1099-B Box 12: What It Means for Your Tax Return

When you sell securities like stocks or mutual funds, your brokerage firm will send you a Form 1099-B, “Proceeds From Broker and Barter Exchange Transactions.” It reports the gross proceeds you received from these transactions to both you and the Internal Revenue Service. Understanding this form is part of accurately reporting your investment activities on your annual tax return.

Understanding Box 12 and Cost Basis

Box 12 on Form 1099-B is associated with Box 1e, “Cost or other basis.” The term “cost basis” refers to the original value of an asset for tax purposes. This is typically the purchase price you paid, adjusted for items like commissions, stock splits, and reinvested dividends.

The checkbox in Box 12 indicates whether your broker has reported this basis amount directly to the IRS. If the basis was reported, the IRS has that figure on record. This applies to “covered securities,” which generally include stocks bought since 2011 and mutual funds purchased since 2012. If the box is checked, you need strong documentation before reporting a different basis figure on your tax return.

Calculating Your Capital Gain or Loss

To calculate your capital gain or loss, you subtract the cost basis from the proceeds of the sale, which are reported in Box 1d. A positive result from this calculation means you have a capital gain, while a negative result indicates a capital loss.

For example, if your Form 1099-B shows proceeds of $5,000 in Box 1d and a cost basis of $3,000 in Box 1e, your capital gain is $2,000. Conversely, if the proceeds were $5,000 and the cost basis was $6,000, you would have a capital loss of $1,000. The form also provides the acquisition date in Box 1b, which helps determine whether your gain or loss is short-term (held for one year or less) or long-term (held for more than one year).

Reporting on Your Tax Return

The transaction details from Form 1099-B must be reported on Form 8949, “Sales and Other Dispositions of Capital Assets.” The totals from Form 8949 are then transferred to Schedule D, “Capital Gains and Losses.” If the basis in Box 1e is correct and was reported to the IRS, you will transfer the proceeds and basis directly to Form 8949.

For older securities, Box 1e may be blank, meaning the basis was not reported to the IRS. This is common for “noncovered securities.” You are responsible for calculating and reporting the correct cost basis on Form 8949, using your own records. You would check Box B at the top of Form 8949 for short-term transactions or Box E for long-term transactions to show the basis was not reported to the IRS.

If you believe the cost basis reported by your broker in Box 1e is incorrect, you must still report the figure from the 1099-B on Form 8949. You then make an adjustment in column (g) of Form 8949 to correct the amount. You must also enter Code “B” in column (f) to indicate the basis was incorrect. This process ensures that the information you file matches the information the IRS received from your broker while allowing you to report the accurate gain or loss.