Stock declared worthless in previous tax year and 2019 I received a 1099-B

[TJ-Shocker]

I've found a few similar questions, however I'm still a little unsure what to do.  I had stock in a company that filed bankruptcy and processed through a few of the steps and I thought was worthless, so I entered the data to mark it as that in a previous tax year.  For 2019 I received a 1099-B now advising that it's been reported to the IRS as a worthless stock transaction.

As I declared it previously I think I entered it using instructions indicating I did not receive a 1099 at that time.  Now that I have do I need to try to file an amended return for that year then use the 1099-B and file as documented for 2019?

Sincerely,

David.

[ThomasM125]

You don't need to report the form 1099 information on your tax return if there are no amounts listed on it. Since the stock became worthless in 2018, you were correct to deduct it then. You don't need to transfer the loss to 2019, unless you think that is when it actually became worthless.

[AunT]

I do not disagree with the previous answer by Thomas, but I wanted to add some information that may help.  The point is that you did correctly report the tax event already, even if there is an amount on the 1099-B.  There is no need to amend or re-do any return.  What is helpful is knowing that if an erroneous 1099 such as this is received, you can add a Statement (typed explanation attached to the end of your 2019 return) that says something along these lines... The Amount reported on Form 1099-B from X---Co.  is $______.  This amount is disputed because:  I already reported this transaction when it actually happened in 2018.  The amount I am reporting on my 2019 Form 1040 is therefore $-0-.  It is important to include the Form or Schedule that it WOULD have been reported on with your return, and have a 0 on the appropriate line with the phrase "See Attached Statement."

It is a strategy that works in other applications, as well.  If a 1099 is received in your SSN but the amount was really your Company's transaction or responsibility, you may include a statement showing "Amount reported on 1099"  "Less: Amount included on tax reporting of affiliated business" Thus, "Amount reported on this 1040 equals $-0-." 

[fanfare]

if you want to file that 1099-b, enter a proceeds of -0- and a cost basis of -0-. 

[TJ-Shocker]

Thank you @AunT for the detailed info.  I usually e-file.  Is there a way to add the notes you describe when I e-file? 

[TJ-Shocker]

Thank you @ThomasM125 .  The 1099b received had the information I would’ve liked to have had in the past.  I’m late for work at the moment, but I let it sit at $0 for an extended period and thought is was correct to say “its worthless” in about 2015 or 2016 tax year.  With it relating to the company declaring bankruptcy who gets to decide when its worthless?

i have some other responses about still including the 1099, then mark fields to $0 so it doesn’t change the taxable impact.  Is that a way to do it while minimizing red flags?

[AunT]

Hi!

I am glad you asked about the e-file.  I was thinking about my answer and I should have added that you will probably have to mail the 2019 return if you add the statement.  I also noted the person who said to put zeros in as a way of acknowledging the 1099-B that you received.  I would like to build on that thought.  Using zeros on Schedule D does work, and if the 1099B has an amount on it, you could simply use the amount reported as both the cost and sales price, resulting in a zero gain or loss for this year.  That would satisfy the IRS for this year without an additional statement, and you would have received your loss last year, so everyone is happy.

As far as who gets to decide, an event needs to happen that shows it is worthless.  So any news that the company is in dissolution or filing for bankruptcy would be grounds for you claiming the loss.  It is good that you didn't do it in 2015 when you just felt it was worthless.  I'm presuming that in 2018 you had heard of the bankruptcy.  Even if you didn't, I still do not believe that you should amend 2018.  If it is ever questioned by the IRS and the loss is disallowed, you will have opportunity to then amend the 2019 to re-claim it.

[TJ-Shocker]

@AunT .

i just checked my notes and I used my 2017 taxes to mark it worthless using the 8949 section when I efiled.  This was when I thought it was correct to do it, because the company in question began that process in mid-late 2015.

Do I need to check for a certain event in the bankruptcy process to decide which correction route?  ie amend 2017 or to edit the figure to 2019. 

[AunT]

I tend to take a rational approach and not bother with amended returns when it is simply a timing difference (from one year to another, with no change in the amount of the loss.)  I am not certain as to the strict legalities of when the stock actually became worthless, but as a part time tax-preparer, I would certainly entertain a taxpayer's thoughts that starting the bankruptcy process is grounds for claiming the worthlessness, so I don't believe there is a fixed line and you are within reason in your original claim.