How should I claim stock wash sale loss disallowed amount back in following year?

The broker is supposed to report each and every wash sale loss that they know of.  With tons of day trading going on the dollar amount the broker reports can be a big number, and you need to account for it in your income tax return.  But simply entering the total of wash sale losses noted on the 1099-B is NOT the same thing as not getting any tax benefit; since wash sale losses are added to the "out of pocket" cost of the replacement shares, when you finally sell those shares and stop trading, the wash sale losses are included in the basis for those shares.

If your broker is really geared up for proper reporting I'd expect that they are accurately doing the accounting for you.   You should be able to test that by looking at the details of the trades.

Tom Young

Thanks Tom... I have checked the transaction history in the account and looks like the broker didn't add my wash sale disallowed sell price as purchase price to later repurchase... but if I just wipe out the wash sale disallowed amount it's not right either...  The brokerage Robinhood uses is  APEX Clearing.  Do you happen to know if they would do accounting properly in this case?  

I know nothing about APEX Clearing.  I do know Schwab handles this situation correctly.

The 1099-B instructions to preparers is pretty clear:

"Wash sales. If a customer acquired securities that caused a loss from a sale of other securities to be both nondeductible under section 1091 and the loss was reported as a wash sale adjustment on a Form 1099-B for the sale at a loss, increase the adjusted basis of the acquired securities by the amount of the disallowed loss."

Thank you Tom. You have been very helpful in the past few years 🙂 . I really appreciate your helps!

I Have the same problem. I agree with nestlen. my broker TD ameritrade made a mistake on 1099 B. He reported tons of wash sales to IRS. He is refusing to change his 1099B. Is it ok if i do not report the wash sale on my return? Would that trigger an audit? I sold everything in september. There should be zero wash sale disallowed. All the loss should be capital loss. Nestlen. You should have zero disallowed deductions. Brokers are really bad reporting wash sales. Mine is 90K. I can not ignore it. I need to know how I can edit turbo tax. I did do electronic import. I went to forms,. I am unable to edit schedule D. Please help

Tom I think you are mistaken the wash sales vs disallowed loss. The broker is reporting a disallowed loss when the security was sold early in the year and was never traded again. There should be zero disallowed loss. All the loss should be capital loss. My broker is reporting I have disallowed was sale on a security that i sold and never traded again. Tom could you please respond. Thank you,

Wow samd,  your amount is too big to ignore!  I did wipe off some wash sale for tax year 2017 manually for those stocks that were sold  completely by the end of 2016.  Basically you have to edit the purchase price manually and add your cost (the wash sale disallowed amount) there.  I didn't enter each trade in 2017 because I had 5000 trades which turbotax can't take, so I just entered the total cost/proceeds for each single stock instead.  What confused the hell out of me is that I had calculated the wash sale disallowed amount  6k for the stock I mentioned in 2017, and was planning to add that to the cost for the stock I sold completely in 2018. Like you said I didn't expect I would get any wash sale at all but end up with 15k with a loss of 4k.  And as I have sold everything completely I should be able to wipe out 15k plus 6k from previous year which will net me a loss of (-4k - 15k - 6k = 25k) !  And I know this is totally incorrect because I made maybe  a bit more than 4k, so seems like I should NOT wipe out 15k but only 6k (This will net me a gain of 15k - 4k - 6k = 5k which is about right.... this just confuses me even further because I don't know what I should do with my other stocks that I am supposed to wipe out the wash sale.... And what makes it worse is one of my friends were telling me the 1099 receiving from the same company doesn't even have a sale record for one of his trade that he is pretty sure had happened...  I am really confused.  My plan is to wipe out wash sale disallowed amount for my other stocks that were sold completely in 2018 and for this messed up stock I just do what I think is right.  Maybe I should not day trade or at least not with such a broken broker in the future!  Good lesson learned indeed.

I also checked trade history in my account and pretty sure they didn't use the last sell price as cost for repurchase of same stock... unless they also changed the price from trade history which I doubt.

so you did wash sale disallowed carry over from 2017 to 2018? did your 2018 1099B reflect that? I am sure it did not. would this trigger an IRS audit since what your reporting is different than what the broker is reporting?

how did you edit form 8949 after importing your transactions from apex? i m unable to edit it. I can only see the first few transactions

Yeah according to the rule wash sale disallowed amount should be wiped off if it's sold completely in the future, so I should be able to carry it over from 2017 to 2018 and add it as a 'cost' for any later repurchase.  I think it should be okay to edit it manually if it is correct way to report so. Theoretically we are supposed to enter each single trade in the form but most ppl don't or can't do it (due to too many trades).  Just make sure you document what you know and prepare for any audit in case they come back. And also buy the $40 audit protection.. not sure if that will actually work but I am sure if IRS know it will cost them $$$ to grill you for $1000 they would back off and leave you alone

wash sale loss disallowed is recovered by the addition to cost basis of identical shares. It all works out so there should be no reason to not report wash sales  or to wipe them off.
if your broker is messing up the wash sale adjustment, find another broker.

As fanfare says and as the 1099-B instructions make perfectly clear, the 1099-B's report of basis INCLUDES the wash sale loss TO THE EXTENT THAT THE REPLACEMENT SHARES HAVE BEEN SOLD.  

@samd You should not edit 8949 form manually. After importing the trades see if you can edit the trade and adjust cost inside the software. Worst case you can manually enter total proceeds/cost for each single stock and adjust there

I'm not sure anybody should be editing anything without a complete understanding of what's going on, without being able to say definitely "the broker's in error."  The issue of "covered" securities has been around for quite a few years now and I'm willing to bet that most brokers - I'd think ESPECIALLY brokers that encourage day trading - have their systems for tracking this stuff well shaken out.

I just confirmed with TD ameritrade that Brokers do not remove wash sales from 1099b when the security is sold disposed and never trades in the last two month of the year . It is up to the prudent investor/trader to remove these wash sales so the loss can be used to offset the gain from another trades. I have their email. I will be attaching it here

<a rel="nofollow" target="_blank" href="https://ttlc.intuit.com/questions/4607000-how-do-i-edit-wash-sales-adjustment-i-want-to-remove-all-wash-sales-reported-by-my-broker-and-report-my-taxes-without-them-i-did-electronically-import-1330-trades-how">https://ttlc.intuit.com/questions/4607000-how-do-i-edit-wash-sales-adjustment-i-want-to-remove-all-wash-sales-reported-by-my-broker-and-report-my-taxes-without-them-i-did-electronically-import-1330-trades-how</a>

of course, the broker is not going to remove wash sales from the report, under any circumstances.
Your contentions is that identical shares purchased that triggered a wash sale have not  had their basis adjusted correctly.
According to the IRS pubs, It is the earliest identical shares that will be adjusted, not necessarily the recent ones that triggered a wash. it's hard to figure the rule that TD Ameritrade uses. I tried last year but gave up.

"I just confirmed with TD ameritrade that Brokers do not remove wash sales from 1099b when the security is sold disposed and never trades in the last two month of the year.

Yep, that's exactly what we've been trying to tell you.  The wash sale stays there, PROPERLY REPORTED, because the basis of that "last sale" has been grossed up.  So to remove the wash sale from the 1099-B would UNDERSTATE your income.  That "prudent investor/trader" nonsense is coming from your fevered imagination.  If brokers were routinely preparing 1099-Bs that tended to understate the income of all those "prudent investor/trader" folks - not as tuned in as you - don't you think the IRS might be interested in that?
 
If you encounter a wash sale situation for a stock pays dividends monthly and you're reinvesting those dividends you typically will see the adjustment in your oldest lot.  FIFO and all that.

TomOld you are absolutely wrong. I disrespectfully disagree w you. You are not a broker but defending the broker. Yet the broker admitted that once the wash sale is triggered it is never removed  which by the IRS rule is wrong. I am by the way much more sophisticated then what you think TomOld . I have MTM accounting and trader status and i report my trades on 4797 form using Tradelog software. I know probably you never heard of that. I have tow argument to prove you wrong. The 1099B has different section. one section is called wash sale disallowed. What is the point of having such a section if I have zero positions and not traded anything nov and dec if it is already factored in the cost basis?  TD ameritrade will sum all the  losses from all the trades that involved a wash sale and put that there. so you are wrong.  I think you are not knowledgeable  and should be removed from Turbotax. . two years ago I traded one ticker SPY back and forth the whole year. The gain from wining trades was $20000 and loses were $15000. Net gain is only $5000. My tax liability is around $1500. However 1099B listed disallowed wash sale $15000. All my losses were wash sales. That can not be right. when i imported to turbo tax. Tax liability was $5000. Almost more than what I made. All i had to do is delete the wash sale disallowed. My other point to prove you wrong 1099B does not have wash sale allowed and wash sale disallowed. Everything is disallowed. All traders need to fix the 1099B by broker and remove the wash sales bc the Broker would not remove them. Wash sales reported on 1099B have nothing to do with cost basis calculation. It is just the broker listing all the losses from positions that triggered a wash sale alert.  Net gain loss = Proceeds - cost basis. Wash sale amounts are not factored at all and not included in the calculation. It is only the loss that is identified as a wash sale and listed separately on 1099B. Per IRS and Broker these wash sales should not be counted for if the position is closed and the security is never traded. Whoever is reading this trust me. Run the numbers yourself.

there are two different types of reporting
Professional trader MTM accounting
Investor activity on Schedule D.

Let's not confuse the two.
for MTM accounting, Wash sales are moot
Also for MTM accounting, Tradelog software is not necessary so now you've got me confused along with you.

[Update: at the time of posting I was definitely confused due to misunderstanding the rules.]

Oh My!

The broker needs to stop the stupidity and remove the wash sales disallowed from the 1099B when the security is sold, position is closed and the security is never traded in the last 2 months of the year. Go educate yourself. This has nothing to do with the cost basis. The wash sale reported on 1099B is reported separately from anything else. Net gain/loss= Proceeds - cost basis. The wash sale is not part of the calculation. It is every time a trade triggers a wash sale. It is attached W next to that trade and all the losses are added to a separate column called wash sale column. These wash sales then get added up and the sum is reported on 1099B as disallowed. When importing the 1099B to turbo tax. Turbo tax does not allow these losses to offset gains made on other trades. Inflating my tax liability. I have go and manually remove all the wash sales from all the trades knowing that I closed the positions and i should use that loss to offset the gains and reduce my tax liability. I have to do extra work just bc TD people and turbotax people are too dumb to remove these wash sales from 1099B. Again these reported wash sales amounts on 1099B have nothing to do with cost basis calculations. Cost basis is nothing but average price of the security over period of time. Gains and losses utilizing cost basis are reported separate than wash sales.  Wash sale should only be reported on 1099B if I still have a position open in that security or if i close the position in December.

hi @samd1 , thanks for all those sharing. Following your comments, we just need to adjust "cost basis" to include those washsale disallowed loss into the cost, however Turbotax asked to upload the 1099-B statement into IRS as the verification. Say we changed the cost basis into include the washsale loss (which happened last year of 2018), then it will be mismatch vs. 1099-B statement from the brokerage, will this trigger the audit by IRS? what's your comment on this case please?