Options showing incorrectly as stock (had to manually correct)

[schwark_taxes312]

My return has been done for weeks, and I was simply waiting for TurboTax to allow payment date beyond 4/15/21.  Today that finally happened so I decided to run one more "federal review", even though nothing had changed in my return.  Turns out it spit out 30 errors that needed "fixing".

Upon reviewing  what they were, all of my covered calls that I sold (and had expired) had been categorized as stocks and also, the zero cost basis triggered a requirement to click through this was okay.

I did live chat with a tax specialist / expert who had me reimport my 1099-B from Charles Schwab and these errors persisted.  I had to go to EVERY SINGLE covered call transaction (30 or so) and change it from "stock" to "option" and select if it was sold or exercised.  Then I had to click through that I didn't want to change the zero cost basis (which sold options don't have).

My questions / issues are:

1) this error was not there a few weeks ago.  Why did my previously reviewed return have zero errors

2) why was the import, which is supposed to save me time, require me to go into so many individual transactions to both select things that should have been on the import and were there with initial import in February

3) why are sold call options triggering a question about zero cost basis.

Seems that either the TurboTax code has an issue or the Schwab import has changed.  I had to manually change so many which really doesn't instill confidence in the import.

[fanfare]

Turbotax has so many bugs/issues with stocks (or options) this year, it's astounding.

Try another tax software provider.

[fanfare]

"  Then I had to click through that I didn't want to change the zero cost basis (which sold options don't have)"

when you sell an option that expires, proceeds is the amount you received and your cost is zero.

You should have left those alone.

If you closed out the trade early, cost is what you paid to to do that.

[schwark_taxes312]

i did leave it alone.  My comment was that TT didn't seem to like that I had proceeds without a non-zero cost basis (as all expired unexercised).  I didn't have data to change, but just had to click through 2 screens of "are you sure" for every transaction. Something I didn't have to do the first time I imported because TT seemed to handle options correctly in February.

[DavidH1230]

I have to agree with the OP.  95% of my transactions were in options, but I noticed during review that they are all listed as Stock (Non-employee) even though Options is a valid selection that can be made. The few wash sale amounts that I did have didn't seem to be imported despite being present on my 1099. Now I feel uncomfortable submitting my return to be filed even though it is supposedly ready.  Having to go through all of these transactions to check for errors manually defeats the purpose of paying for the TurboTax service and has just caused frustration and anxiety.  I would feel much better going with a local tax preparation service at this point and ditching TurboTax altogether, and I suggest anyone else in this situation do the same.

[DianeW777]

Your knowledge about your tax situation when it comes to your investments is very good. Wash sales are an item where final results cannot be known except by yourself. The broker does know when a wash sale occurs but they don't necessarily know when it ends.  When the stock from a wash sale is finally disposed of completely, then you are allowed to take the full loss, if applicable.

For this reason you must review those transactions to make sure the amounts on your return are accurate and reflective of the situation.

Example: 

X bought 5 shares of ZZZ stock, at $5 per share, then sold it for $3 per share, however immediately before the original 3 shares were sold, X bought another 5 shares at $5.00 per share.  

     $25 for the first block of shares

       15 is the proceeds creating a $10 loss 

The $10 loss is now added to the cost of the new shares for an overall cost basis of $35.  

Once the second block of shares is sold (5 shares with cost basis of $35) without any repurchase with in the 60 day window (30 days before or 30 days after the sale), and if they are sold at a loss, then no wash sale exists on the sale, and a loss is allowed.

Please update here if you need further assistance. Our tax experts are here and ready to help.

@DavidH1230

[Edited: 02/16/2022 | 5:18a PST]

[earnandenjoy]

I agree Turbo Tax sucks on this one. This is the second year, I have to review and edit each one of my Options transactions to convert them from Stock to Options. I have more than 60-70 options transactions. This is so annoying. @TurboTax why cannot your software identify the transaction as an option from either the PUT or CALL keywords that are preceded by a number and followed by a space? Surely there's is no company with stock symbols as CALL or PUT at least for US stocks.

[schwark_taxes312]

This year all options created "errors" to review upon the final check.

The problem is that they were listed as stock, but if I changed to option type, then I couldn't show any proceeds (box 1d) just disappeared and so would have shown zero profit and underreported my gains.

If I clicked through each of these errors, changing NOTHING (leaving as stock and box 1d intact), then the errors just disappeared.

I did a phone chat with a tax specialist and they pretty much had no answer to this other than to say "if the error goes away, it's fine".  

So from a turbotax perspective, it's "wrong" showing them as stocks, not options, but I believe from an IRS perspective, this was the only way to properly account for this income (when I sold options to open, unexercised).  

I really wonder if I should find other software or just not worry about this as it seems to be an error on TT's coding / view of options.

[Rainey5]

I have the same issue.  TT categorized my option transactions as stock sales and it is asking for the cost basis.  Most of my 30 option transactions expired.  There is no cost basis.  I just need to pay taxes on the premiums I received for selling Puts and Calls.  If I change the transaction to “options”, and “expired” it is still asking for a cost basis.  As soon as I click “expired”, it wipes out the option premium I received.  This is not right. I need to know how to correct these transactions.  According to other users, this issue was introduced in an update this year.  It is also asking me to click whether “the cost basis is incorrect or missing on my 1099-B”  OR  “I have other boxes on my 1099-B to enter”.   This is definitely a TT bug.  Thanks!

[CatinaT1]

Are you still experiencing this problem?

Make sure you have ran all updates. 

If using TurboTax Online: Clear your cache and cookies. See this FAQ, for your particular browser.

If using TurboTax Desktop: Please see this FAQ.

[Rainey5]

Yes, I’m still experiencing this issue after updating TT. I read on other user’s posts that Morgan Stanley/etrade included a code, “N” somewhere in the download, when they shouldn’t have for the option transactions.  This is causing TT to ask for a cost basis.   I’m going to give it a little more time to see if Morgan/eTrade uploads new tax files for downloading or TT somehow handles this issue. I’ll probably end up deleting the download and manually adding my option transactions.  

[CatinaT1]

The issue with 1099-B's incorrectly importing with adjustment code N has now been resolved.  Please delete your imported 1099-B, update your TT Desktop software, and then re-import.

[Rainey5]

I deleted the import and re-imported. This did not correct the issue I am having. TT is still characterizing my option sales as stock sales and asking for a cost basis. Trying to correct it zeros out the premium received for the option, sale.  I have decided to manually add these options  I’m very disappointed in TT and will consider another tax package next year.  

[menchly]

Yes, Turbo Tax seems even have added more bugs than last year - and that must have required a lot of effort.  As others have noted the Options entry process doesn't work if you use the "Expired" button.  If you use it the basis disappears and you are left with 0 and 0 for "Proceeds" and "Cost basis".  I found a work around.  Use the "Sold" button (even if the option expired) and put 0 in the cost basis (which you have to do multiple times because, the forms don't communicate with each other - also happens in many other parts of Turbo Tax) .  Another really bad bug is if an option was initiated in 2023 but does not expire until 2024 it still shows as income in 2023. If you don't catch this you will end up paying income tax twice on any gains.  Because of these bugs you will have to correct each and every option trade.  

[jswaters65]

Same issue added hours to my prep.

last time I use TT