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

IRS Definition

A broker or barter exchange must file Form 1099-B, Proceeds From Broker and Barter Exchange Transactions, for each person:

• For whom the broker has sold (including short sales) stocks, commodities, regulated futures contracts, foreign currency contracts (pursuant to a forward contract or regulated futures contract), forward contracts, debt instruments, options, securities futures contracts, etc., for cash;
• Who received cash, stock, or other property from a corporation that the broker knows or has reason to know has had its stock acquired in an acquisition of control or had a substantial change in capital structure reportable on Form 8806; or
• Who exchanged property or services through a barter exchange.

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If you sold stock, bonds or other securities through a broker or had a barter exchange transaction (exchanged property or services rather than paying cash), you will likely receive a Form 1099-B. Regardless of whether you had a gain, loss, or broke even, you must report these transactions on your tax return.

Although you must report the full amount of the proceeds, you will also be asked for your basis (what you paid for the stock and any expenses such as brokerage fees). The total gain or loss will be entered on your tax return.

If you receive a Form 1099-B and do not report the transaction on your tax return, the IRS will likely send you a CP2000, Underreported Income notice. This IRS notice will propose additional tax, penalties and interest on this transaction and any other unreported income. Learn how to handle an underreporter inquiry (CP2000).