1099-B Question

[mblatour]

Hi,
Okay, I am preparing a return for a new customer who has 1099B proceeds. I have never done this before (only my 2nd year preparing returns) and I am not sure what to do.

The 1099B is printed on their portfolio and states "Gross proceeds from each transaction are individually reported to the IRS after deducting commissions. For bond transactions, accrued income is also deducted. Taxable accrued interest is reported on Form 1099-INT and included in your 'Details of 1099 Reported Interest Income' ".

Below this is a list of about 10 different tranactions for 2005. I am given the Reference Number, Date of Sale/Exchange, CUSIP number, Quantity, Description(Box7), Price, Gross proceeds less commissions (Box2), and Federal Income Tax Withheld for each transaction.

What do I do with all of this? I've began researching already, but I was hoping I could get some direction from here. I'd really appreciate any information you can give me.

[Safire]

That will go on a Schedule D, hopefully the papers you have from brokerage firm also lists the basis that your taxpayer had in each of these stock transactions, if not, you will have to find out.

[mblatour]

more information

I found a spot titled "Details of Short & Long Term Gain or Loss" where the opening trade date and closing dates are listed, as well as the sale proceeds and original cost and then also the loss or gain. There looks to be an overall loss of $8500.

What I am confused about is in a separate area, under 1099B, it lists the Gross Proceeds less commissions for each stock and the numbers are adding up to $48,000.

How can there be a loss and proceed for each stock (they are exactly the same stocks listed I checked the reference numbers.

What gets reported where? What are they actually taxed/not taxed on?

Hope I am making sense, because my head is spinning!

[Safire]

The numbers for the "Gross" sales will go in one column on the Schedule D and the other numbers that show you the "purchase" information will go in another colum, which should all add up to the overall "loss" that you mentioned.

Take a good look at Schedule D and you should see what I mean.

[mblatour]

what about the $48,000

What about the $48,000 in proceeds? It looks to me as if they made out with that amount because later in the portfolio, there are withdrawal amounts and several are for $10,000 each.

Do I do anything with the $48,000?

[Unregistered]

School

Seems as though someone needs to return to tax school

[mblatour]

I never claimed to be an expert!

That was uncalled for an inappropriate. I am a young mother of 2 young children and I do this so that I can stay home with my kids. I took completed a 12 month tax course in 3 months and averaged 95% over 12 exams. I haven't dealt with this before, so asking for direction so that I can do right by my client seems to me to be a smart thing.

Unregistered, hmm, too bad you won't put your name out there, must be a reason!
JERK

[geekgirldany]

It probably has multiple pages. One that has the 1099B showing the Gross Proceeds. Then on the second page it has it broken down on each transaction. It will show the Gross Proceeds, the Purchases amount, if it is a long term or short term gain, the date of the transaction, and then it may have the gain or loss.

Like Safire said look at the Schedule D and it may help you in seeing where all this goes.

[mblatour]

thanks

Thank you geekgirldany and Safire for your help. I had entered it all in on Schedule D (it's what I originally thought I should do but questioned myself). I guess what I am freaking out about is that I am coming up with Fed. tax due of over $6,000 and State due of over $2000 and I just don't want to miss anything before I tell my NEW customer that they owe this much. They were a nice retired couple and the gentlemen seemed very bright, so hopefully he already knows whats coming.

Again, thanks for your help, I appreciate the help instead of criticism.

[jainen]

only deduct $3000

Unfortunately, he can only deduct $3000 of his losses. The rest will give him a head start on next year. Better rehearse that line before you tell him how much he owes.

It used to be that new preparers didn't worry much about securities sales. That was an advanced topic for sophisticated investor-clients. Now everyone dabbles in the capital markets, and a stunning number of our clients get burned by it.

Download Pub 544 and plan on taking a class in capital gains for your CPE this year.

[LawrenceGR]

Don't make it harder than it is

If you are anything like me you are trying to make this harder than it really is, I can relate to your inexperience everyone on this board was a rookie once. Doing returns in class and doing them in real life are worlds apart, in college we had to do C-Corps now I don't care to mess around with them. The only things you interested in are: date of purchase, date of sale, cost basis and sale price. As previously post they are only allowed $3000 loss per year but the rest will carry over. After you do a few more of these 1099-B's you will find they are not that difficult. Good luck to you.

[natiro]

Schedule D

This question worries me and I'm not posting to be disrespectful. . .

Taking a class and passing it with flying colors does not give someone enough experience to practice on their own. I thought I'd work in a firm for two years, get my CPA license, and then go out on my own. After two years, I realized there was still so much that I didn't know, and appreciated being in an environment where someone else was reviewing my returns and giving me the opportunity and resources to continue learning. Ten years later, I finally went out on my own.

Taxpayers have professionals prepare their returns because they trust that we know what we need to know to prepare their returns accurately. We have a duty and responsibility to to our clients to have the experience and knowledge we need to be able to do this.

The question that started this thread was about basic tax preparation and this worries me. I understand why you would want to be able to prepare returns and stay at home to raise your kids, but I recommend, for your sake, that you work for a couple of years for someone or some firm where you can get training in the basics of tax preparation. If this isn't possible, you should at least spend some time looking at the resources available to you. . .really read the instructions to the forms, and look at the publications that are available on the IRS website. There is a good publication on investment income (550 or something like that. . .I don't want to look it up) which is really helpful in explaining how to report transactions.

I disagree too with unregistered who suggested you need more coursework. Coursework isn't enough. You need experience with oversight and I can't urge you enough to consider getting it.

Good luck.

[mblatour]

I appreciate your concerns

I realize there is a lot to learn and there always will be. I realize that the experience would be very valuable to me, nothing beats experience hands down. I stay home while my husband works outside the home so that my children are not in daycare. It's how I was raised and it's how I want my children to be raised.

I have always been really good with numbers and worked for 4 years in Estimating. My goal with taking the Income Tax Preparation Course was to be able to do simple returns and earn a little extra money doing it; while keeping the dust off my resume.

I have done a ton of research, I am constantly doing research. I downloaded all of the suggested Publications; some before they were suggested and some after they were suggested by this board. I don't rely solely on this board by any means. I document everything I find. As a matter of fact, I am currently on the phone on hold with the IRS as I type this getting a third opinion. Most of the items I question here on this board, I get 3 or 4 opinions on. This doen't seem to be a bad thing for me to do, but several of you seem to think it makes me a weak preparer because I ask for help.

I would like to continue to ask questions and get more information. I am learning and the more information I can get the better. I am awful about wording my questions the way I want to ask them. I may sound like a idiot to some, but I am really not. I am just trying to do my best with what I have.

I took a second course in December of 2005 as a refresher. I plan to do that every year and some day when my little ones are in school, I will go further and possibly work in an office of some sort.

If I don't understand something or cannot get the answers I need to feel confident about, I will by no means prepare a return incorrectly. I can admit when I am over my head and please rest assured, my clients are being taken care of. I've been accused of caring too much, spending too much time, and being too thorough with my clients in several occasions.

Thanks again for your concerns, and I hope I didn't seem too defensive.

[Lion]

Background

It's great that you're researching and using boards such as this, since you don't have colleagues in an office. But, if you're new, how can you know which ones on the board to trust? And, calling the IRS should be reserved for procedural questions/technical issues and not for tax law questions or advice or the best way to file something for a client; their answers are wrong much too often and carry no weight of law. Also, use the practioners line and not the general line if you do call IRS. Really consider working around other people. Work for Block or a firm open long hours during tax season so you can go to an office environment with colleagues around when your husband is home with the kids on nights and weekends. Listen in as other preparers work with their clients. Look over their completed returns. Find out what research materials they like and what courses. You can learn so much faster from people than you can from books alone. This summer or fall, take HRBs basic income tax course (66 hours), again at nights or weekends when hubby stays with the kids. Follow that with Everyone's return. After you have a few years under your belt, aim for at least 30 hours of education re taxes per year. In the meantime, read the instructions for Schedule D thoroughly. Your list of trades should have a gross proceeds column that adds up to the number on the 1099-B; sales prices. When you include all of the cost basis for each trade in its own column and your software does the subtraction, you should get the same gain or loss (within rounding limits) that you found on the broker's statement. Fill out D as best you can and then print those pages only to proofread against the broker statement and to have in front of you to look over for reasonableness and to learn how they flow to make any corrections on this one and to do it faster next time. You need to work a few years with colleagues; you'll be strong in something, they'll be strong in something, you'll all learn from each other.

[jainen]

Another nice thing

Another nice thing about working in a larger firm is the reference material. Since you like to research that should be especially attractive. Things like Capital Changes and RIA are too expensive to subscribe on your own.

"really good with numbers" doesn't mean much in this business anymore. The computer does all that. Your research abilities should give you a great edge and make you especially valuable to firms who do taxpayer representation.

H&R Block courses are not the best for tax theory, but they can't be beat for the technical skills of filling out the forms. This was your original question, I believe.