What to do with wrong cost basis/proceeds for stock options in 1099-B

[henrysf]

The 1099-B from Fidelity contains wrong cost basis and proceeds for my covered call stock options in my personal brokerage account.

For example, let's say I 

Sold to open at $10, so I received $1000.

Brought to close at $5, so I paid $500.

The gain is %500.   I am ignoring fees to keep it simple.

However, in 1099-B, Fidelity listed

Cost basis $0, and Proceeds $500.  Gain is $500.

"Gain" remains the same, but reported cost basis and proceeds are wrong.  I believe the total cost basis and proceeds are also reported in 1099-B to IRS?

I can thing of a few things to do:
1. Do nothing and import/enter what's wrong Fidelity.

2. Make correction to use my recorded cost basis and proceeds.  Gain would remain the same, but total cost basic and proceeds will be different.  Though, would that potentially cause headache ahead as my cost basic and proceeds are different from Fidelity's 1099-B to IRA?

What is best practices in this case?

[ReneV4]

Option number two above is the best option. You should make corrections using your records to avoid paying more taxes than you should. 

The easiest way to input this information is to sort it by summarizing the sales section totals from your Form 1099-B, instead of entering each trade.

To do this, separate the section totals into their respective categories, for example:

• Short-Term Covered: (Box A) Basis was reported to the IRS
• Short-Term Non-Covered: (Box B) Basis was NOT reported to the IRS
• Long-Term Covered: (Box D) Basis was reported to the IRS
• Long-Term Non-Covered: (Box E) Basis was NOT reported to the IRS

You only need to make one entry for each category that has totals. If you have all 4 categories, you make 4 entries. If you only have Long-Term and Short-Term "Covered," you only make 2 entries.

1. Click on Wages & Income
2. Select Add more income
3. Scroll down to Investments and Savings and click down arrow
4. Select Stock, Crypto...(1099-B...)
5. Select Add investments, Add a different way
6. Select Stock, Bonds, Mutual Funds (1099-B)
7. Enter brokerage information, then Continue
8. In the "Tell us about the sales..." section, answer those questions, then Continue
9. In the "Now choose how to enter your sales", select Sales section totals, Continue
10. Note: To adjust the basis, click on the box below the sales section, I need to adjust my total cost basis

• If you choose to summarize, you will need to mail in a copy of Form 8453 to the IRS after you e-file so that they have documentation of your summary.

[henrysf]

@ReneV4 Thank you  Just to clarify on why you said "You should make corrections using your records to avoid paying more taxes than you should."

The gain/loss and Date Sold(1c) from 1099-B are correct, but the Proceeds(1d), Cost Basis(1e), and Date Acquired (1a) are wrong.  The said, it's not likely I need to pay more as gain/loss is correct (even though cost basis and proceeds are wrong), right?

I understand taking the "summarizing the sales section totals" approach means less work, but I actually prefer correcting individual options trades given I have only a few such trades.  As I will keep trading records for those trades, I feel it's easier to refresh my memory if later I am lucky enough to be audited by IRS.  Is there any drawback for correcting those individual trades directly?

BTW, my 1099-B (from Fidelity) has "Short-term transactions for which basis is reported to the IRS" and " Long-term transactions for which basis is reported to the IRS" with numbers in a table.  I think those are the "Short-Term Covered: (Box A) Basis was reported to the IRS" and "Long-Term Covered: (Box D) Basis was reported to the IRS" you meant?

[Mike9241]

since this was what was reported to the iRS and most importantly, the gain is correct, you can't really do anything. there's no way to adjust both proeeds and cost because they would net to zero. 

there could have been fees deducted from your proceeds, and thus the broker would not have deducted them from proceeds but added then to cost.