What Is Form 1099-B: Proceeds From Broker and Barter Exchange?

KEY TAKEAWAYS

• Form 1099-B is an IRS information return. It reports proceeds from barter and broker exchange transactions during the tax year.
• The form reports sales or exchanges of stocks, bonds, and commodities. Plus, other property by brokers, barters, and certain mutual funds.
• Proceeds reported on Form 1099-B must be on your tax return.

What Is Form 1099-B?

Form 1099-B is a tax form used to report proceeds from barter and broker exchange transactions. The form reports the sale of stocks, bonds, commodities, and other financial instruments.

Depending on your capital structure, you may need to ask a tax specialist about your taxable income. For instance, if you deal in crypto exchanges, you may need something other than a 1099-B form.

Bartering activities can also create more than just ordinary income. Sometimes when products, tangible assets, or services are being exchanged, they can result in a capital gain or loss as well. From the IRS’s perspective, the fair market value of the goods and services you received, are taxed as if they are cash, even though no cash was involved in the exchange.

The form is also used to report any gains or losses from these transactions. Form 1099-B must get filed with the IRS if the total proceeds from all transactions exceed $600.

To file Form 1099-B, you will need the following information:

• The name, address, and taxpayer identification number of the customer
• The date of the transaction
• The type of security or commodity sold
• The number of shares or units sold
• The sales price per unit
• The net proceeds from the sale
• Whether the gain or loss is short-term or long-term

This information will calculate the customer’s gain or loss from the sale of the security or commodity. It is essential to file this form correctly to avoid penalties from the IRS.

What Is The Purpose Of Form 1099-B?

Form 1099-B is to report proceeds from barter and broker exchange transactions, including reporting sales or exchanges of property i.e., stocks, bonds, commodities, and other certain properties. 

Form 1099-B helps the IRS to determine whether taxpayers have reported their income from such transactions. What if a taxpayer has not reported all income from their broker or barter exchange transactions? The IRS may assess penalties and interest.

Who Can File Form 1099-B?

You must file Form 1099-B if you are a broker or barter exchange and you have engaged in a transaction where:

• The client was not exempt from reporting the transaction on Form 1099-B, and
• You did not withhold any taxes from the proceeds of the transaction

How To File A Form 1099-B?

A Form 1099-B is to report proceeds from barter and broker exchange transactions. The form gets filed with the IRS by the broker or barter exchange, and a copy goes to the taxpayer.

What Are Short-Term And Long-Term Gains?

Short-term gains are gains on assets held for one year or less. Long-term gains are gains on assets held for more than one year.

For example, let’s say you buy a stock for $100 and sell it one year later for $150. Suppose you held the stock for more than a year. Your gain would be long-term and would get taxed at the long-term capital gains tax rate. 

Now let’s assume you held the stock for less than a year. Your gain would be short-term and would get taxed at your marginal tax rate.

Now you understand short-term and long-term transactions, look at the examples of brokers below. Here, we use standard 1099-B form to talk about stock sales. 

Example of Form 1099-B

Form 1099-B is for brokers and barter exchanges to report proceeds from barter and broker exchange transactions. The form is to report both short-term and long-term gains.

For example, let’s say you sold stock through a broker. The broker would use Form 1099-B. It would report the stock transactions proceeds from the sale. The form would show the date of the sale, the amount of proceeds, and whether the gain was short-term or long-term.

Summary

Form 1099-B is to report proceeds from barter and broker exchange transactions. This form is to report both short-term and long-term gains.

The most important thing to know about Form 1099-B is that it reports proceeds, not cost basis. Cost basis information gets reported on Form 1040, Schedule D.

Short-term gains get taxed at your ordinary income tax rate, while long-term gains get taxed at a lower capital gains tax rate.

Written by Jami Gong, MPAcc, CPA

Jami Gong is a Chartered Professional Account and Financial System Consultant. She holds a Masters Degree in Professional Accounting from the University of New South Wales. Her areas of expertise include accounting system and enterprise resource planning implementations, as well as accounting business process improvement and workflow design. Jami has collaborated with clients large and small in the technology, financial, and post-secondary fields.

Written by Jami Gong, MPAcc, CPA

Jami Gong is a Chartered Professional Account and Financial System Consultant. She holds a Masters Degree in Professional Accounting from the University of New South Wales. Her areas of expertise include accounting system and enterprise resource planning implementations, as well as accounting business process improvement and workflow design. Jami has collaborated with clients large and small in the technology, financial, and post-secondary fields.