Wealthfront robo-advisor keeps doing some stupid tiny sales to rebalance my account which causes nothing but trouble. Nevertheless the sale did happen so I've imported the 1099-B which has two interesting transactions:
1. proceeds $50.16, cost basis $50.42, loss $0.26W (correctly indicating wash sale)
2. proceeds $50.36, cost basis $50.73, loss $0.37W (also correctly indicating wash sale)
In turbo tax it looks like that due to rounding (8948)
1. proceeds $50, cost $50, column f: W, column g: (adjustment) $0, column h (profit loss after adjustment): $0
2. proceeds $50, cost $51, column f: W, column g: (adjustment) $0, column h (profit loss after adjustment): -$1
Questions:
Reporting of 1. looks verbose. Due to rounding there is effectively no loss or gain so the whole adjustment and marking it as "W" doesn't make sense but since it's been marked in 1099-B as "W" it seems to be OK? Should I leave it like that?
Is reporting of 2. correct? Due to rounding the cost goes up to $1 so there is this theoretical $1 of loss. However the adjustment being the difference from before the rounding is $0.37 which is rounded to $0. This results of deductible loss of -$1 which seems to be a bug as it was indeed a wash sale? Seems wrong.
If this is indeed a bug what should I do about it? It seems that it would make sense to calculate adjustment using numbers after the rounding which would mean $1 adjustment and $0 gain/loss in the column h. Should I correct it adjustment to $1? If yes, should this adjustment be -$1 or +$1?
Thanks!
You can make that adjustment if you want, but it is unnecessary given the nominal amount of money you are dealing with. You can leave the entries the way they are as the IRS will not be concerned about them since a $1 entry will not significantly affect your income tax.
Thanks for your answer.
I understand that it’s little to no money difference but I would prefer TurboTax to calculate and report my taxes correctly no matter if IRS is going to go after me or not. You’ve said that I can change it if I want.
Does it mean that it is incorrect as is or it’s correct? Is the correct adjustment $1 or $0 in this situation?
thanks!
Your return is correct as is because the IRS allows you to round off whole dollars. The IRS understands this so no adjustment is necessary,
@ErnieS0 ,
I understand the rounding but the problem here is that TT calculates profit loss using rounded numbers ($50 - $51) and adjustment using not-rounded numbers and then rounds it ($50.36 - $50.73 = -$0.37 so rounds to $0). While IRS allows rounding it needs to be done in a consistent way.
If both profit/loss and adjustment were calculated using rounded or not-rounded numbers everything would be fine with profit/loss = $0. Due to inconsistency of rounding moment the loss = -$1 when clearly I am not eligible to report it.