Hi, I retired a few years ago, and started selling mutual funds for living expenses. I've discovered that I've been misunderstanding my 1099-B by taking the reported cost basis at face value, not realizing I needed to calculate a cost basis for sales for which the cost basis was not reported. Obviously this means I was reporting more income than I actually had, so it's in my favor. I need a bit of step-by-step so I can file this part correctly. (Later I'll also amend previous years.)
I have total cost basis information from Quicken, and I'm using cost averaging. Everything is LTG. Let me set up some terms:
Total proceeds = proceeds for which the cost basis was reported (RP) + the proceeds for which the cost basis was not reported (UP). Both amounts are in the 1099-B.
Total cost basis = reported cost basis (RCB) + unreported cost basis (UCB) [to determine the UCB, I subtract the RCB from the total].
Let me know if any of that is incorrect. Otherwise, here's what I think I'm supposed to do, plus a couple questions. I need two sections:
Long-term (Box D): Enter RP and RCB.
Long-term (Box E): Enter UP. TT tells me to enter the cost basis as "the sum of Box 1e," but the reported amount is zero. I enter UCB here anyway? Or is it an adjustment to the total cost basis, in which case I enter B as the adjustment code?
Is there additional information I need to provide the IRS beyond what TT enters into the Form 8949?
Also, what do "covered" and "noncovered" mean?
