How should I claim stock wash sale loss disallowed amount back in following year?

[nestlen]

My situation is pretty messy due to heavy day trade in Robinhood. 

In 2017 I had heavily day traded a penny stock and because of wash sale rule, I ended up paying $6000 for the wash loss disallowed amount for the tax year 2017.  At that time my plan was to sell everything in 2018 and deduct above amount from the 'gain' in 2018 if there any.

I kept day trading the same stock and sold everything in June 2018 and never bought back any share as of today.  

However from the 2018 1099B  I still have wash sale loss disallowed for $17,000 and a 'loss' of $7000 for the same stock in 2018...   so again I will have to pay the difference because the wash sale rule even though I am at loss...

I am quite confused about the disallowed amount again because I have sold everything in June and never bought back after that...  And if I don't claim the wash sale disallowed amount this year how can I claim it back next year as I don't have the shares no more?

So How should I claim my wash sale disallowed amount back in this case?  How much do I actually need to pay?

Any idea is well appreciated!

[TomYoung]

The broker is supposed to report each and every wash sale loss that they know of.  With tons of day trading going on the dollar amount the broker reports can be a big number, and you need to account for it in your income tax return.  But simply entering the total of wash sale losses noted on the 1099-B is NOT the same thing as not getting any tax benefit; since wash sale losses are added to the "out of pocket" cost of the replacement shares, when you finally sell those shares and stop trading, the wash sale losses are included in the basis for those shares.

If your broker is really geared up for proper reporting I'd expect that they are accurately doing the accounting for you.   You should be able to test that by looking at the details of the trades.

Tom Young

[nestlen]

Thanks Tom... I have checked the transaction history in the account and looks like the broker didn't add my wash sale disallowed sell price as purchase price to later repurchase... but if I just wipe out the wash sale disallowed amount it's not right either...  The brokerage Robinhood uses is  APEX Clearing.  Do you happen to know if they would do accounting properly in this case?  

[TomYoung]

I know nothing about APEX Clearing.  I do know Schwab handles this situation correctly.

The 1099-B instructions to preparers is pretty clear:

"Wash sales. If a customer acquired securities that caused a loss from a sale of other securities to be both nondeductible under section 1091 and the loss was reported as a wash sale adjustment on a Form 1099-B for the sale at a loss, increase the adjusted basis of the acquired securities by the amount of the disallowed loss."

[nestlen]

Thank you Tom. You have been very helpful in the past few years 🙂 . I really appreciate your helps!

[samd1]

I Have the same problem. I agree with nestlen. my broker TD ameritrade made a mistake on 1099 B. He reported tons of wash sales to IRS. He is refusing to change his 1099B. Is it ok if i do not report the wash sale on my return? Would that trigger an audit? I sold everything in september. There should be zero wash sale disallowed. All the loss should be capital loss. Nestlen. You should have zero disallowed deductions. Brokers are really bad reporting wash sales. Mine is 90K. I can not ignore it. I need to know how I can edit turbo tax. I did do electronic import. I went to forms,. I am unable to edit schedule D. Please help

[samd1]

Tom I think you are mistaken the wash sales vs disallowed loss. The broker is reporting a disallowed loss when the security was sold early in the year and was never traded again. There should be zero disallowed loss. All the loss should be capital loss. My broker is reporting I have disallowed was sale on a security that i sold and never traded again. Tom could you please respond. Thank you,

[nestlen]

Wow samd,  your amount is too big to ignore!  I did wipe off some wash sale for tax year 2017 manually for those stocks that were sold  completely by the end of 2016.  Basically you have to edit the purchase price manually and add your cost (the wash sale disallowed amount) there.  I didn't enter each trade in 2017 because I had 5000 trades which turbotax can't take, so I just entered the total cost/proceeds for each single stock instead.  What confused the hell out of me is that I had calculated the wash sale disallowed amount  6k for the stock I mentioned in 2017, and was planning to add that to the cost for the stock I sold completely in 2018. Like you said I didn't expect I would get any wash sale at all but end up with 15k with a loss of 4k.  And as I have sold everything completely I should be able to wipe out 15k plus 6k from previous year which will net me a loss of (-4k - 15k - 6k = 25k) !  And I know this is totally incorrect because I made maybe  a bit more than 4k, so seems like I should NOT wipe out 15k but only 6k (This will net me a gain of 15k - 4k - 6k = 5k which is about right.... this just confuses me even further because I don't know what I should do with my other stocks that I am supposed to wipe out the wash sale.... And what makes it worse is one of my friends were telling me the 1099 receiving from the same company doesn't even have a sale record for one of his trade that he is pretty sure had happened...  I am really confused.  My plan is to wipe out wash sale disallowed amount for my other stocks that were sold completely in 2018 and for this messed up stock I just do what I think is right.  Maybe I should not day trade or at least not with such a broken broker in the future!  Good lesson learned indeed.

[nestlen]

I also checked trade history in my account and pretty sure they didn't use the last sell price as cost for repurchase of same stock... unless they also changed the price from trade history which I doubt.

[samd1]

so you did wash sale disallowed carry over from 2017 to 2018? did your 2018 1099B reflect that? I am sure it did not. would this trigger an IRS audit since what your reporting is different than what the broker is reporting?

[samd1]

how did you edit form 8949 after importing your transactions from apex? i m unable to edit it. I can only see the first few transactions

[nestlen]

Yeah according to the rule wash sale disallowed amount should be wiped off if it's sold completely in the future, so I should be able to carry it over from 2017 to 2018 and add it as a 'cost' for any later repurchase.  I think it should be okay to edit it manually if it is correct way to report so. Theoretically we are supposed to enter each single trade in the form but most ppl don't or can't do it (due to too many trades).  Just make sure you document what you know and prepare for any audit in case they come back. And also buy the $40 audit protection.. not sure if that will actually work but I am sure if IRS know it will cost them $$$ to grill you for $1000 they would back off and leave you alone

[fanfare]

wash sale loss disallowed is recovered by the addition to cost basis of identical shares. It all works out so there should be no reason to not report wash sales  or to wipe them off.
if your broker is messing up the wash sale adjustment, find another broker.

[TomYoung]

As fanfare says and as the 1099-B instructions make perfectly clear, the 1099-B's report of basis INCLUDES the wash sale loss TO THE EXTENT THAT THE REPLACEMENT SHARES HAVE BEEN SOLD.  

[nestlen]

@samd You should not edit 8949 form manually. After importing the trades see if you can edit the trade and adjust cost inside the software. Worst case you can manually enter total proceeds/cost for each single stock and adjust there