figure.
• W — Wash sale loss disallowed. Enter the disallowed amount from Box 1g as a positive number in Column (g) (it increases your taxable gain by reducing the net loss you can claim).
• H — Holding period adjustment. Used when the holding period for tax purposes differs from what is implied by the acquisition and sale dates — for example, certain constructive sale or short-sale situations.

Multiple codes can apply to the same transaction; list them alphabetically in Column (f) with no spaces (e.g., "BW").

1099-B to Form 8949: field mapping

Misconceptions Versus Reality

Common Mistakes

Not electing specific identification before selling. The most common optimization mistake is investors who intended to select a particular lot but forgot to do so at order entry, locking in FIFO when a higher-basis lot would have been significantly more tax-efficient. Set the cost-basis method preference on your brokerage platform before placing any sale order on a multi-lot position.

Assuming ACATS transferred basis correctly without checking. Investors who transfer accounts and then sell positions without verifying post-transfer basis records have reported incorrect gains or losses on their returns — sometimes large ones. The transfer completing is not the same as the basis data arriving accurately. Review every position's basis at the receiving broker before you sell anything.

Missing wash sales that cross accounts or brokers. Investors who harvested tax losses in a taxable account and bought the same fund in an IRA within 30 days, or bought through a different broker's account, have generated wash sales that appear nowhere on their 1099-B. Box 1g will show zero, creating a false sense of compliance. Track wash sale exposure across all accounts if you are actively loss-harvesting.

Treating an amended 1099-B as optional. Brokers issue amended 1099-Bs through mid-March and sometimes later. Investors who filed using the original form and received a corrected version afterward may need to file an amended return, depending on the magnitude of the change. Check whether you've received any amended forms before the extension deadline each year.

Pre-Filing Checklist

• Compare each 1099-B line to your trade confirmations for both proceeds and cost basis
• Verify that post-ACATS broker records match your pre-transfer basis records for any transferred positions
• Check all Box 3 fields to determine which Form 8949 check box (A through F) applies to each sale
• Identify Box 1g wash sale amounts — then separately check for cross-account wash sales the broker did not catch
• Confirm gifted, inherited, or DRIP-reinvested lots use the correct basis (donor basis, stepped-up value, or lot-level purchase price) rather than a broker default
• Verify that any specific ID lot elections you made at order entry are reflected in the 1099-B lot detail
• Check for any amended 1099-B forms that arrived after the original before you file
• Contact your broker to request a corrected 1099-B for any errors found, before your filing deadline

Frequently Asked Questions

Sources and Methodology

This guide describes general IRS rules for Form 1099-B reporting and cost-basis accounting based on publicly available guidance as of mid-2026. Key sources include:

• IRS Publication 550 (Investment Income and Expenses): the primary IRS reference for capital gains, cost basis, wash sales, and the treatment of dividends reinvested through DRIPs.
• IRS Instructions for Form 8949: the authoritative source for check box selection, column entries, and adjustment codes including B, W, and H.
• IRS Regulations §1.6045-1 and §1.6045A-1: the underlying regulations defining covered securities and the broker-to-broker cost basis transfer requirements that govern ACATS basis reporting.
• IRS Revenue Ruling 2008-5: addresses wash sale rules when a taxpayer sells stock in a taxable account and acquires substantially identical stock in an IRA within the wash sale window.
• Energy Improvement and Extension Act of 2008: the legislation that created the covered/uncovered securities framework and phased broker cost-basis reporting requirements in from 2011 through 2014.

This content was reviewed by the Swoopr Editorial Team in August 2026. Tax rules can change; verify current IRS requirements and any broker-specific procedures directly before relying on any figure or procedure described here.

Conclusion

Form 1099-B is both a convenience and a compliance constraint. It delivers most of the data you need to report capital gains — but it delivers the same data to the IRS, making accuracy non-negotiable for covered securities where the IRS performs automated matching. Reading each box with purpose — Box 3 for coverage status, Box 1g for wash sale disallowance, Box 2 for holding period — tells you which Form 8949 check box applies and whether any adjustment codes are needed. When the broker's basis is wrong, the fix is explicit and documented: report the broker's figure, note adjustment code B, and supply the correct number in Column (g). Keeping your own purchase records — original confirmations, transfer statements, lot election screenshots — independent of any single broker's records is what gives you the evidence to support those corrections if the IRS asks.

Related Reading

• Stock & Investment Taxes — the parent hub for this content group, covering capital gains rates, wash sales, and related tax topics for equity investors.
• Covered vs. Uncovered Securities — a deeper look at the 2011–2014 phased rollout of broker cost-basis reporting and what it means for your reporting obligations today.
• Taxes & Rules — the full hub covering tax rules, brokerage regulations, and trading compliance for U.S. investors.