Form 1099-B

What is Form 1099-B?

Form 1099-B is a tax form issued by broker-dealers to report proceeds from selling stocks, bonds, and other securities through a broker in a tax year. Officially titled "Proceeds from Broker and Barter Exchange Transactions,” Form 1099-B is used to track and report capital gains and losses, which individual taxpayers report on their tax return. 

Form 1099-B is also used to report the fair market value of barter exchange transactions (when two parties exchange goods or services directly without using money). U.S. tax law requires broker-dealers to report information about these sales to sellers and to the Internal Revenue Service (IRS).

When will I receive Form 1099-B?

Most people who sell capital assets will receive a Form 1099-B from their broker-dealer or other financial institution no later than February 17, 2025. For sales of assets that the IRS does not consider capital assets for tax purposes (such as collectibles,  real estate, and crypto), you will not receive a Form 1099-B.

Taxpayers will receive their 1099-B from their broker-dealers already filled out. You will need to reference the form to calculate gains or losses on your federal and state income tax returns, and to complete other tax documents (such as Form 8949 and Schedule D). Capital gains are subject to the federal capital gains tax, while capital losses can offset capital gains and reduce taxable income. Whether the transactions resulted in capital gains, capital losses, or broke even, you must report them on your tax return.

What is a 1099-B supplemental statement?

A broker-dealer may provide a Form 1099-B supplemental statement to the seller along with Form 1099-B. This supplemental statement is a separate document that provides additional information about the cost basis of a transaction reported on Form 1099-B. 

This information may include income you may have already paid taxes on when acquiring the assets. For instance, this could include ordinary income tax paid for the tax year you exercised your stock options.

→ Learn more about stock option taxes.

What is a 1099-B supplemental statement used for?

The 1099-B supplemental statement can be a useful reminder that you may need to make adjustments to the cost basis reported on Form 1099-B. In certain cases, you may have already paid taxes on income that was previously reported to the IRS.  

For example, if you sold stock during the past tax year, your broker-dealer will report the proceeds from that sale on a Form 1099-B. This notifies the IRS that you had a reportable sale and you may owe capital gains tax on the proceeds from the sale. But how much you still owe the IRS will depend on two factors:

• How long you held the stock: The amount of time you owned the stock you sold determines whether you’ll pay short-term or long-term capital gains tax. 

• Your cost basis: This is how much it cost you to acquire the stock, including any ordinary income that you already recognized at exercise or vesting. If the stock you sold came from restricted stock units (RSU), in most cases you’ll already have paid ordinary income tax on the fair market value (FMV) of the stock when you took ownership of them. This FMV will typically be the cost basis of the stock. The amount subject to capital gains tax (whether short-term or long-term) will be the difference between the sale price of the stock and the cost basis. Similarly, exercising stock options can also trigger ordinary income tax or the alternative minimum tax (AMT). Any income already recognized may be a factor in determining your correct cost basis.

To avoid paying taxes twice on the same income, you may need to make an adjustment on Form 8949 (Sales and Other Dispositions of Capital Assets), which is an attachment to Schedule D of your individual income tax return. Receiving a 1099-B supplemental statement does not mean that any adjustment was already made: Rather, the information on a 1099-B supplemental statement is meant to help you accurately report your cost basis and avoid paying taxes twice on the same income.

Why Carta issues a 1099-B supplemental statement

Carta’s liquidity solutions help companies organize secondary transactions for their company shares, including tender offers. Because many of the employees who sell shares in these transactions could require cost-basis adjustments, Carta issues a 1099-B supplemental statement to help taxpayers and their tax professionals accurately report any gains and pay the appropriate amount in taxes.