What is the best way to import previous year (and future) cost basis?

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BogleMelon
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Joined: Mon Feb 01, 2016 11:49 am

What is the best way to import previous year (and future) cost basis?

Post by BogleMelon » Mon Jan 13, 2020 8:57 pm

I have my first serious brokerage (taxable) account at Fidelity in 2019. I needed to sell some BND and VTI for some reason. I understand that Fidelity will report my tax basis when issuing 1099-B (plus it is there in the monthly statements). I will use TurboTax Delux desktop version to report my taxes. I am not planning on trading that much in a taxable account (if any). I am a buy-and-hold kind of investor. 2019 was only the first year to invest in taxable, and I needed to tweak some things before committing to my final plan...
Questions:
- Generally, should I keep more attention to the cost basis in a spreadsheet/software? Or saving the statements is enough?
- If so, what is the easiest way to do that starting 2019 historical data? I use YNAB to budget and track expenses and find it superior to Quicken in that field, so do I still need to get Quicken Premier for the sole purpose of importing 2019 tax basis from Fido and then use it for the future cost basis as well?
- Will TurboTax keep the cost basis somehow if I used it from year to year?

Thanks
"One of the funny things about stock market, every time one is buying another is selling, and both think they are astute" - William Feather

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FiveK
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Re: What is the best way to import previous year (and future) cost basis?

Post by FiveK » Mon Jan 13, 2020 11:57 pm

Might be worthwhile to read https://www.fidelity.com/bin-public/060 ... lation.pdf.

Whether you prefer paper or electronic is up to you.

Whether, for electronic records, you use something like Quicken or a spreadsheet is up to you.

TurboTax only reports to the IRS the basis you (or Fidelity) provides for shares sold in a given tax year. After those taxes are documented and filed, you don't care about the basis on the shares sold. You do care about the basis on the remaining shares.

Topic Author
BogleMelon
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Re: What is the best way to import previous year (and future) cost basis?

Post by BogleMelon » Tue Jan 14, 2020 8:28 am

FiveK wrote:
Mon Jan 13, 2020 11:57 pm
Might be worthwhile to read https://www.fidelity.com/bin-public/060 ... lation.pdf.

Whether you prefer paper or electronic is up to you.

Whether, for electronic records, you use something like Quicken or a spreadsheet is up to you.

TurboTax only reports to the IRS the basis you (or Fidelity) provides for shares sold in a given tax year. After those taxes are documented and filed, you don't care about the basis on the shares sold. You do care about the basis on the remaining shares.
Thanks for clarifying. But wouldn't my broker tell me the cost basis when I sell 10 years from now, something that I've bought today?
Would you please explain why it is important for us to keep that record?
"One of the funny things about stock market, every time one is buying another is selling, and both think they are astute" - William Feather

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RickBoglehead
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Re: What is the best way to import previous year (and future) cost basis?

Post by RickBoglehead » Tue Jan 14, 2020 8:44 am

It is your responsibility to track your cost basis.

Your broker is tracking your cost basis, and will report that basis for each sale made. You can see that basis online when you log into your brokerage account.

When you sell in 10 years, you will need to have the cost basis for the shares sold. When you go to your brokerage, if for some reason they don't have the cost basis (let's say you moved to a new brokerage and the cost basis wasn't passed on from the old brokerage), you won't have it. There is not a line on the tax return to say "Sorry, I don't have the cost basis, my brokerage company lost it". However, the IRS will be happy for you to enter ZERO and pay tax on the resulting gain (i.e. your entire share price).

It is very simple to download your statements in PDF format and retain them, or put the paper statements in a notebook. It's up to you to track your cost basis.

If you decide to use Quicken, spending extra money to buy Premier over Deluxe is simply wasted money.

As stated, TurboTax has no knowledge of any investments that you haven't sold.
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