Brokerage Statements!
As a recent grad, I’m navigating my first tax season and have a quick question about why basis isn’t reported to the IRS.
Additionally, my firm mentioned that I need to include brokerage statements with my return if there’s a wash sale, even when the basis has been reported to the IRS.
I could look this up, but I’d prefer to hear insights from fellow anonymous professionals! Thanks!
One response
Congratulations on your graduation and welcome to the world of taxes! Here’s a breakdown of your questions:
Basis Not Reported to the IRS: When you sell securities (stocks, bonds, etc.), brokers need to report certain information to the IRS, including the proceeds of the sale and often the cost basis (the amount you paid for the securities). However, there are specific situations where the basis may not be reported. For example, if you sell stocks held in a non-covered account (like stocks acquired before 2011 or certain types of mutual funds), the broker may not report the basis to the IRS. In such cases, you as the taxpayer are responsible for maintaining your own records and reporting the correct basis when you file your taxes.
Wash Sales: A wash sale occurs when you sell a security at a loss and then repurchase the same or substantially identical security within 30 days before or after the sale. If you have a wash sale, the IRS allows you to disallow the loss for tax reporting purposes, which affects your basis in the repurchased securities. This is why your firm requires you to attach brokerage statements to your return, even when the basis has been reported to the IRS. It’s essential to ensure that all relevant transactions are documented since wash sales can create complexities in reporting gains and losses.
It’s great that you’re seeking advice from professionals! Keeping good records and understanding these concepts will help you tremendously in your first tax season. If you have any more questions, feel free to ask!