Wash sale loss disallowed.... skip December?

jm0895 said:
Okay, I thought I was losing my mind. I've been going crazy for the last 48 hours trying to figure out why my 1099 has this issue. I was very aware of the wash sale rule and carefully closed out any positions with losses and did not trade those (or similar) securities for 30 days. There should be no wash sale losses disallowed as some of these positions were COMPLETELY closed MONTHS before Dec 2021 and never touched again.

This has been maddening b/c all I read is the standard advice which doesn't address this situation we are encountering. In fact the standard advice makes it sound like our situation shouldn't even occur, so I'm left trying to figure out what piece of the puzzle I'm missing or if I'm just dead wrong in my understanding of the rules somehow. No one I've talked to has been able to help.

The only thing I can think of currently is that MAYBE THE BROKERS ARE REPORTING ALL POTENTIAL WASH SALES AS WASH SALES DISALLOWED AND MAY NOT BE CORRECTLY ADJUSTING THE COST BASIS FOR TRADES WHEN THEY ARE FULLY CLOSED OUT. I don't know how to address this. I also don't how how to check this other than going through each transaction individually. There are thousands and thousands of transactions reported so this is extremely tedious. My accountant told me verbatim that she has to report the numbers on the 1099 or the IRS will be on me quickly. I'm at a loss at this point and I think I need to find a professional who has experience in this, specfically wrt to long/short options and wash sales.
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No matter how many calls you make to the brokerage houses and ask multiple times you will receive the same exact information that they cannot give you any advice since they are not tax professionals and they do not offer any help in deciding how to get rid of a wash sales. Trust me I have spent countless hours researching and calling and I have gotten absolutely no where.

I then ask my tax professional and receive absolutely zero help, they said the same thing you did. That they have to go off the 1099 no matter what.

What I once again don't understand is the fact you mentioned that the trades were closed out months before December 2021 and never traded again. I did the same exact thing you did and still had wash sales.

I really cannot comprehend why this issue isn't being addressed and being looked into, I mean I see literally thousands of posts on wash sales all over the forums and the answers to these wash sales seem as easy as making a ham sandwich yet everything you apply to making the wash disappear DOES NOT WORK.
 
ajacobson said:
IRS form 550 - get it off the internet.
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Right because the average person will understand that entire tax form. If you know about form 550 then why not chime in and assist in how wash sales can be eliminated in the most simplest way because as you can see following the rules of selling off a stock prior to the new year and not trading it 30 days after does not apply for some odd reason.
 
Jzwu2017 said:
Did you ask your broker who did your 1099-B about your wash sales?
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Brokers do NOT help in any wash sale questions. How do I know? I have called multiple brokers and have spent countless hours talking to each and every one of them. THEY DO NOT ASSIST IN ANSWERING ANY QUESTIONS ABOUT WASH SALES. THEY TELL YOU TO CONTACT YOUR TAX PREPARER WHO ALSO HASNT A CLUE BECAUSE THEY GO STRAIGHT TO THE 1099.
 
Jzwu2017 said:
I think the complexity lies in the fact that if you keep trading the same stock the wash sale thing goes into a perpetual cycle.

For example, if you traded 200 shares of stock syz (trade #1) and took a loss, say from $10/share to $8/share to a total loss of $400. In the next 30 days you traded xyz again for 100 shares (trade #2) in a winning trade. Now the half (100 shares) of the original 200 shares trade (#1) became a wash sale and the $200 loss is disallowed in the original trade. Instead, it is now part of the second 100 shares trade’s (#2) cost basis.

If during the 30 days you traded xyz once more in 50 shares (trade#3) and took a loss. Now 50 shares of the original 200 shares trade (#1) became a wash sale and the $100 loss is disallowed in the original trade and added to the cost basis of the 50 shares trade (#3). However, if within 30 days of the 3rd 50 shares trade (#3) you traded xyz again for 100 shares (trade #4). Then the 3rd 50 shares trade (#3) became a wash sale and its loss plus the $100 loss from the original 200 shares trade (#1) is disallowed again, which will be added to the cost basis of the last 100 shares of the xyz trade (#4). If the last 100 shares trade (#4) is a winning trade all is good. But if it’s a losing trade any future xyz trade within next 30 days will trigger a wash sale of that 100 shares trade (#4).

You can see this wash sale cycle goes in perpetuity as long as you keep trading xyz and have losing trades. Wash sale rule only applies to losing trades. I am sure brokers use a software to do this wash sale calculations throughout the year.

The only way to clear disallowed losses from previous wash sales is to stop trading the same stock for 30 days after a loss (or make sure you only have winning trades within 30 days of the last losing trade :)), after which you start fresh again. You cannot clear previous wash sales but they don’t matter either. The disallowed losses matter.
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So yes its not the wash sales but the DISALLOWED losses that matter. This is what is the downfall of the 1099,

How do you get rid of the disallowed losses? Can you not get rid of them since they are "DISALLOWED" ???


Like I mentioned I had disallowed losses that I thought wouldn't be disallowed since I sold off stocks in December and didn't trade them until the new year 30 days + later.
 
By the way even ask for current trading reports from your broker that are up to date and see the wash sales and disallowed losses as of.your first quarter trading. I can tell you they will NOT match your 1099. I looked over my last report from 2021 and compared it to my 1099 and they were totally off.

If no one believes it do it yourself. Call your broker and ask for your trading report from 2021 and compare it to your 1099. It will NOT match.

Any CPAs here know why??
 
Guys, don’t fret about wash sales or disallowed losses. Wash sales are just a label put on those trades defined as wash sales by IRS. They don’t affect your taxes in any way.

Disallowed losses do affect your taxes if they are across the end of the tax year, i.e., Dec. - Jan. However, any disallowed losses in the previous tax year will be added to the next year’s cost basis. Therefore, they don’t matter either in the long run. It’s just how taxes are calculated and paid per tax year.

I just did my 2021 tax return. Everyone is fine except that I have some disallowed losses in 2021 tax year (in Dec. 2021) that I will get in 2022 as the cost basis will be adjusted up accordingly.
 
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