You'll need to sign in or create an account to connect with an expert.
your broker or fund company preset a default cost basis method for you. That default method probably won’t give the best tax results when you sell shares. What you may not know is, you can change the default method to the one you want to use.
But know that once shares are sold, there’s no way to go back and retroactively make changes. It’s best to set your method of choice now before you start selling off shares. This way you won’t unknowingly lock yourself into a bad decision.
I understand that I can set the cost basis method in my brokerage account for stock sales going forward.
My question though was for the sale in 2021 that is already reported in 1099 to IRS. It has a cost basis calculated based on FIFO method as that was the setting in my brokerage account. Now for 2021 tax computation that I am doing, can I use a different cost basis (same stock bought in the same brokerage account at a higher price on a different date) than the one reported to IRS in 1099 ?
No, based on your facts, you cannot change your method of accounting (FIFO) for the transaction at issue. If you plan on changing from FIFO to another form of accounting such as LIFO (Last In First Out) for tax purposes, you are required to complete Form 970 Application To Use LIFO Inventory Method, or a statement with all the information required on Form 970 to adopt the LIFO method.
You must file the form (or the statement) with your timely filed tax return for the year in which you first use LIFO.and comply with all requirements listed in the form. You must file the form with the return for the first tax year you plan on using LIFO. Switching to LIFO is irrevocable unless you gain permission from the IRS to switch to another method.
Still have questions?
Questions are answered within a few hours on average.
Post a Question*Must create login to post
Ask questions and learn more about your taxes and finances.
kro0904
Returning Member
matrimnl
New Member
ps_raghavan
Returning Member
dylanwood25
New Member
raysim52
Level 2