I have unknowingly made very few wash sales across taxable and retirement accounts. I have prepared TY 2018 tax return using TT Premier 2018 and used the broker issued 1099-B for this. Now I have to incorporate modifications to cost bases for a few transactions which were wash sales across IRA and taxable accounts.
Can I open my form 8949 in Turbotax and modify the required bases? Or do I need to do something else? Please post a link to any article that explains the process.
One thing I know is IRA and retirement accounts don't figure into wash sales. You do not report any buys, sells, interest, dividends or any transactions in IRA or 401K accounts. So you can move money around inside them. That's the benefit of using IRA accounts. You only report distributions as ordinary income for which you will get a 1099R. Which means you will lose the capital gains lower tax on any sales.
ira's can figure into wash sales.
A wash sale occurs when you sell or trade stock or securities at a loss and within 30 days before or after the sale you…. 4.) Acquire substantially identical stock for your individual retirement account (IRA) or Roth IRA."
For many years the rules were not as clear when it came to IRAs, but that changed with Revenue Ruling 2008-5. In that ruling, the IRS identified what must result when a wash sale occurs because of an IRA trade: "The loss on the sale of the stock or securities is disallowed under section 1091 of the Code, and the individual’s basis in the IRA or Roth IRA is not increased by virtue of section 1091(d)."
also spelled out in IRS pub 550 - see page 56
Rev. Rul. 2008-5
Loss from wash sales of stock or securities. This ruling provides that if an individual sells stock or securities for a loss and causes his or her IRA or Roth IRA to purchase substantially identical stock or securities within a specified period, the loss on the sale of the stock or securities is disallowed under section 1091 of the Code, and the individual’s basis in the IRA or Roth IRA is not increased by virtue of section 1091(d).
what the op was asking about was not wash sales within an IRA but a wash sale when op sells at a loss in taxable account and then buys identical securities within the 30 days within his IRA or ROTH IRA
"Can I open my form 8949 in Turbotax and modify the required bases? Or do I need to do something else? Please post a link to any article that explains the process."
To answer your actual question: Yes, you can do that in "forms mode" if you are using a desktop product. To get the "correct" presentation here you'd enter your adjustment in column (g) and enter a "W" in column (f). This might prevent e-filing if you are forced to "override" amounts and codes that are already there, but should not pose a problem if you're simply filling in blank fields.
If you're using an online product then the forms aren't available to you for direct entry but you can accomplish what you're trying to do using "interview mode." Go back to the sale where you want to make the wash sale adjustment and edit the sale. Click on the "I'll enter additional info on my own" blue button and on the next page enter your adjustment in the "Wash sale loss disallowed" box. That will correctly report the trade on Form 8949.
Box 1g. Wash Sale Loss Disallowed
Wash sales. Report wash sale loss amount disallowed. You must report any loss disallowed under section 1091 if both the sale and purchase transactions occur in the same account with respect to covered securities with the same CUSIP number. You are permitted, but are not required, to report in box 1g all loss disallowed under section 1091. For example, you may report a disallowed loss even though a security is sold in one account and repurchased in a different account.
And of course the broker may not have any idea that a wash sale loss was incurred if the purchase of the replacement shares happens in an account at a different financial institution.
Thanks for the clarification. What you have said in your latest post is that I can put a 'W' in column F and make cost basis equal to proceeds ( sale price) and don't worry about the amount in Box 1g? Just curious about quantities here. For ex. if I had a loss on 500 shares in taxable account and gained on a number of calls not amounting to 500 shares in the IRA account what would be the treatment? Does it mean that amounts don't matter whether the net gain across the accounts is positive or negative?
I really appreciate everyone contributing to clarify my questions.
I should have made it clear that the instruction I posted was for preparers of Form 1099-B, that's not directed at taxpayers. If you have a wash sale loss situation you are supposed to report it, even if it isn't reported to you.
In your situation you should adjust your taxable sale to reduce the amount of the loss. When you buy replacement shares in the wash sale window you defer the amount of the loss in a ratio to number of shares sold at a loss vs. number of replacement shares. So if you sell 100 shares at a loss of $800 and buy 25 replacement shares in the wash sale window you'd report only 3/4ths of the loss. I'm not sure exactly how the amount gets adjusted when you buy an option on the stock that was sold; my guess is that the number of shares covered by the contract would be used to calculate the ratio.
if anyone has experience with the quantities - like how many shares loss disallowed for buying options in IRA account please post comments.
As per Schedule D Instructions, the events that will deny you your loss are
Buy substantially identical stock or securities,
Acquire substantially identical stock or securities in a fully taxable trade,
Enter into a contract or option to acquire substantially identical stock or securities, or
Acquire substantially identical stock or securities for your individual retirement arrangement (IRA) or Roth IRA.
It does not say
Enter into a contract or option to acquire substantially identical stock or securities, for
your individual retirement arrangement (IRA) or Roth IRA.
Note: if your option is exercised within 30 days, you would end up acquiring substantially identical stock or securities for your IRA.
Note I'm not a tax professional and only make an observation on reading the Instructions.
Consult your own tax professional for your situation.
I have edited my WS trades using TT dialogue mechanism. I had input disallowed loss in Box 1g for the required transactions and TT calculated the loss/gain. I have verified the totals and they look correct. Error check found no errors. Is this the right approach?
Thanks in advance for responses.