Turbotax is asking for cost basis even though the 1099-B says "unknown"

[kblank321]

I connected my accounts so Turbotax imported the info from my 1099-B forms.  The 1099-B says the investment in question is under "transactions for which basis is not reported to the IRS and Term is Unknown".  Box 1e "Cost or other basis" says "Unknown", but Turbotax keeps insisting that I enter an amount.

[Bsch4477]

Your broker doesn’t know the cost basis or holding period of the asset so you must supply that information. 

[DawnC]

The broker/1099-B issuer does not know the basis, so you have to enter it.   If you do not know the basis, you will need to enter $0, which will maximize what you pay in tax on that transaction.   Cost basis is the amount you paid to acquire the security.   Please see the help article below if you need help finding your stock's basis.   The difference between the proceeds and the basis is the amount of taxable gain.

How to find a stock's cost basis

[kblank321]

I don't understand why I have to provide it at all when the description on the 1099-B says "transactions for which basis is not reported to the IRS" - ?

[KrisD15]

"Basis" is what you paid, or your "value".

What you sold it for less your cost is your gain (or loss if you sold it for less that what you paid for it).

Although your 1099-B says the basis was not reported, the IRS still wants it. Since it wasn't reported by the Broker on your 1099-B, it's up to you to report it on your tax return. 

[VolvoGirl]

If your personal records don't show what you bought it for or paid for it the IRS will assume your cost is zero and the whole sale amount is all Gain and taxable.  

[kblank321]

OK, thank you everybody!  I am doing my elderly father's taxes for him, I haven't had to file a tax return since my "1040EZ" days 20+ years ago!  (Hubs always does ours, bless him!)

[Pip_12_mn]

Why does my 1099-B  have the cost basis filled in when the heading for those shares is titled :

"Long-term transactions for which basis is not reported to the IRS"?   Doesn't the IRS get the same information as what's on my 1099-B?

[JamesG1]

It depends.

There are three kinds of transactions that a broker may report to you.  They are:

• Transactions reported on Form(s) 1099-B showing basis was reported to the IRS,
• Transactions reported on Form(s) 1099-B showing basis wasn’t reported to the IRS, and
• Transactions not reported to you on Form 1099-B.

These same three kinds of transactions are reported on IRS form 8949 Sales and Other Dispositions of Capital Assets.  Part I reports short-term transactions and labels these transactions A, B and C.  Part II reports long-term transactions and labels these transactions D, E and F.

The transaction that you listed would be labeled E and reported on Part II of IRS form 8949.  Even though the cost basis was not reported to the IRS by  the broker, you will be reporting the basis to the IRS when you file your 2023 Federal 1040 tax return

See also here.

@Pip_12_mn 

[Pip_12_mn]

So, you are implying that what's reported to me on the 1099-B which I receive is NOT the same as what the IRS receives?  I always thought 1099-DIV and 1099-B forms were sent to the IRS as well?

[DianeW777]

No, that is not what is being implied.  The IRS receives the same forms you receive (1099-B, 1099-DIV). 

What is explained by @JamesG1 is that in some cases the brokerage does not know your cost basis and therefore does not enter an amount.  This can happen in at least two circumstances.

1. The investment was moved to another broker and the second broker does not know your activity or cost basis from the beginning.
2. The investment was with the same holding company before the IRS initiated the required reporting of cost basis by the brokerage companies. (approximately 2008)
   • Note that reinvested dividends continue to accumulate cost and stocks at various prices and purchase dates.

Bottomline is that you must always know your cost basis for any investment you sell.  For this reason you will want to add a cost basis that is not present on your tax forms unless you do not know.  If you do not know, the full amount of the sale in these transactions would be taxable income.

There are several internet sites that can provide a cost per share if you know the dates and times of your purchases for any stock where the basis is not reported on your documents. For these reasons the statement above and printed here for your convenience is very important.

• The transaction that you listed would be labeled E and reported on Part II of IRS form 8949.  Even though the cost basis was not reported to the IRS by  the broker, you will be reporting the basis to the IRS when you file your 2023 Federal 1040 tax return

@Pip_12_mn 

[Pip_12_mn]

THere is a contradiction here:

The Broker DID ENTER a cost basis amount on my 1099-B yet also says that the "basis wasn’t reported to the IRS" on the 1099-B. So if the IRS is getting the same form as me as stated by @DianeW777 , then the IRS DOES receive cost basis info in my case.

So based on what was  explained by @JamesG1 "that in some cases the brokerage does not know your cost basis and therefore does not enter an amount", there is a contradiction! Why are they reporting an amount yet also saying it's NOT REPORTED to the IRS? 

[DianeW777]

Thank you for the clarification.  My understanding is that the brokerages will print that for any stock that had a basis they are aware of before the legal requirement of reporting.  If this does not happen to be the reason your brokerage noted this, the explanation must come from them.

• Example when the brokerage enters NOT REPORTED TO IRS: When a security is noncovered, this means a brokerage doesn't have to report its cost basis directly to the IRS.

The word 'noncovered' refers to the period when it was not required to be reported.

@Pip_12_mn 

[Pip_12_mn]

This makes better sense, sort of and thank you @DianeW777 for your further clarification.

Evidently the Broker  labels the transaction "non covered" IF the purchase was made pre-2008, even though they are reporting the cost basis .

I purchased these shares pre-2008 but when I sold them, there was a cost basis associated with the shares on the sale transaction screen. So they KNEW the cost basis, REPORTED the cost basis, but DEFINED them as "Non Covered" because the shares were purchased pre-2008.

[fanfare]

For non-covered securities ( BOX B or E) showing zero ( or wrong) basis, enter the correct basis yourself.
Use code "B" and put -0- in col (g).

If you agree with the amount shown, there is nothing to do.

@Pip_12_mn