Tax Reporting: Profit or Loss Realized for Closed Contracts on Form 1099 for Noncovered Securities

Profit or Loss Realized for Closed Contracts on Form 1099 for Noncovered Securities is the aggregate profit or loss recognized over the course of the year from transactions in commodity futures and regulated futures contracts which have been closed, reached final settlement or, in the case of options, expired.

Circular 230 Notice: These statements are provided for information purposes only, are not intended to constitute tax advice which may be relied upon to avoid penalties under any federal, state, local or other tax statutes or regulations, and do not resolve any tax issues in your favor.

W8 Re-certification

If you are not a U.S. citizen or entity formed within the U.S. and have an account with Interactive Brokers, you are requested to declare your citizenship or country of formation with the US tax authority (IRS). This declaration can be done online by correctly filling out the W-8BEN form. Filling out this form is an easy process that only takes a few minutes. In the short movie below, we show you where to find the W-8BEN in your IB account management and how to fill it out.

If you fail to declare your foreign citizenship or country of formation, and IB does not have a valid W-8BEN form on file, you are presumed to be a US person/entity without a proper tax certification. As a US person/entity, you will be subject to backup withholding at a rate of 28% on interest, dividends, and substitute payments in lieu; as well as gross proceeds. 

Every 3 years the IRS requires a re-certification of the W-8BEN form. IB will ask the beneficial account owner to re-certify their foreign status by re-signing the W8-BEN in order to continue their status as a foreign person and claim the tax treaty benefits. If you experience any problems or have questions regarding the W-8BEN form or how IB handles Non-US persons and entities, select this Tax Information and Reporting link and choose the tab Non-US Persons and Entities or consult the following IRS information page for more details: www.irs.gov/instructions/iw8/ch02.html

IRA: 2012 Tax Reporting

Each year Principal Trust Company, the Individual Retirement Account (IRA) plan trustee, delivers tax forms directly to IRA owners via US mail for prior year transactions.  The Internal Revenue Service (IRS) requires certain transaction reporting within the IRA

Tax forms for eligible accounts will be published by January 31 (Form 1099-R) and by May 31 (Form 5498).  These forms display the IRA distributions and IRA contributions made for the previous tax year.

Select from the following for additional information.

What to Expect

Reconciling Transactions

Tax Form Corrections

Understanding Form 1099-R

Understanding Form 5498

 

What To Expect

IRA tax forms do report: deposits, withdrawals, rollovers, conversions, recharacterizations, year end fair market value, and US tax withholding from withdrawals.

IRA tax forms do not report:  cost basis, sale proceeds, payments-in-lieu, dividends, credit interest, debit interest, foreign tax withholding, and trustee-to-trustee transfers.

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Reconciling Transactions

Your Interactive Brokers monthly and annual activity statements list all IRA cash deposits and withdrawals, as well as broker-to-broker asset transfers via ACATS.  The account statements provide the NAV for each transaction. Contribution and distribution tax years and codes do not appear on the activity statements.

In order to obtain specific IRA contribution/distribution designations, contact Customer Service by Chat or Inquiry/Trouble Ticket via Account Management.

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IRA Tax Corrections

Tax correction requests for open IRAs must be received in writing to Interactive Brokers, not Principal Trust Company, through the secure Inquiry/Trouble Ticket via Account Management

For closed IRAs, we kindly ask you to submit correction request using the form available on our website through our Messaging System.

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Understanding Form 1099-R

The IRS requires that any distribution or cash withdrawal taken in the prior year be reported by the account's administrator.  This form reports the IRA distributions made from each IRA account type.

Data displayed is received from the withdrawals, conversions, and recharacterizations in your IRA.  This may include money distributed to another tax-deferred account as a rollover, conversion, or recharacterization.

For additional questions about your Form 5498, see Understanding Form 1099-R.

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Understanding Form 5498

The IRS requires that any contribution or cash deposit received in the prior year be reported by the account's administrator.  This form reports the IRA contributions made from each IRA account type.  Generally, the tax form is published by May 31, but may be issued no later than June 30, 2013.

The data shown on the form includes the following:

  • 2012 December 31 Fair Market Value
  • 2012 Contributions
  • 2012 Rollover Deposits
  • 2012 Roth Conversions
  • 2012 Recharacterizations
  • 2011 and 2012 SEP Contributions made in 2012

For additional questions about your Form 5498, see Understanding Form 5498.

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Click here to return to the Retirement Account Resource page.

Disclaimer:  IB does not provide tax advice. These statements are provided for information purposes only, are not intended to constitute tax advice which may be relied upon to avoid penalties under any international, federal, state, local or other tax statutes or regulations, and do not resolve any tax issues in your favor. We recommend that you consult a q

 

Year End Statement & Report Comparison

Overview: 

The Interactive Brokers Year End Reports provide an activity review for US persons and US entities.  The various account statements provide the transaction details as the basis for each report.   Each of the standard reports spans the time period from January 1 through December 31.

Some reports, such as the Gain/Loss Summary Worksheet, may consolidate transactions and calculations.  For the sake of conserving volume, trade activity may be combined.  The account statements include all activity.  For your convenience and to assist with your reconcilation, customized statements permit activity displays suitable for your personal needs (see the tab "Customized Templates" for details).

All US tax reports include the total figures as required under the US tax laws.

Non-US Persons and Entities

Income paid from US sources to non-US  persons and entities may find this comparison helpful.  IB is required to withhold US taxes at a rate of 30% on payments of US source stock dividends and substitute payments in lieu. Both the withholding and the income is reported on the US tax Form 1042-S. 

For additional information about how IB handles non-US persons and entities, select this Tax Information and Reporting link  and choose the tab Non-US Persons and Entities.

Year End Reports (For Trading) Comparison shown below identifies the most common transaction types which appear on the year end reports.  Not all activity is included on each report.

Comparison of trades shown on the year end reports
Year End Reports Stock Bond Equity & Index Option Single Stock Futures Futures Forex
Form 1099 Sell Sell - - Gain/Loss -
Form 1042-S - - - - - -
Annual Statement Buy/Sell Gain/Loss Buy/Sell Gain/Loss Buy/Sell Gain/Loss

Buy/Sell Gain/Loss

Buy/Sell Gain/Loss

Buy/Sell Gain/Loss
Gain/Loss  Worksheet
Cost/Sell Gain/Loss Cost/Sell Gain/Loss Cost/Sell1 Gain/Loss1 Cost/Sell Gain/Loss - -
1256 Worksheet
- - Gain/Loss5 - Gain/Loss -

NOTES:  (1) Only cash settled; (2) Gain/Loss Worksheet was first published by IB with tax year 2007.  Worksheets for prior years are not available.  IB did provide gain and loss data on the Annual Statements; (3) The 1256 Worksheet was first published by IB with tax year 2008; (4)  Option transactions are not 1099 or 1042-S reportable transactions.  In accordance with the IRS guidelines, IB excludes the activity from the tax reports; (5)  Only broad-sed index options appear on the 1256 Worksheet

 

Year End Reports (For Income) Comparison shown below identifies the most common types of income which appear on the year end reports.  Not all income is reportable on a 1099 or Dividend Summary.

Comparison of income shown on the year end reports
Year End Reports Dividends Credit Interest Debit Interest Accruals Pay In Lieu Credit Pay In Lieu Debits Fees
Form 1099 Yes Yes No No Yes No No
Form 1042-S  Yes Yes No No Yes No No
Annual Statement Yes Yes Yes Yes Yes Yes Yes
Dividend Summary Yes No No No Yes Yes No
Gain/Loss Worksheet No No No No No No No
1256 Worksheet No No No No No No No

NOTES:   (1) US Tax Form 1042-S is provided to non-US persons/entities, along with the Dividend Summary.  The Tax Form reports interest, dividends, substitute payments in lieu, and US tax withholding from US securities; (2) For US persons/entities, the Dividend Summary may list dividends as potentially eligible for treatment as “Qualified” based on the holding period.  IB does not report this on the 1099-DIV or to the Internal Revenue Service; (3) Debit transactions are not 1099 or 1042-S reportable transactions.  In accordance with the IRS guidelines, IB excludes the activity from the tax reports; (4) Exchange, market data, and activity fees


 

 

2009 Gain/Loss Summary Worksheet: General Explanation

Important Note:  The Worksheet has been prepared using IRS guidelines for information purposes only.  It is not intended to replace any official IRS tax forms or schedules; and should not be regarded as an IRS Form Schedule D.

Interactive Broker's 2009 Gain/Loss Summary Worksheet ("Worksheet") provides the capital gains and losses for your account's year-end review.  Investors of a limited number of securities will find the pairing of 2009 sell trades useful.  Designed to aid with your year end reconciliation, the following securities and trades are included: Bonds, Equity Options, Fractional Shares, Index Futures*, Mutual Funds, Short Sale, T-Bills, Tender Offers, and WHIFITs.

A general explanation of the Worksheet is organized below by Parts, Columns, and Totals.

 *Only cash-settled

Worksheet Parts

The Worksheet is divided into two parts.  The period in which you held the position determines whether or not Short-Term or Long-Term applies. 

Part 1 - Short Term Capital Gains and Losses - Assets Held One Year or Less

Part 2 - Long Term Capital Gains and Losses - Assets Held More Than One Year

Worksheet Columns

Each section contains the following seven columns to identify your trades.

(a) Description of property (b) Date acquired (c) Date sold (d) Sales price (e) Cost or other basis (f) Gain or (loss) Codes

1.  (a) Description of property...shows the security symbol, name, quantity, and other information to identify the asset sold.

Example:  500 sh. DB - DEUTSCHE BANK AG-REGISTERED

2.  (b) Date acquired...shows the trade date of your security's purchase. 

Asset Transfers:  IB has entered the date supplied by you through Position Transfer Basis.  If an update was not received by year-end, then the asset transfer settlement date appears. See your monthly or annual summary for details. 

Short Sales:  The box is left blank if the closing trade has not been completed.  For short sales included on a prior year Worksheet or 1099-B, the code ADJ is entered.

3.  (c) Date sold...shows the trade date of your security's sale.

4.  (d) Sales price...shows the gross security sale price, net of commissions. 

Option Adjustments:  For exercised call options, the writer's sale proceeds have been increased by the amount received for the call. For exercised put options, the holder's sale proceeds have been reduced by the cost of the put. See IRS Pub. 550, page 57, for details.  For expired options, an amount of 0.00 is entered, followed by the Code "Ep".

5.  (e) Cost or other basis...shows the total price paid for your security, plus commissions.

Corporate Actions:  Adjustments have not been made for any stock splits or non-dividend distributions. See IRS Pub. 550, page 44, for details.

Mutual Funds:  IB does not use an average basis for mutual funds. The First In, First Out (FIFO) method is used.

Original Issue Discount:  The basis has not been increased by the amount of OID included in your income. See IRS Pub. 550, page 13, for details.

Option Adjustments: For exercised put options, the writer's basis has been increased by the amount received for the put.  For exercised call options, the holder's basis has been increased by the cost of the call. See IRS Pub. 550, page 57, for details.

6.  (f) Gain or (loss)...shows the calculation for each security using the tax execution methods First-In, First Out (FIFO), Last In, First Out (LIFO), or Maximize Losses (ML). 

Loss: Negative amounts are identified in parentheses.  For example, a loss of $2,000.00 displays as (2,000.00).

Tax Method:  If no code appears in the Codes column, then FIFO applies.  The other methods are noted by either LI = LIFO or ML = Maximize Losses.

7.  Codes...shows various trade designations, such as: corporate actions, asset transfers, or option assignments.

Codes and Meanings Table:  The last page of the Worksheet contains a table to identify each non-security symbol used.

Worksheet Totals

1. Subtotal adjustment from option assignment...shows the total amount of all sale proceeds increases or decreases made from option assignments to the assigned stock sale proceeds (see Cost or other basis details above). 

The adjustments, in accordance with IRS guidelines, are added or subtracted in order for the next Subtotal line to equal the amount reported by IB on the 1099-B, box 2.  Please keep in mind that IB does not report any option proceeds or adjustments to sales proceeds from assignments on the 1099s.

2.  Subtotal for stocks, bonds and T-bills...shows the total non-adjusted proceeds reported for each trade under column (d) Sales price for stocks, bonds, and T-bills only.  This amount should equal the 1099-B, box 2, amount. 

1099-B, box 2:  In general, this 1099 figure should equal the combined Parts 1 & 2 Subtotal for stocks, bonds and T-bills figure.

3.  Total...shows the combined proceeds for all trades under column (d) Sales price, including option sale proceeds.

Total Option Sale Proceeds:  Subtract the Total amount of column (d) from the Subtotal for stocks, bonds and T-bills of column (d) to obtain the total proceeds from all option sales.

 

Click here to go back to the main 2009 Worksheet article.

Note:  Securities classified by the IRS as IRC Section 1256 contracts are included on the Gain/Loss Worksheet for 1256 Contracts.

 


IRS Circular 230 Notice: These statements are provided for information purposes only, are not intended to constitute tax advice which may be relied upon to avoid penalties under any federal, state, local or other tax statutes or regulations, and do not resolve any tax issues in your favor.

 

What’s New for the 2009 Gain/Loss Summary Worksheet

 

 
Wash Sales – If you sold a stock or security at a loss, but re-purchased within 30 days the same or substantially the same security, the Worksheet identifies the sale using code “WS” (Disallowed loss from wash sale).
 
Social Security Number – For security purposes, the first 5 digits of the tax identification number have been removed.
 
Tax Basis Declaration – Two new tax basis methods, made available January 2009, help identify gain/loss methods for trades.  The optional methods Last In, First Out (LIFO) and Maximize Losses (ML) join the default First In, First Out (FIFO) on the Worksheet.
 

Select Gain/Loss Summary Worksheet: Considerations for details about the new features.

Click here to go back to the main 2009 Worksheet article.

 

 

 

IRS Circular 230 Notice: These statements are provided for information purposes only, are not intended to constitute tax advice which may be relied upon to avoid penalties under any federal, state, local or other tax statutes or regulations, and do not resolve any tax issues in your favor.

Understanding the 2009 Gain/Loss Summary Worksheet

IMPORTANT NOTE: This article has been customized for use by individual US taxpayers investing in securities for information purposes only.  Persons are encouraged to consult a qualified tax professional with the preparation of tax returns.  IB does not provide tax advice.  Traders or dealers in securities, for whom other tax treatment applies, may find the worksheet helpful.  The methodology used to determine the yearly gain or loss, however, differs.  Traders electing the mark-to-market accounting method may consult IRS Instructions for Form 4797, page 2.

The 2009 Gain/Loss Summary Worksheet calculates the gain or loss for your securities bought and sold from January 1 through December 31 utilizing the Internal Revenue Service (IRS) guidelines.  Every sell trade executed appears, including short sells, on a trade-date basis.  Not all securities, however, are eligible for inclusion.  For additional information, see the following article categories.


Below we have categorized information about this year's "Worksheet" within the IB Knowledge Base.  Each article provides more details to assist with your understanding of this tool.

 

 

IRS Circular 230 Notice: These statements are provided for information purposes only, are not intended to constitute tax advice which may be relied upon to avoid penalties under any federal, state, local or other tax statutes or regulations, and do not resolve any tax issues in your favor.

2009 Gain/Loss Summary Worksheet: Considerations

Overview: 

Interactive Brokers has taken the time to ensure that the gain/loss figures are calculated according to your elected tax methods.  Sell transactions are offset versus the original purchase details available.  Consider the following limitations and issues as you review the Worksheet.

Corporate Actions

For each of the transactions labeled corporate actions, adjustments under to the Worksheet in formation may be required.  The IB Worksheet does not make those adjustments.  Activity classified by the issuer as a sale may be included on the Worksheet, the 1099-B's box 2, and under the Annual Statement’s Corporate Actions section. 

Transactions designated as corporate actions include those processes that impact shareholders by Publicly Traded Companies and result in a material change.  Over 50 voluntary or mandatory actions fall in this category.  Some of the most common processes which may be reported include:   

► Acquisition                              ► Merger

► Captial Reduction                   ► Reverse Split

► Conversion                             ► Rights Issue

► Dividends or Interest              ► Stock Split

 

Option Assignments/Exchanges/Expirations

Options not considered to be Section 1256 contracts appear.  Special rules apply for assignments and exchanges.  The IB Worksheet makes adjustments.  The option transaction’s proceeds do NOT get included on the Worksheet next to the actual trade.  In accordance with IRS guidelines, IB includes the proceeds with the assigned stock.  The IRS Publication 550 on page 57 describes in detail the adjustments required for both the option writer and holder. 

If an option expires during the year, IB enters the expiration date under column (c), Date Sold, 0.00 under column (d), Sales price, and assigns “Ep” under the Codes column.  The gain or loss treatment differs for the option writer and holder.  See IRS Publication 550 for details.

 

Short Sales

Securities sold during the year that you do not own are short sales.  The sale proceeds are included in the 1099-B, box 2, and on the Worksheet, regardless of the year in which the sale is covered or closed.  This may cause a difference in the figure reported for your tax purposes versus the IB Worksheet and the 1099. 

Determination of gain or loss takes place when the security covered is purchased at a later date.  The IB Worksheet makes adjustments for current and prior year sales.  See IRS Publication 550, page 55 for details.

 

Tax Basis Declaration

The default tax basis method for IB accounts is First In, First Out (FIFO).  This matches the the first assets purchased with most recently sold assets for gain and loss tax purposes.  In January 2009, we added an option to allow modification of the tax basis method.  Customers may elect two additional methods, Last In, First Out (LIFO) or Maximize Losses (ML).

On the Worksheet, trades using the default FIFO method do not have an identification code.  For trades using the methods LIFO or Maximize Losses, the following codes apply: 

First In, First Out (FIFO), code = no code appears

Last In, First Out (LIFO), code = LI

Maximize Losses, code = ML

Note:  The tax basis method may be changed for trades going forward through Account Management.  Select Report Management and choose Tax Basis Declaration.

 

Transferred Accounts

The cost of a transferred security reflects the closing price value and date acquired "as of" the transfer settlement date.  An exception applies for cost and date acquired details manually entered by you within Account Management before January 1.  The IB Worksheet makes adjustments for these entries.

If you were unable to complete the online adjustment, then contact your former financial firm for the original cost basis. 

Note:  IB provides the ability through Account Management to update the basis by December 31.  Updates reflect on all future statement records.  Select Report Management and choose Position Transfer Basis.

 

Wash Sales

Stock or security trades sold at a loss, but purchased again within 30 days may be considered wash sales.  The IB Worksheet does identify wash sale trades, beginning in tax year 2009.  Trades considered wash sales are identified by the code “WS” (disallowed loss form wash sales). For more details on trades considered wash sales or the adjustments, see IRS Publication 550, page 56.

 Click here to go back to the main 2009 Worksheet article.

 For information about when all tax forms are made available, go to our Tax Information and Reporting page, then click the Reporting Dates tab.

IRS Circular 230 Notice: These statements are provided for information purposes only, are not intended to constitute tax advice which may be relied upon to avoid penalties under any federal, state, local or other tax statutes or regulations, and do not resolve any tax issues in your favor.

 

 

 

Why are corrected 1099-DIV forms issued ?

Form 1099-DIV is published with the classification or tax character of the dividends at the time of publication.  Issuers may make adjustments or corrections following the required 1099 issue date.  IB is required to re-issue a corrected 1099 with the changes when known to both you and the IRS.

Notification will be sent to you if a corrected 1099 is issued and posted in Account Management. Consult your tax advisor for further guidance.

 

Disclaimer:  IB does not provide tax advice. These statements are provided for information purposes only, are not intended to constitute tax advice which may be relied upon to avoid penalties under any international, federal, state, local or other tax statutes or regulations, and do not resolve any tax issues in your favor. We recommend that you consult a qualified tax advisor or refer to the U.S. Internal Revenue Service.

How do I select my Country of Legal Residence?

Overview: 

Choosing the correct Country of Legal Residence for non-US persons is important and may provide lower withholding rates.   All Interactive Brokers accounts must select a Country of Legal Residence due to regulatory and reporting laws.

The Country of Legal Residence is your tax home.  Generally, this is your main place of business, employment, post, regardless of your family home.  It is the place where you work or attend school on a long-term basis, permanantly, or indefinitely. 

For an entity, the tax home is the place where the entity was formed.

Your Country of Legal Residence is not always the same as your Passport Country.  For example, a South African passport holder may attend 4 year university in France.  During the study in France, the student tax home would be considered France. 

What if I pay taxes in two countries this year?

It is possible to pay taxes in two countries and to be considered a Legal Resident of both countries during the same year.  When completing an account application, your choice would be the country in which you currently live and will pay taxes to. 

What if I do not have a regular place of business?

In some cases, persons may not have a regular place of business or home.  Your tax home is the place where you live on a regular basis or wherever you work at the time of your application submission.

What if none of these applies?

Your Country of Legal Residence is wherever you work.

For additional help determining your status as either a non-US Legal Resident or a US Legal Resident, visit www.irs.gov to review the IRS Publication 519 or visit http://www.irs.gov/publications/p519/index.html  

 

Disclaimer:  IB does not provide tax advice. These statements are provided for information purposes only, are not intended to constitute tax advice which may be relied upon to avoid penalties under any international, federal, state, local or other tax statutes or regulations, and do not resolve any tax issues in your favor. We recommend that you consult a qualified tax adviser or refer to the U.S. Internal Revenue Service.

 

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