How to manually report options credit spreads in turbotax where the form only shows profit or loss realized in closed contracts? Should total proceeds be the profit?

[makeitreynes]

How to manually report options credit spreads in turbotax where the form only shows profit or loss realized in closed contracts? Note: Turbotax is not picking this 1099-b form up automatically. For each leg/line item, should total proceeds be the value under profit if positive. If positive, the cost basis as zero? Whereas, if negative, the total proceeds zero and the cost basis the negative value as a positive number? For example, here's a zero days to expiration credit spread in my 1099b Option symbol, Profit or loss realized on closed contract XSP 08/28/2024 563.00 C, $ 38.68 XSP 08/28/2024 564.00 C $ (18.32) Should the first sale be: total proceeds: 38.68 cost basis: 0 Should the second sale be total proceeds:0 cost basis: 18.32 Where in that one credit spread i made 38.68 - 18.32 = 20.36

[baldietax]

are these transactions presented separately in the 1099-B as 'regulated futures contracts' / Section 1256 Option Contracts etc... if so it's possible they should be reported on Form 6781 rather than Schedule D/Form 8949; in TT go to Wages & Income / I'll Choose What I work On / Investment Income - Contracts and Straddles and also check the IRS instructions for Form 6781.  Not a CPA and I've only had limited experience in this form but wanted to point you in this direction; I had a few SPY spreads last year which E*Trade reported as Section 1256.

[makeitreynes]

I only got a statement for 1099b from charles schwab. No other form. These are for options credit spreads, not futures. I did not get assigned on any since they're cash settled so it should be easier to manually file.

[baldietax]

yes not futures but some brokers designate certain option spreads as Section 1256 contracts - but the statement should show that clearly; so if they're just included as sales under regular 1099B sections, what's the issue, are they just missing cost basis?  Generally you would input each leg as tho they are separate and will get to the net gain/loss on Schedule D.

The short leg may have zero for the cost basis and falling under the "cost basis not reported to the IRS" i.e. non-covered category.  You may want to input these as "one by one" with the details rather than as a sales summary, that should help avoid having to mail more details to the IRS.  TT also doesn't handle short options well they provide all these drop downs and buttons, but if you select expired it doesn't allow you to input proceeds, so say they were sold either way, this doesn't matter as long as you get the right outcome on Form 8949 / Schedule D, and you have to input that leg was 'sold' on open date and 'acquired' on the close date etc.

Hope this helps.  If some other issue pls do post further.

[Mike9241]

we don't know what type of options you trade. certain options can be section 1256 contracts

see PUB 550 https://www.irs.gov/forms-pubs/about-publication-550 

but then Schwab so have identified them as such and reported accordingly. 

there would be a section on your composite 1099 labeled "1256 option activity"

open 1256 contracts, at year-end, are marked-to-market. 1256 contracts are first reported on form 6781 not schedule D. from there the gain loss is split and carried to schedule D 

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if you are a trader who has properly elected IRC 475(f) then mark-to-market reporting is required. the gain/loss for the year is ordinary income or loss reported on form 4797 line 10 (including 1256 contracts rather than reporting on form 6781) . if you are a trader who has not elected 475(f) or an investor, each leg that has been closed/expired by year-end is reported separately on form 8949 or schedule D. you would be subject to the wash sale rules 

[makeitreynes]

Thanks Mike. I do realize now that the file is called 1099 Composite, and within the form it mentions
"OPTIONS SUBJECT TO SECTION 1256 REPORTING- Report on Form 6781 Gains and Losses from Section 1256 Contracts and Straddles."
So after checking what's under 1256 Options Activity, I'm realizing the 1099 Composite page is just a summarized relay of what's under the more detailed, 1256 options activity page.
The only options I did are 0DTE put/call credit spreads on cash settled options.
Under 1256 Activity I do get a more detailed view with the columns: options symbol, transaction type description (SALE, BUYCOVER), Quantity, Open Date, Close Date, Opening Amount, Closing Amount, Realized Gain Loss 


I'm still figuring out which column do i get total proceeds from, and which column do i get cost basis from? I'm guessing total proceeds should be the closing amount, and cost basis should be the opening amount.

This is all I'm prompted for when filling out the 1099 section in turbo tax. However, I'm not sure I'm in the right turbo tax view for filling out this info

[makeitreynes]

Thanks baldietax! I just replied to Mike on this thread after realizing that, yes I do have a 1256 section. I didn't realize that the 1099 section I was looking at was just a composite view of the more detailed 1256 section. 

The 1099 composite section was not showing cost basis. However, the 1256 does show opening amount, closing amount, and realized gain.

Still figuring out if I'm reporting on the right turbo tax form for this.

[Mike9241]

1256 contracts should have been marked to market by Schwab for year-end reporting (line 8 realized profit for year, lines 9 and 10 unrealized profit at the beginning and end of the year, line 11 the amount to be reported on form 6781. you do not enter the details of each trade. just one line Schwab account xxxxx and only the net - column b or c depending on net gain or net loss.   option trading that is not section 1256 gets reported on form 1099-B

[RobertB4444]

It sounds like you're reporting this in the investment income section for the 1099-B.  If you will go to the wages and income section of your federal return you can scroll down to the investment income section and the last entry is "Contracts and Straddles".  Click start next to that and enter the section 1256 information there.

@makeitreynes 

[makeitreynes]

Thanks @RobertB4444 ,
I do see this 1256 Contracts and Straddles page.

The next page asks Any Elections? Mixed staddle election, Straddle-by-straddle identification election, Mixed straddle account election, Net section 1256 contracts loss election.

I need help identifying if any apply to me. All my trading is 0DTE put/call credit spreads and there are no straddles. For 2024, I'm net profit, so the last option does not apply to me. I'm not doing options straddles, so nothing else applies to me.

The next page asks if any apply: Section 1256 contracts marked to market, Losses from straddles, Gains from straddles, Unrecognized gains from positions held on December 31, 2024, None of the above

I'm not sure if any here apply to me either. I'm not doing straddles. I do not see how marked to market will apply here since all my spreads expired same day. 

When not checking any, the page no longer prompts for info and it just has $0.00 reported for 2024 under my income and expenses page view

[makeitreynes]

Update:

I just spoke with a turbo tax advisor. They mentioned as long as I don't have wash sales that I should be able to report under 1099-b, under sale section totals.

They advised that I do also have the option of reporting one by one under the 1099-b one by one view, but that it's not required by the IRS.

So simply, I was directed to just do 1099-b sale section totals and just report my year end profit or loss (where total proceeds is my profit, cost basis is 0). If I had a 2024 net loss total proceeds would be 0 and cost basis would be the loss as a positive number

[fanfare]

Regarding stock and options, options are covered transactions and the broker reports them for Box A.

Detail Reporting Exception: if you summarize Box A or Box D, Form 8949 is not needed for transactions without adjustments. No mailing is necessary. No attachment is necessary.

As an active investor, be aware that your category Box A or Box D sales without adjustments do not require Form 8949, so there is no reason to import or key in those transactions.
Instead use the "enter a summary" option to put your numbers on Schedule D Line 1a or Line 8a.
No mailing is necessary.

If you have wash sales, it gets more complicated since those adjusted transactions have to be itemized on Form 8949 and the summary totals adjusted accordingly.
Generally you shouldn't see wash sales on spreads unless you trade the same spread frequently in a 60-day period.

@makeitreynes