Wrong 1099-B form due to my mistake, and broker refuses to fix it

[Qiang Jin]

I was relocated to US in July 2019 and I was a nonresident alien. But I made a mistake when filling tax certificate in Morgan Stanley portal. I should have filed a W8-BEN form as I was nonresident for full year in 2019, but instead I filed W-9. As a consequence, the sold stock after that will be reported on 1099-B form and become taxable. Had a call to broker and they said they cannot fix it, as the transaction already happened after W-9 was filed. The 1099-B form has not been ready yet, is there any chance to fix it? Or is there any way to justify this to IRS when filing my tax return?

[DavidD66]

If you don't report it, you will more than likely get a letter from the IRS about it.  I would just wait for the letter and respond to it in writing and explain the situation.

[Qiang Jin]

I think that's too risky. I'd like to see if this is lawful or not first, to avoid any potential penalty, as the stock sale payment is large.

The key to my issue is: With my true situation, the stock sale income is not taxable:

• I was nonresident and stayed less than 183 days in US in 2019.
• the stock sale income is not an US income (vested before I came to US)
• the stock sale income is not effectively connected to US trade or business
• According to IRC section 871 (a)(2)  the capital tax should be exempted.

But it was my mistake in the process of transaction that I was filing a wrong withhold tax certification forms so that the income appears in 1099-B form. Will it help if I attach a paper explaining my situation in my tax return?

[DavidD66]

If you want to be proactive, you can attach a statement and a copy of the 1099-B to your tax return.

[mogambo]

Hi @Qiang Jin Qiang -- Could you advise what you ended up doing regarding this matter? I have a similar issue , whereby, although I was a Non Resident Alien for FY2021 my broker issued me form 1099B (showing gains reported to the IRS) , as I was not asked by the broker to fill out form W8 BEN.  

[DaveF1006]

It depends. The form W8 BEN is only filled out and submitted to an employer. This does not pertain to unearned income such as stock transactions. Since you are a US non-resident in 2021, please refer to out affiliate at sprintax.com for further information.

@mogambo