Last year, I read this article about position reporting for end of year taxes.
I made sure not to short any stock or ETF and I shorted stock options instead. I closed the position on Dec 31, which is what the website confirmed would be on last years taxes, however, when I got my brokers 1099, I was surprised to see a total gain that did not make sense.
They did not include that short option position, which drastically changed my total gain/loss for the year. I emailed them 3 times, but they insist on telling me that closing short option positions are based on the settlement date rather than the trade date.
How can I fix this issue on my 1099, or if that's not possible, what can I send to the IRS as an explanation for my gain that I will report vs. my stated 1099 gain which is not accurate? Are there any forms I can fill out to clarify the mistake as well? Thanks.
For some reason Intuit thinks the link has a phone number so if you want the article, look up
You have to close your short trades two business days before the end of the year.
Stocks settle in two business days (formerly three days).
Options settle in one business day.
I don't think IRS will give you a pass if you attach a note that you did not understand the rules.
If you want to cheat you can change the date, but IRS may notice that your reported gain/loss does not agree with the 1099-B sent to IRS by your broker. That's the chance you take.
(a) General.
(1) For income tax purposes, a short sale is not deemed to be consummated until delivery of property to close the short sale.
and this is another source where the year to report depends on whether you had a gain or loss.
In almost all cases, the trade date controls the tax-reporting year for a stock sale. That is, if you sell stock by the last trading day of this year, you report the sale on this year’s taxes. The exception occurs when you close out a short sale for a loss, in which case the settlement date controls the reportable tax year.
What do you mean by change the date? I thought that short sales on stocks settle in 2 days and options were an exception for that rule because of the Tastyworks article.
Have you ever seen anyone else get into this issue and are there any other possible options? The tax bill is too crazy for me to handle.