Hi, I'm Tom Presper with Presper Financial Architects. Today, I want to talk about tax form 1099-B. We've had some questions from clients recently about the difference between covered shares and non-covered shares. Now, this does not impact your IRAs or your 401ks. It typically affects your non-qualified investment accounts that you might own individually, jointly with your spouse, or as a trust. A little bit of history: prior to 2012, the IRS trusted us to track the cost basis on the investments we had, such as stocks, bonds, and mutual funds. If we sold any of those, they trusted us to accurately report that on our tax returns and to pay appropriate taxes. However, after 2012, instead of trusting the taxpayer to track this information, they have burdened our custodians (Pershing, TD Ameritrade, Schwab, etc.) to track this information. This gives them more confidence that they are receiving accurate information and that we are paying the proper taxes that are due. For definition purposes, non-covered shares are shares that were purchased prior to 2012, while covered shares are shares purchased after 2012. Both of these types of shares are reported on the 1099-B, but covered shares are reported both to you and to the IRS. That's the key difference. Non-covered shares are not reported to the IRS, so you have to track the cost basis for those and fill that in on your tax return when you file it. Tax preparers and CPAs are aware of this, but if you do your own taxes, you might want to pay attention if there's a large difference between the gross proceeds or sales and the cost basis. I'll give you an example: we had a client who reached out to us because last year they rebalanced their account. They had $100,000 in sales, but...
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