How to handle sub 50 cent wash sales reported on 1099-B?

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Direwolf14
Posts: 28
Joined: Tue Apr 03, 2018 1:40 pm

How to handle sub 50 cent wash sales reported on 1099-B?

Post by Direwolf14 » Thu Feb 14, 2019 10:42 am

Hi Everyone,

So I experimented with a Betterment account last year just to see what the whole Robo-Advisor thing was about (failed experiment BTW). Received my 1099-B yesterday and there are about 7-8 transactions where the wash sale loss disallowed amount is less than $0.50 (half of them are literally for 1 or 2 cents). When I import this data into my tax SW, it rounds the disallowed amount down to $0 and flags an error that this is no longer a wash sale. I see 2 potential solutions:

1. Keep disallowed amount rounded down to $0 and remove the wash sale adjustment code (transaction will not appear on 8949)
2. Manually round up disallowed amount to $1 and transaction will appear on 8949 as a wash sale

I wasn't sure if the IRS was notified of all wash sale transactions and expects them to appear on my 8949. I guess I don't really mind the extra $7 or $8 of disallowed loss... But how would you handle this situation? Thanks.

gokartmozart
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Location: Pacific NW, USA

Re: How to handle sub 50 cent wash sales reported on 1099-B?

Post by gokartmozart » Thu Feb 14, 2019 11:52 am

I would not be concerned too much about amounts "disappearing" in the process of rounding, if the IRS rounding rules are scrupulously followed. The rules are the rules after all.

I definitely would not round amounts under $0.50 up as you suggested in your solution 2. That directly violates the IRS rounding rules.

Here is what I would do (assuming the SW allowed me enough manual overrides). Put a "W" in form 8949's column (f). This acknowledges that the 1099-B reported a wash. Then I would put the adjustment from the 1099-B's box 1g in form 8949's column (g). Of course, if you round any amounts anywhere in your return, you must round all amounts in your return. Properly rounded, this box 1g adjustment is zero. Put 0 in form 8949's column (g).

gokartmozart

Disclaimer: I have not experienced a wash sale myself. I read through the 8949 instructions.

livesoft
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Re: How to handle sub 50 cent wash sales reported on 1099-B?

Post by livesoft » Thu Feb 14, 2019 12:44 pm

I wouldn't worry about it and do the #1.

Indeed, I do something similar with 1099-INT that show 0.02, 0.03, and 0.01 interest paid. The tax prep software hates the rounded down zero, so i simply delete entire imported 1099-INT.
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Topic Author
Direwolf14
Posts: 28
Joined: Tue Apr 03, 2018 1:40 pm

Re: How to handle sub 50 cent wash sales reported on 1099-B?

Post by Direwolf14 » Thu Feb 14, 2019 2:17 pm

Thanks for the feedback. I'll definitely stick with rounding down the allowed wash sale amount to $0. And I will attempt to leave the wash sale adjustment code on the transactions if my tax SW will allow.

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