Hi there, I reviewed this thread and have a lot of experience preparing taxes for clients with different stock sales, so I figured I should chime in. I've struggled with this reporting discrepancy and lack of information available, so here's my 2 cents to save us all some time in the future:
E-Trade & Morgan Stanley are probably one of the worse in regards to how they report wash losses and gain/loss on stock sales, since it generally doesn't add up to the adjusted gain/loss on your taxes. Most other brokers such as TD Ameritrade, don't have this similar issue, as they're wash losses and gain/loss shown on 1099-B will actually reconcile to the adjusted gain/loss.
For E-Trade, you need to input into your tax return the total proceeds, cost basis, and wash loss as shown per your 1099-B. The gain/loss on 1099 will not match your Schedule D on your tax return because E-Trade, again, terrible in regards to this, does not exclude wash losses from the gain/loss on the 1099.
Example:
Sales/Proceeds: $8,000
Cost Basis: $12,000
Wash Loss: $2,000
E-Trade will show this on 1099-B as: $8k - $12k = $4k loss (they'll also show the $2k wash loss, but it doesn't impact their gain/loss column). So even though they show $4k loss, that actual taxable loss will be $8k - $12k + addback $2k wash loss disallowed = $2k loss on your taxes on schedule D and/or 8949.
Bottom line: since E-Trade is bad with their taxable reporting and doesn't care to clarify this anywhere on their form (or online the last time I checked), you simply need to know that your adjusted gain/loss reported on taxes will not match their number, with the variance being the wash loss (since E-Trade is showing the true gain/loss on 1099-B, but not necessarily the taxable gain/loss which factors wash losses). The rules might change and E-Trade might eventually get with the program and fix this, but this message should be accurate for the 2021 tax reporting year. Hopefully they fix it starting with the 2022 tax year.
