missing cost basis

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I am trying to file my taxes using TurboTax. I got a 6 month extension because my 1099-B reported that the shares of a mutual fund that I held in a Schwab account were sold because the fund was dissolved late last year, but did not include the cost basis for many of the shares. I had purchased the shares in 2000 and reinvested dividends I received every month since then. However the cost basis was missing on shares purchased prior to 2006, presumably when they were transferred to the Schwab account. I was advised by an accountant I spoke with to look online for a cost basis and plug in the numbers for each month. I did that, but when I prepared to file, TurboTax told me I needed to fix an issue because “corrected cost basis should not have a value for transactions not reported on Form 1099-B or Form 1099-DA.” I am not sure what to do because these transactions were reported to the IRS according to the 1099-B but they were just missing the cost basis. So this issue raised by TurboTax doesn’t make sense to me. I don’t see anywhere it says that the transactions were not reported - simply that the cost basis was missing and so I added them. I wonder if anyone can provide any guidance about this matter. Should I just go ahead and file regardless of this issue? I can’t seem to find anything about this by searching. Iwould greatly appreciate any help.

M-MTax

Level 15

You are running into an issue because TurboTax has a very specific technical distinction between a missing cost basis and a corrected cost basis.

Because your mutual fund shares were purchased between 2000 and 2006, they are legally classified by the IRS as "non-covered" securities. Brokerages were not legally required to track or report cost basis to the IRS for mutual funds until 2012. Therefore, when Schwab generated your Form 1099-B, they checked a box indicating that this transaction belongs to a category where the "basis was not reported to the IRS" (often Box E or F on Form 8949).

The error message occurs because you likely checked a box saying "The cost basis is incorrect or missing on my 1099-B" and then typed your researched number into the "Corrected Cost Basis" field. In TurboTax's software logic, a "corrected" cost basis is only allowed if the broker actually reported a number to the IRS in the first place, and you are overriding it. Since Schwab reported no basis (blank/missing) for these non-covered shares, TurboTax blocks you from using the "corrected" adjustment field.

How to Fix the TurboTax Error

To resolve the error without getting stuck in the filing review loop, you need to change where you enter the number:

Delete the "Corrected" Adjustment: Go back to the investment sales section in TurboTax and edit the specific transaction(s) causing the error. Uncheck any box that says "The cost basis is incorrect or missing" to clear out the hidden "corrected cost basis" fields.
Ensure the Right Category is Selected: Make sure the transaction is classified exactly as it appears on your 1099-B—likely "Long-term, basis not reported to the IRS".
Type the Value Directly into Box 1e (Cost Basis): Instead of leaving Box 1e blank (or at $0) and trying to adjust it later, simply enter your calculated total cost basis directly into the main "Cost Basis" or "Box 1e" input field.

Since the IRS is already expecting a Form 8949 Box E or F transaction (where they know the broker didn't supply a basis), typing your researched number directly into the primary cost basis field satisfies TurboTax's system and correctly transfers the number to your tax return.

noahpfAuthor

Level 1

Thank you so much for the very helpful response. I only wish TurboTax were as clear and thorough in their instructions as you have been. The box stating "The cost basis is incorrect or missing on my 1099-B” clearly seems to apply here for the transactions missing the basis, so unless I am missing something, it seems strange to leave it unchecked in those instances.

Unfortunately I spent a full day going through the literally hundreds of entries for these transactions so now I will need to spend another day going back and correcting them all.

I guess I will miss the 10/15 deadline but I am told that I can submit on TurboTax through 10/31 so I should be able to make the deadline.