Form 1099-B Has Incorrect Proceeds

[Oscar Zilch]

My Form 1099-B has the incorrect proceeds from a stock sale. Do I report the correct proceeds or request an amended Form 1099-B? Since the IRS will tie my Form 8949 back to the Form 1099-B, seems like I must report the incorrect proceeds listed on the Form 1099-B?

Thanks.

[tagteam]

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@Oscar Zilch wrote:

My Form 1099-B has the incorrect proceeds from a stock sale. Do I report the correct proceeds or request an amended Form 1099-B? Since the IRS will tie my Form 8949 back to the Form 1099-B, seems like I must report the incorrect proceeds listed on the Form 1099-B?

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If you wind up fighting the due date, then file the return with the proceeds shown currently but you should absolutely demand a corrected 1099-B if you are certain the proceeds shown are not correct - you can file an amended return thereafter if necessary.

[TomYoung]

Everything else being equal I'd expect the 1099-B proceeds amount to be correct.  Is there any chance that the sale originated from some sort of "corporate action" - like a stock plus cash merger - where there can be some differences in how reporting is handled from one broker to the next?  What stock was sold?

[Oscar Zilch]

It was actually a bond that matured. I know how to adjust basis with the error codes, etc., but there is no way to adjust for incorrect proceeds. I guess I should use these proceeds so everything will tie?

[TomYoung]

Boy, I just can't see how a brokerage firm could get a matured bond proceeds wrong.  It's simply the face amount of the bond, right?

If you're really confident that you've got this all correct then one approach could be to leave the proceeds alone and use whatever basis figure you need to get your gain/loss properly stated.  That does eliminate the possibility of the IRS's computers flagging the transaction as "proceeds don't match" and as long as you have your gain/loss properly stated the IRS can't really lay a finger on you. 

[Oscar Zilch]

Yes, should be just the face amount of the bond but their system messed it up. I also thought about adjusting the basis--that may be the only way to correct it without filing as is, getting an amended Form 1099-B and then filing Form 1040X.

[fanfare]

Spoiler

Spoiler

Spoiler

if you get a corrected 1099-B that is consistent with your basis adjustment on 8949, there's no need to file an amended return.

if you get a corrected 1099-B that is consistent with your basis adjustment on 8949, there's no need to file an amended return.

corrected basis is adjustment code "B"

[SkiNewMexico]

I have a related question.  My 1099-B also has incorrect proceeds stated for a bond "sale."  Actually, there was a corporate action that was the result of a bankruptcy.  My original bonds were exchanged for worthless bonds.  I received no cash payment.

However, my broker reported this as a sale where the proceeds I received were equal to my cost basis.  On top of that, they reported an accrued market discount.

It makes no sense to me to have to pay income tax for an accrued market discount that I never received.

I think that the fair way to represent this transaction is a sale resulting in proceeds of $0 , an accrued market discount of $0, and reporting my cost basis in the original bond.

Would you agree?  And if so, is the best way just to change the numbers the brokerage sent me, or come up with some work-around?  (By the way, I have contacted my brokerage about this, but they seem to be in no hurry to respond).

Thanks in advance!

[Anonymous]

not saying you're wrong. but reporting different from the 1099B is going to get ou a notice from the IRs - it might even be 2 to 3 years down the road

"My original bonds were exchanged for worthless bonds."   are you sure?  some bonds pay no interest. they are issued at a discount and accretion occurs every year on an effective interest rate basis. finally, at maturity you get the face value of the bond. 

generally, when bonds or stocks are exchanged in a taxable transaction, there is a worksheet that is issued by one of the company's to figure everything out. Ask your broker to provide you with a copy.  supposedly this is what they used to generate the reporting.  

[SkiNewMexico]

Yes, I'm quite sure the bonds are worthless, or close to it.  The company went through a bankruptcy restructuring.  The new bonds issued are a general unsecured claim.  The company made clear that funds were set aside to cover 1 to 2% of the unsecured claims, at best (I have a document from them stating this). 

So, I know the bonds will never recover more than 2% of their face value.  The likely return is more like zero, in my opinion.

My main concern here is whether characterizing this transaction as one with $0 proceeds and $0 in amortized market discount is correct.  I understand that by changing what the brokerage said in the 1099-B, I will attract the interest of the IRS.  I don't mind attracting their interest -- as long as I'm sure that I'm right.

[Anonymous]

that document you have, if you showed you it to the IRS would result in the IRS denying your worthless claim.  The IRS takes the position that if it has any value it is not worthless even though it may become worthless in the future.   you can: 1) try contacting the brokerage again to demand they provide documentation as to how they came up with what they did or 2) try searching the web yourself to see if there is documentation about the exchange/reorganization or 3) take your best shot and prepare your return the way you think is correct.  you are saying you got a worthless bond to replace another bond that was worthless.  

[SkiNewMexico]

Hackitoff,

Thank you for your reply.  I agree that it is hard for me to say that the bond I got in exchange is truly worthless if I have a document stating that at most a 2% recovery is possible.

At the same time, it makes no sense to me that the brokerage has said that the "proceeds" I received from this corporate action transaction are the same as what I paid for the bonds.  The post-restructuring bonds are materially different from the bonds I bought originally, and are clearly impaired.

What I'm considering is saying that the "proceeds" I received from the corporate action are 1 to 2% of the face value, and that the accrued market discount is 0.  Does this make sense?

My other question, then, is about how to report this.  The original transaction was reported to the IRS  (as a covered security with LT capital gains).  Should I keep the transaction as a covered security, and report different figures for the proceeds and accrued market discount than were sent to the IRS (and leave some comments if I can)?

I have contacted my brokerage more than three weeks ago about this, and have yet to receive a response.  I've also tried calling the IRS twice -- both times the line to the Schedule D department has been busy.

[Anonymous]

do what you think is right.  that's all that can be recommended. have you considered talking to your broker about moving your account to another brokerage because you can't get answers (only if its practical and your brokerage may not care if your a/c is relatively small.   

if the broker is say showing $20,000 as proceeds and accrued market discount of same amount the reported gain on 8949 would be zero.

you do have the option of reporting exactly as the broker did then using type c transaction and the adj basis to come up with what you say is the  correct gain or loss. 

[SkiNewMexico]

Hackitoff,

Thanks again for your response.

On Form 8949, I could put a B (indicating a basis adjustment) in Column f, and enter in an adjustment to the cost basis that yields the correct amount of capital gains (in this case, losses) for the transaction.

However, if I do this, am I saying that I believe the cost basis as reported by the broker is wrong?  In fact, I agree with the broker's cost basis.  The problem I have is with the broker's proceeds as stated on the 1099-B.

I don't see any direct way to enter in an adjustment in the proceeds reported on the 1099-B.  On the instructions for Form 8949, I see that it is possible to enter in a O (for an adjustment not explained by the other options given) in Column f, and then enter in the adjustment.  But if I do this, it seems to me that the reason for the adjustment won't be clear to the IRS. 

(With TurboTax, how does one enter an O in Column f on Form 8949?  I see that I'm not allowed to change it directly in Form 8949.  I'm guessing that it has to be changed in the 1099-B worksheet, but don't see how to do this...)

Finally, I could simply change the proceeds number to what I think is right.  However, since Form 8949 asks me to fill in what was given to me on the 1099-B, this option doesn't seem quite right and would certainly garner attention from the IRS.

So my choice, then, is to 1) say I'm adjusting my cost basis (when in fact I agree with the broker's cost basis); 2) say I'm making an adjustment for some mysterious "other reason," or 3) change the proceeds number to what I think is right, but is different from what is on the 1099-B.

Thanks again!  

[chastity_lashure]

Yes, I had a customer that had an incorrect proceeds 1099-B, actually the individual stated he had never had any involvement with the company in question. nor did he have stocks or bonds related to the 1099-B.  I referred him to the Tax Advocacy Office with the IRS.  ()https://www.irs.gov/taxpayer-advocate). This post was helpful.  If you are ever in a situtation where you were sent a form, that was given to you by a business for tax purposes, that does not pertain to you.  Sometimes the Tax Advocacy Office can assist with the situation.