Private stock sold prior to the current tax year - 1099-B Date sold or disposed

[adamhurwitz]

What is the correct way to report a sale of private stock in a small business that was sold prior to the current tax year and has not yet been reported on previous tax returns?

Issue
The 1099-B Form, "Box 1c - Date sold or disposed" does not allow a date prior to the current tax year to be entered.

Example
The current tax year is 2021, and $1,000 has been invested in a private company in January, 1, 2010 that went out of business in December, 1, 2020. The taxpayer was informed of the company going out of business in 2021 and needs to report the $1,000 loss in private stock on the 1099-B form. However, Box 1c does not allow any date to be entered prior to 2021.

User flow

"Federal" > "Stocks, Cryptocurrency, Mutual Funds, Bonds, Other" > "Add more sales" > "Stocks, Bonds, Mutual Funds (options, index funds, ETFs)" > "I'll type it myself" > "Sales info (Boxes 1a - 1e)" > "Box 1c - Date sold or disposed"

[DianeW777 · Accepted solution]

A sale or redemption of stock must be reported on the tax return for the year of the sale.  If your Form 1099-B shows 2020, then you must amend your prior year return to report the sale. If your Form 1099-B is a 2021 tax form then use a date in 2021 as the sale date. You could also use the date various When I walk through the steps, you must select the check beside 'Something other than a date'.

If you need to amend your 2020 tax return you can use the link below to get started.  Be sure to read all the information carefully so that TurboTax knows the original and changed figures.

• How to amend (change or correct) a return already filed?

Please update here if you need further assistance.

[adamhurwitz]

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A sale or redemption of stock must be reported on the tax return for the year of the sale

1. Would the company shutting down and going out of business in 2020 count as a sale in 2020 if investors were made aware of this information in 2021?
2. What if there are no 1099-B forms provided by the company that went out of business? It seems that the private stock investment user flow mentioned above in TurboTax fits best: "Federal" > "Stocks, Cryptocurrency, Mutual Funds, Bonds, Other" > "Add more sales" > "Stocks, Bonds, Mutual Funds (options, index funds, ETFs)" > "I'll type it myself"

Thank you for sharing this information @DianeW777!

[HelenC12]

You can deduct worthless stock only in the tax year it becomes completely worthless. This normally happens when the corporation files for bankruptcy, stops doing business (shuts down), and has no assets. Financial difficulties won't make a company's stock worthless unless there is no hope that the company will pull through.

If you didn't receive a 1099-B form, enter the worthless stock like any stock sale but with a sales price of zero and the word "worthless" in its description. Enter the correct cost or basis, date acquired, and December 31 as the date sold.

To enter worthless stock as investment sales with no 1099-B form:

1. Open (continue) your return in TurboTax.
2. In the search box, search for investment sales then click the "Jump to" link in the search results.
3. Answer Yes to the question Did you sell any investments?
   • If you land on the Here's the investment sales we have so far screen, click Add More Sales.
4. Answer No to the 1099-B question.
5. On the next screen, select the type of sale you had (stock, second home, collectible, land etc.) and click Continue.
6. Continue following the onscreen instructions to enter the sale.

Related Information:

• Where do I enter a 1099-B?
• Do I have to report personal items that I sold?

[xxngn]

I'm in the same situation.

I have 2021 Tax form, but date in Box 1c is in 2020. Do I have to amend my 2020 tax return?

I have a gain of about 4600. What is the best way for me to input this? Do I input it as a summary or do I have to amend 2020 return?

Thanks

[DianeW777]

It depends. If you actually received the funds in 2021 you do have to change the sale date to 2021, you can use January 1. You are not required to report the sale until you actually received the funds.

If  you held the stock for more than one year then be sure to select the proper holding period.  You can select 'various' as the purchase date if you know you held the stock long term (more than one year).  If you did not hold the stock for more than one year then you must indicate short term holding period. This makes a difference on how any gain will be taxed (long term gets capital gain treatment and short term is taxed at your regular tax rate).

You can use summary totals for each holding period if you have several transactions. You may be instructed to do the following with summary totals and it's a normal action.

If you are e-filing your tax return, then mail your statements, and Form 8949, if applicable, along with Form 8453 to: 

Internal Revenue Service

Attn: Shipping and Receiving, 0254 

Receipt and Control Branch 

Austin, TX 73344-0254

If you need a blank Form 8453, you can download this pdf, enter your address information and check the box for Form 8949 (this form is really just a cover sheet)

@xxngn