Cross account wash sales and calendar year wash sales.

[cles325]

I have made a mess using my margin account broker to buy options and buying same underlying shares with my cash account broker. Then top it all, I rolled options to new year (took losses) and purchased same shares into the new year.

How do I account for this behavior in turbo tax?

I understand the brokers don't report the "spirit" of the trade moving from options to shares and only report matching option tickers so rolled options don't get accounted for properly. And it is my duty to reconcile my cash account with my margin account.

I have a figure for unreported disallowed wash sales and would at this point love to just throw the whole tax write off out the window! This accounting mess isn't worth the money I would save having a loss to carry over to the new year.

I have imported the brokers 1099 forms.

How do I take my trading yearly loss and remove $500 from it to account for the cross accounts and rolled positions?

[Mike9241]

use a pro who can look at both 1099-B's and properly compute cross a/c wash sales and any other adjustments that are necessary. 

[cles325]

so for a possible future $50 tax credit I should hire a pro now for hundreds...

[DianeW777]

If you believe that you no longer have a wash sale and that you should be allowed to now use the unallowed loss, due to the stock being completely sold or disposed of as of December 31st, and you are not sure which stocks were affected by the unallowed wash sale loss previously, then you could enter one sale for this.

The selling price would be zero and the cost basis would be the amount of your previous unallowed wash sale loss.  As you indicated, under a potential review you would have to show the transactions that led to this decision.  For your convenience below you can see the wash sale rules.

Keep in mind that not all states follow the same federal rules in relationship to wash sales.

Wash Sale Rule Defined:

• A wash sale occurs when an investor sells or trades a security at a loss, and within 30 days before or after, buys another one that is substantially similar.
• It also happens if the individual sells the security at a loss, and their spouse or a company they control buys a substantially similar security within 30 days.
• The wash-sale rule prevents taxpayers from deducting a capital loss on the sale against the capital gain.

Affect on Cost Basis:

• The loss that occurs on a wash sale is added to the cost basis of the shares purchased that created the wash sale.
• When all shares are sold and there is no repurchase, that increased cost basis will be used in full and used to determine gain or loss.

Be sure to keep good records going forward so that you know when to add those losses for future sales.

[fanfare · Accepted solution]

@cles325 

The simplest solution is to report all consolidated 1099-Bs exactly as reported by the broker(s).

IRS will be satisfied with this.

It is recommended (by me) to use the "I'll enter a summary" option.

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At tax time, you have the option to summarize your activity by Sales Category.

As an active investor, be aware that your category Box A or Box D sales without adjustments do not require Form 8949, so there is no reason to import or key in those transactions.
Instead use the "enter a summary" option to put your numbers on Schedule D Line 1a or Line 8a.

Category A and D are the covered transactions.

If you summarize (recommended),

you only need to supply details of 1099-B covered transactions with adjustments that are not listed on your e-Filed Form 8949. and all non-covered transactions not listed there.

in other words, for active investors, generally this is a list of the Wash Sales.

Note: turboTax may suppress some covered transactions without adjustments. For those, no mailing is required !
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If you have two pages (for example) of Wash Sales,
use Adobe Reader to print those two pages. That's all you have to mail to the IRS, given that those wash sales are not on your e-Filed form 8949 already.
(you might enter them manually if they are few in number.)

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Alternatively, if entry of Wash Sales is too tedious,
summarize and check the box for adjustments and enter the disallowed amount.
This summary for that broker will go on Schedule D Line 1b.
You will be making the mail-in election.

[snowmman]

Interesting. I was reading another post here where someone claimed that  Turbotax in 2021 was only listing wash sales on the Form 1949, and so I started researching just what transactions need to be reported...It seems like IRS guidance is changing, so there are more cases where "no" individual transactions need to be reported?

I was reading the latest IRS Schedule D and Form 1949 instructions, and the detail around "exception 1" and "exception 2"

I've excerpted below the paragraphs from the IRS Schedule D instructions that I am trying to understand relative to your suggestions.

It seems that even if there are wash sales, if the brokerage includes the cost basis adjustments in the 1099, then no Form 1949 or statement showing individual transactions is needed? 

What is your thinking about this language?

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Lines 1a and 8a— Transactions Not Reported on Form 8949

You can report on line 1a (for short-term transactions) or line 8a (for long-term transactions) the aggregate totals from any transactions (except sales of collectibles) for which:

• You received a Form 1099-B (or substitute statement) that shows basis was reported to the IRS and doesn't show any adjustments in box 1f or 1g;

• The Ordinary box in box 2 isn’t checked;

• The QOF box in box 3 isn’t checked;

• You aren’t electing to defer income due to an investment in a QOF and aren’t terminating deferral from an investment in a QOF; and

• You don't need to make any adjustments to the basis or type of gain or loss reported on Form 1099-B (or substitute statement), or to your gain or loss.

See How To Complete Form 8949, Columns (f) and (g) in the Form 8949 instructions for details about possible adjustments to your gain or loss.

If you choose to report these transactions on lines 1a and 8a, don't report them on Form 8949. You don't need to attach a statement to explain the entries on lines 1a and 8a and, if you e-file your return, you don't need to file Form 8453.

Figure gain or loss on each line. Subtract the cost or other basis in column (e) from the proceeds (sales price) in column (d). Enter the gain or loss in column (h). Enter negative amounts in parentheses.

Example 1—basis reported to the IRS.

 

You received a Form 1099-B reporting the sale of stock you held for 3 years. It shows proceeds (in box 1d) of $6,000 and cost or other basis (in box 1e) of $2,000. Box 3 is checked, meaning that basis was reported to the IRS. You don't need to make any adjustments to the amounts reported on Form 1099-B or enter any codes. This was your only 2021 transaction. Instead of reporting this transaction on Form 8949, you can enter $6,000 on Schedule D, line 8a, column (d); $2,000 in column (e); and $4,000 ($6,000 − $2,000) in column (h).

If you had a second transaction that was the same except that the proceeds were $5,000 and the basis was $3,000, combine the two transactions. Enter $11,000 ($6,000 + $5,000) on Schedule D, line 8a, column (d); $5,000 ($2,000 + $3,000) in column (e); and $6,000 ($11,000 − $5,000) in column (h).

current IRS Schedule D instructions:

https://www.irs.gov/instructions/i1040sd#en_US_2021_publink[phone number removed]

current IRS Form 1949 instructions
https://www.irs.gov/instructions/i8949#en_US_2021_publink[phone number removed]

[GeorgeM777]

Agreed.  If cost basis on your 1099-B has been adjusted to reflect wash sales then you can use your 1099-B as is and import, or manually enter, the information contained therein.  

Whether a Schedule D is all that is needed, or whether a Form 8949 is also required, will depend on whether the transactions being reported had cost basis reported to the IRS.  If cost basis has been reported to the IRS, whether the transaction was short-term or long-term, then Schedule D is all that is required.  TurboTax will not separately prepare Form 8949 if cost basis has already been reported to the IRS. 

@snowmman

[snowmman]

Thanks for the reply @GeorgeM777 

I had already filed my taxes, and I had thousands of transactions. I'm just now reviewing things based on my readings, to make sure I fully understood things (for next year!)

Interesting how Turbotax now can support 10,000 transactions. I'm trying to make sure I understand things so I don't have to mail in anything that has lists of lots and lots of transactions. (I apparently didn't have to mail any thing in this year, efile'd, and I did I have wash sales. ...so I'm trying to see why Turbotax apparently didn't tell me I had to mail in anything (Form 8949)

In looking at my brokerage 1099-B, I see there is a separate breakout for Wash Sale Loss (1g)

so when the IRS says I don't have to report (individually) transactions that don't have a 1g entry, they're saying I do have to report those with a 1g..i.e. wash sales.

from IRS, saying which transactions don't have to be reported (one of the cases)

• You received a Form 1099-B (or substitute statement) that shows basis was reported to the IRS and doesn't show any adjustments in box 1f or 1g.

So the upshot from all this, is that it sounds like maybe Turbotax is doing the right thing..i.e. just listing wash sale adjusted transactions on the Form 8949.

[GeorgeM777]

Yes, because wash sales represent an adjustment in the cost basis, those transactions will be reported separately, meaning you should see them on Form 8949 Sales and Other Dispositions of Capital Assets.   You should not have to submit your 1099-B to the IRS as they already have a copy and moreover, you are likely submitting Schedule D and Form 8949 with your return.

@snowmman