In 2020, I made the following four option transactions:
In June, I sold a covered put option that expired after 30 days I received a premium of $24.00.
In July, I sold a covered put option on the same stock that was exercised which resulted in me buying 100 shares for $4,300.00. I also received a premium of $25.50.
In August, I sold a call option on the same stock I purchased that expire after 30 days. I received a premium of $32.00.
In September, I sold a call option on this same stock which exercised resulting in me selling my 100 shares for $4,700.00. I also receives a premium of $31.50.
I know these are all treated as capital gains but I am not sure how they would be recorded on form 8949.
Are the two premiums on the expiring contracts treated as separate transactions with a zero cost basis?
Do I report the premiums from the exercised transactions the same way as above or do I ONLY use these two premium to adjust my cost basis on my stock sale and purchase.
The options that expired, are reported as independent transactions. For the put you sold that expired, report it with proceeds of $24 and a cost basis of 0. Same for the expired Call, it will have proceeds of $32, and a cost basis of $0.
The options that were exercised are not reported, and adjust the basis of the underlying stock that was purchased or sold.
The options that expired, are reported as independent transactions. For the put you sold that expired, report it with proceeds of $24 and a cost basis of 0. Same for the expired Call, it will have proceeds of $32, and a cost basis of $0.
The options that were exercised are not reported, and adjust the basis of the underlying stock that was purchased or sold.
refer to IRS Pub 550 for the treatment of all scenarios you can imagine.
when you get your 1099-B, that would have all the info you need. if your broker partners with Turbotax you should be able to import the transactions that need to be reported.
Hi David,
I have a slightly different issue on Turbo Tax. The 1099-B on short term capital gains for selling PUT options needed to be reviewed because of he cost basis being zero. So, while reviewing these transactions, I changed the answer for the "What type of investment did you sell" from "Stock (non-employee)" to "Options".
The moment "Options" is selected, further down there were 2 radio buttons - Sold or expired.
For the PUT Options that I sold and that had expired, I decided to choose "Expired". When I do that the "Proceeds" field disappears, and when I go to the end of the review, the Tax I owe started getting reduced.
I'm worried that Turbo Tax has taken the answers incorrectly. Any advice?
@earnandenjoy @I'm also in the same category and facing the same issue for the expired CALL/PUT options.
When I answer 3) question as Expired, TurboTax hides the proceeds. This is incorrect and reduces my tax liability.
My alternative solution is
I know the above is not the correct situation. However, at least I'm reporting the amount correctly. does anyone has seen the issue and is this alternative valid?
Please help with Turbotax - should I select "Stocks" or "Options" in Turbotax? If I select "Options", the premium is automatically set to 0.
Last I tried it, TurboTax doesn't handle that "Expired" pathway very well.
Treat it as a stock with a zero cost basis.
Better yet, since options are covered transactions,
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.
@fanfare Form 8949 and Schedule D are generated by the Turbotax. How do we control it does not add entries for Options on Form 8949 but adds the amount from Option sale on Schedule D? Is there a way to manually enter the amount?
I manually edited the description for the Options imported from the 1099-B form?
CALL ({code}) {company name} COM JUL 1 (Option expired)
I chose the "SOLD" checkbox for option (instead of EXPIRED) so that TurboTax does not ignore the gains from Option
I believe Turbotax would add this amount on Schedule D too under short-term gain.
TurboTax recently changed its rules for Form 8949.
Even if you enter a detail for a covered transaction, TurboTax may suppress it.
It should not, but it's not clear you can do anything about that.
As long as your Schedule D totals agree with your consolidated 1099-B totals,
that's all that is required.
---
IRS requires details of all sell transactions, EXCEPT for Category A or D without adjustments.
If you did not get a 1099-B your category is C or F
There is no exception for these categories.
If you summarized a broker 1099-B that is entirely Box A or D without adjustments, you don't mail that statement in to the IRS.
For anything else you summarized, you mail the details.
Thank you @fanfare for the details.
Correct me if I understand correctly from your previous response
If I'm correct on #3, then the only way we can report Box A transactions is by choosing investment type as "Option" and selecting "Sold" (even though it is expired). The reason we cannot choose "Expired" because Turbotax removes the gains received from Option sell when select Expired. To let the IRS know, I appended the description with (Option Expired)
Let me know if this is reasonable approach
Correct me if I understand correctly from your previous response
Summarize view is Form 8949
Form 8949 with "I'll enter a summary " produces a summary for a category on Schedule D, and that Form 8949 line 2.
If 1099-B has only Box A or Box D, then there is no need to report Form 8949
If the transactions are without adjustments, Form 8949 is not required. No mailing is necessary.
If 1099-B has a mix of Box A and Box B (cost basis not reported to IRS) - in this case, one needs to report all transactions (for both Box A and B) on Form 8949.
No. The Exception described above still applies for Box A.
If I'm correct on #3, then the only way we can report Box A transactions is by choosing investment type as "Option" and selecting "Sold" (even though it is expired). The reason we cannot choose "Expired" because Turbotax removes the gains received from Option sell when select Expired. To let the IRS know, I appended the description with (Option Expired)
the appended description is a good workaround for TurboTax failings in this area.
Box A transactions that are exempt but you choose to detail anyway are summarized on Schedule D line 1b.
As noted before, TurboTax may try to thwart you.
Mike, I don't think that works perfectly with short options. I imported from TDAmer and all the trades that involved the short sale of a call or put were flagged to be reviewed. The dates were the confusing part. They had the cost basis as zero and the proceeds (or lack there of) correct but the date acquired was the date the trade closed. Right or wrong, I changed the dates. Thanks for the clarifications here. I am now less confused. 🙂
Your 1099-B conforms to the IRS reporting rules for short sales.
You are acquiring a security to close your short position.
That happens on the date you close the trade and that is Date Acquired.
The security purchased, an option, settles one business day later. That is the Date Disposed.
Your 1099-B probably shows both dates the same.
The day you entered into the short position is irrelevant.
@fanfare I am having the exact same problem when I import transaction from etrade into Turbotax. The way etrde lists the short positions are
- Date Sold: The day on which the option is sold short
- Date Acquired: The day on which the short position is closed
- Cost Basis: 0
- Proceeds: $$
- Type: Stock (non employee).
As listed by many here, once i flip the type to option, there are 2 radio buttons (sold or expired) that appears, and when I choose, expired the proceeds become hidden and this poses a problem to reflect the transaction correctly. So I am keeping the type as stock only without changing it as option. But the Needs Review button appears which flags that Date acquired cant be later than Date sold. So Do I need to flip these dates to fix the issue? Pls advise
If you closed the trade then EXPIRED would be incorrect.
If the option expired, enter that date for Date Acquired.
see my post above for how to report a short sale correctly.
It doesn't matter if it is a stock or an option.
Stocks settle in two business days.
I'm still confused and I don't remember this being a problem last year. TurboTax needs to give us the proper way to get out of this problem. I am concerned that if I do a work around it will result in a problem somewhere else. The issue is this: our 1099B lists whether an option is sold or expired. When you enter the option as expired, the proceeds from the sold call or put disappear. Obviously this is not correct. So what do we do to solve this? List it as a stock and then list the proceeds? Is this the correct way to handle?
I selected the "Sold" checkbox and appended the description with (Expired call). This is the first year I had options, so I can't speak on the previous year's TT experience.
this thread is mingling two separate issues and ways to address them
TurboTax has never handled the "EXPIRED" indicator correctly,
So yes, you may enter it as a stock if you are entering the transactions yourself.
Enter a meaningful description i. e. "27 Oct AAPL Option" .
I add the keyword "(S)" for short and/or "EXPIRED" as appropriate.
As I recall TurboTax will squish in a pretty long description.
I also have TD Ameritrade, and have sold (short) a few options (naked) in 2020, which then expired.
In reading the instructions on the "Proceeds from Broker and Barter Exchange Transactions" section of the TD Ameritrade 1099-B - I see this:
"Long positions are reported based on the trade date and short positions are reported based on the settlement date of the trade."
In TurboTax - I'm going to update all my sold (short) options that needed review as:
Sales Info -> Type: Options (have to manually change this)
Date Acquired (no change) and Date Sold / Disposed of: The expiration date, which TD reported on the form, and is already filled in correctly as the settlement date
Sold or Expired: Sold (I have to select this) - Like others have posted in this thread - cannot chose expired because it zeros out the proceeds/gains. If TT had an option for short vs. long on options - then they could make Sold vs. Expired work correctly - but sold seems to work to match up the gains.
Everything else I'm leaving as imported. So basically I'm only changing the type, and choosing Sold, then moving on. Hope it works, seems to reflect the detail reported on the 1099-B.
Thanks,
Kevin
I made the same mistake of picking 'expired' and saw my tax liability go down ( refund increased ). How do I correct the ones I already reviewed wrongly?
Is it LTCG or STCG (long or short term capital gain)? I sold a covered call option and the term was for about 14 months. It expired worthless. Do you know how TurboTax handles this?There seems to be some confusion on how the short call should be reported. Some sites say LT, others say all covered call options sold short would be STCG. IRS guidelines not clear either.