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What is a 1099-B form?
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What is a 1099-B form?
If you've ever sold stocks, bonds or other securities, you might have received a Form 1099-B (Proceeds From Broker and Barter Exchange Transactions) in the mail come tax season. As a self-employed individual, you might think that this is just another 1099 form showing you your earned income. But that’s actually not the case.
Form 1099-B is a tax form used to report the sale of securities to the IRS. Basically, it's like a receipt for your stock transactions. This form is typically sent to you by brokers or other financial institutions. It has a lot of information, and can be intimidating to navigate. If you receive a 1099-B form, you’ll need to report that information on your taxes.
Key takeaways:
- Form 1099-B is used to report any transactions involving a broker that exceed $600
- These transactions can be applied to bonds, stocks and even barter exchanges
- Recipients of a 1099-B form must report the income on their taxes
Table of contents
Who receives Form 1099-B?
Anyone who has sold any kind of stocks, bonds, options, commodities or securities with a broker or brokerage firm will receive Form 1099-B. You should typically revive this form by the end of January or February 15th by the latest.
Form 1099-B can do more than just track your stock market transactions. Did you know that it can also report on your bartering activities? That's right, if you've been swapping goods or services with your friends or other businesses, the IRS wants to know about it.
“Barter exchange transactions,” as they're officially called, typically involve a group of people who exchange property or services without the exchange of cash. So, if you've been trading your gardening skills with your neighbor for their homemade jam or fixing your friend's car in exchange for their accounting services, be prepared for a Form 1099-B at the end of it.
Quick tip
Use a 1099 tax calculator to find tax deductions you can use to lower your self-employment taxes.
How is Form 1099-B different from a composite 1099 form?
Sometimes, you may receive a “Composite 1099 Form” from a brokerage firm. This type of form combines the information of multiple 1099 forms into one, often including Form 1099-B, Form 1099-INT and Form 1099-DIV.
It’s common for composite forms to lack certain information in Form 1099-B, such as the short-term and long-term transaction check boxes. Rather than including such specifics, composite forms often categorize various transactions so that it is clear which ones are short-term and which are long-term.
If you’re self-employed, you have to accurately track of all your income sources when filing your taxes. You’ll report income information on your taxes if you receive a 1099-NEC, 1099-MISC, or a 1099-K. A 1099-B form does not affect your self-employment taxes as capital gains or losses are not considered “earned income.”
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How to file Form 1099-B?
Filing a 1099-B form involves reporting any capital gains or losses made from selling securities or stocks. You will use Form 8949 (Sales and Other Dispositions of Capital Assets) to record all your transactions found on Form 1099-B.
The net short-term or long-term capital gain or loss will be then entered on Schedule D (Form 1040). You have to pay taxes on any capital gains you report. If it is a short-term gain, the income tax rate will be determined based on your tax bracket. If it is a long-term gain, the tax rate will be lower. Capital losses are not taxable, but you can use them to offset your gains and lower your taxes.
For barter exchanges, you will need the fair market value (FMV) of the goods or services traded. The IRS treats this as cash, even if there was none involved in the process. This should be reported if the exchanges exceed $600.
As Form 1099-B has a lot of information on it, it can be challenging to file correctly. You should always seek professional tax help if you are having trouble filing your taxes to ensure that you are not hit with any penalty fees.
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