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Author: ushats Two stars, 250 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121146  
Subject: non covered securities and cost basis Date: 2/25/2014 7:03 PM
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I had Dell and Mako in my taxable account at Tdameritrade.
Mako was taken over and got cash for my 30 shares
Dell became private and I received $13 per share

TD ameritrade did not report the cost basis to IRS in the 1099B.They said they don't have to report cost basis of non covered securities. So what is non covered securities?
My HR block person said I don't have to report cost basis but I feel i have to. I have a loss in dell

Thanks
Usha
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Author: ptheland Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 120239 of 121146
Subject: Re: non covered securities and cost basis Date: 2/25/2014 7:54 PM
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First, fire your HR Block person. They are not helping you by saying you don't need to report cost basis. If you report your cost as zero you are paying more tax than you need to. (Except in a couple of certain situations, and even then you will almost certainly overpay your state taxes if you're in a state with income taxes.)

It's up to you to keep track of your cost basis. Go back and find the record of when you purchased the stocks in question.

Non-covered securities are securities where the broker doesn't need to report the cost basis on your 1099B. Generally, they are stocks you purchased before 2011 and mutual funds you purchased before 2012. (I might be off a year there - I'm working from memory and not looking up the dates.)

Finally, take a look at the supplemental information that came with the 1099B. Sometimes the cost information will be there.

--Peter

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Author: ushats Two stars, 250 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 120240 of 121146
Subject: Re: non covered securities and cost basis Date: 2/25/2014 8:34 PM
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it is so difficult to find a good person to help with tax.

I do know the exact cost basis.

i do see the supplemental information and proceeds from broker and barter exchange transactions
if TDameritrade reported cost basis to IRS on Mako which was bought in 2012, should I not see something in 1099B? It is reported as 0.00

I will go back to H&R block and do a schedule D , I think

Thanks for the quick response

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Author: TMFPMarti Big funky green star, 20000 posts Home Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 120241 of 121146
Subject: Re: non covered securities and cost basis Date: 2/25/2014 10:06 PM
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if TDameritrade reported cost basis to IRS on Mako which was bought in 2012, should I not see something in 1099B?

Absolutely. Which means they didn't report basis to the IRS. Should they have? Beats me. To find out I'd have to look it up, and why spend my time deciding whether the broker prepared the 1099-B correctly? You know the basis. You should know the basis even if the broker was reporting it, otherwise how do you know it's right? So report a sale with no basis reported on the 1099-B and be done with it.

Phil
Rule Your Retirement Home Fool

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Author: SD51555 One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 120244 of 121146
Subject: Re: non covered securities and cost basis Date: 2/25/2014 11:34 PM
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You have to accurately report your basis regardless if it is covered or not.

Any transaction that is coded as covered, simply means your brokerage firm is required to report your basis on your 1099-B. A non-covered transaction is one where you may have initiated your position prior to the IRS implementing rules requiring brokerages to track and report your basis.

It's in your best interest to report your basis, especially if you have a loss. If you have a gain, you still want to report your basis so that you only pay on your gain and not your entire sale amount.

When reporting covered transactions, make sure your basis entry matches your 1099-B, or you are ripe to get a love not from the treasury.

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Author: SD51555 One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 120245 of 121146
Subject: Re: non covered securities and cost basis Date: 2/25/2014 11:39 PM
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First, fire your HR Block person.

Agree. But fire the person, and not the company. In any business, there is the best in the shop, and there's the new guy. I would go back to H&R Block and speak with the manager. Odds are they will personally fix it, or set you up with the best person in the office and get you squared away.

Taxes are like any serious service business. You have to search for and screen to find the best in the biz.

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Author: TMFPMarti Big funky green star, 20000 posts Home Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 120246 of 121146
Subject: Re: non covered securities and cost basis Date: 2/25/2014 11:51 PM
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When reporting covered transactions, make sure your basis entry matches your 1099-B, or you are ripe to get a love not from the treasury.

I hope you meant to insert "or is adjusted properly" before the comma. I fully expect brokers to get it wrong as often as right.

Phil
Rule Your Retirement Home Fool

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Author: 2gifts Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 120247 of 121146
Subject: Re: non covered securities and cost basis Date: 2/26/2014 8:55 AM
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Absolutely. Which means they didn't report basis to the IRS. Should they have? Beats me. To find out I'd have to look it up, and why spend my time deciding whether the broker prepared the 1099-B correctly? You know the basis. You should know the basis even if the broker was reporting it, otherwise how do you know it's right? So report a sale with no basis reported on the 1099-B and be done with it.

I don't know about individual taxes because I haven't done mine yet, but I just did the investment club taxes and ran into this issue where the brokerage either didn't report a basis at all or reported an incorrect basis because the stock had been transferred in, so they didn't have all the data. I just had to fill out an extra form for the Schedule D that specified if the brokerage reported the correct basis or not, and report the right number. I figure there must be something similar for individuals, although I do remember providing TurboTax with correct basis information last year when it had been reported incorrectly by the brokerage. Perhaps the software just filled out that form last year and I just don't remember.

I don't understand why the OP doesn't just report the proper basis and pay the appropriate taxes. As you point out, though, there is always the option of declaring a 0 basis, and paying capital gain on the entire thing. That results in paying extra taxes, but certainly works for the IRS, although it's not something I'd do.

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Author: vkg Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 120255 of 121146
Subject: Re: non covered securities and cost basis Date: 2/26/2014 11:10 AM
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First, fire your HR Block person. They are not helping you by saying you don't need to report cost basis.

It might not be exactly what the H&R Block person said. What is said and what is heard is not always the same thing. If it is, then a replacement is needed.

An incompetent tax person can create serious problems. My SIL's taxes were quite a mess. The notification from the IRS arrived a couple months after her tax preparer died. The answers that were coming from his replacement were if possible worse. I would not allow the agency to talk to the IRS.

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Author: ptheland Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 120257 of 121146
Subject: Re: non covered securities and cost basis Date: 2/26/2014 12:17 PM
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It might not be exactly what the H&R Block person said. What is said and what is heard is not always the same thing.

That is quite true.

And I'll admit that I have a bias against Block (and Liberty and Jackson Hewitt and the other big chain tax prep outfits). Their main way of making money is by extracting it from those least able to afford the cost.

Until just a year or two ago, their target audience was lower income folks who qualified for the earned income credit and were generally without a bank. They charge the taxpayers (usually a lot) for preparing the return. Then they charged them more (always a lot) for a Refund Anticipation Loan so they could get their money today instead of waiting a week or two.

There are basically two kinds of EIC clients. Those with low incomes who are struggling to get by and really could use the extra money. And those who lie and cheat to claim kids they don't support to get the "free" money from the government.

For the first category of folk (the truly low income), the huge fees are just taking advantage of those who don't know better. And for the second category (the liars and cheats), the fees are for conspiring with the thieves to take money from all of us. In either case, charging outrageous fees to file these returns and provide additional unnecessary services is, in my opinion, morally wrong.

On the good news front, the Refund Anticipation Loan business has been significantly curtailed with actions from the IRS and Congress. And there are new penalties against tax preparers who do not ask enough questions when preparing a return claiming the EIC. Currently, the IRS is wielding those preparer penalties like a club, hitting anyone and everyone who touches an EIC return. They'll eventually get their hands slapped by a court and become a bit more reasonable about the penalties.

Sorry for the rambling and ranting. This is really a sore spot for me.

--Peter

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Author: vkg Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 120259 of 121146
Subject: Re: non covered securities and cost basis Date: 2/26/2014 12:38 PM
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And I'll admit that I have a bias against Block (and Liberty and Jackson Hewitt and the other big chain tax prep outfits). Their main way of making money is by extracting it from those least able to afford the cost.

Understand, the Refund Anticipation Loan business felt really dirty. Their games with IRAs didn't seem much better.

They also deal with clients noone else will touch. My BILs return is realitively simple, but I won't touch it. He is crazy (and we have the paperwork to prove it).

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Author: ptheland Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 120260 of 121146
Subject: Re: non covered securities and cost basis Date: 2/26/2014 1:16 PM
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They also deal with clients noone else will touch.

As long as you bring money (or a refund they can take a chunk of), they'll deal with you. As quickly as possible.

As in, you don't HAVE to report your basis. (And I'd prefer that you didn't because then you've got to go find it and bring it back and take up more of my time and I'd rather get you in and out of my office as fast as I can because then I make more money. I don't care that reporting zero basis increases your taxes. I just want to collect my fees.)

--Peter

PS - How's that for bringing the rabbit trail back on topic??

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Author: ushats Two stars, 250 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 120296 of 121146
Subject: Re: non covered securities and cost basis Date: 2/28/2014 5:06 PM
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"When reporting covered transactions, make sure your basis entry matches your 1099-B,"

could you explain this.
as i mention, in 1099B they have reported - 0.00

usha

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Author: irasmilo Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 120297 of 121146
Subject: Re: non covered securities and cost basis Date: 2/28/2014 5:57 PM
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"When reporting covered transactions, make sure your basis entry matches your 1099-B,"

could you explain this.
as i mention, in 1099B they have reported - 0.00


Are you looking at the covered securities section or the non-covered securities section? The non-covered securities section may or may not show a cost basis. Regardless of what is shown, no cost basis is reported to the IRS.

Only when looking at covered securities do you need to make sure your basis entry matches the 1099-B, or you enter an appropriate adjustment code to adjust the broker number to the correct value per your records.

Ira

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