IB 1099-B Tax Question

M

maryp

Hi,

I just received a letter from the IRS that I owe them around $24,000 additional taxes for my 2007 Federal Tax Return due to unreported income from Interactive Brokers.

During 2007, I traded the following financial instruments with IB - options, forex, stocks, SSFs, and futures.

IB sent me a 1099-B which had the following info:

Box 2 "Stocks, bonds, etc." with Gross proceeds less commisions and option premiums checked. Amount entered was
$92,000.

In Box 8 Profit or (loss) realized in
2007

$ -8,240.40

In Box 11 Aggregate profit or (loss)


$ -8,240.40


Yet, I lost over $10,000 trading that year in my IB account so I don't owe any additional taxes. To clarify, I did not make a profit at all in 2007, rather I lost money.

I filed the short 1040 for that year and did not fill out a Schedule D since I did not have any profits.

So, how do I fix this? Did IB make a mistake on my 1099? IB's own Schedule D worksheet appears to back up my losses.

Any advice is appreciated.
 
Wrong mary. The irs computers picked up total sales of $92,000 and the irs does not know what you paid for the total stocks so assumes you made a profit of 92k thus you owe 27k of taxes on those total sales. simply amend your return and fill out sch d showing your loses on stocks and futures and refile. easy to do.
 
Sorry, a typo. Yes, its $27K the IRS claims I owe. So, are you saying that my 1099-B from IB was correct, or do I need to contact IB before re-filing or contacting the IRS?

Surely, I don't owe the IRS anymore money because of this. I just hope I can prove it.

P.S. Now I fear the IRS will come back on 2006 and previous years.
 
1099 B is correct. What's missing is schedule D. 1099 contains only proceeds of your sales. Schedule D contains your cost basis and it will correctly show your PnL.
Without having your cost basis IRS assumes that you pocketed a profit of 92K.
 
Quote from maryp:I filed the short 1040 for that year and did not fill out a Schedule D since I did not have any profits.
More...
This was your mistake. Regardless of whether or not you made a profit, you must fill out a schedule D to show the IRS what you paid for your trades.
 
Yeah, you must file schedule D along with your 1040 for year 2007. Simply amend it.

Also note that you have lost around $10k. You can only claim $3000 for the year 2007. This can be used to offset your ordinary income (if any). The rest will be carried over for future years (2008, 2009, etc.).

Also note that the gain/loss for trading futures is treated differently than the gain/loss for equity/options. For futures, it is a 60/40 split for long-term and short-term. You should list them out separately from your equity/option gain/loss - though you get the info from the same broker. The long-term gain gets a lower tax rate.

You should do the 2007 amendment first before you do your 2008 return because you need the carry-over amount for your 2008 schedule D.
 
Maybe I am miss-reading some of the replies here.

I thought 1099b was only for futures (regardless of the buy or sale side of the trade)
Stock and options won't show up in there and there is a separate schedule D report to download for them in IB.
 
Quote from Bolimomo:

You should do the 2007 amendment first before you do your 2008 return because you need the carry-over amount for your 2008 schedule D.
More...

Do you really think the order matters?

surdo
 
Quote from lemeeeplay:

Maybe I am miss-reading some of the replies here.

I thought 1099b was only for futures (regardless of the buy or sale side of the trade)
Stock and options won't show up in there and there is a separate schedule D report to download for them in IB.
More...

The #2 box on 1099-B includes stock sales.
 
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