Statement and Year End Reporting for US persons and entities comprises the following:
Cost Basis: While the required reporting schedule was staggered, the primary cost basis that will be reported to the IRS includes equities bought and sold after December 31, 2010. This includes the adjusted cost basis resulting from wash sales and corporate actions.
The future phase-in period for broker reporting includes the assets sold on or after the following dates:
- Mutual Funds and ETFs - 1/1/2012
- Simple debt instruments (i.e. treasuries, fixed-rate bonds & municipal bonds) and options, - 1/1/2014
- Other debt instruments - 1/1/2016
Tax Basis Method: Brokers are required to use the method first in, first out (FIFO), unless given other instructions by an investor. Changes to your tax basis method may be submitted through the Tax Optimizer. The Tax Optimizer is launched from within the Portal and is available for stock, option, bond, warrant and single-stock future trades.
IB offers multiple tax basis methods, including three basic options:
First In, First Out (FIFO) - This is the default option. FIFO assumes that the oldest security in inventory is matched to the most recently sold security.
Last In, First Out (LIFO) - LIFO assumes that the newest security acquired is sold first
Specific Lot - Lets you see all of your tax lots and closing trades, then manually match lots to trades. Specific lot is not available as a Portal Default Match Method. This will have to be configured in TWS.
Tax Optimizer also lets you select the following additional of the specific identification method.
- Highest Cost (HC), Maximize Long-Term Gain (MLTG), Maximize Long-Term Loss (MLTG), Maximize Short-Term Gain (MSTG), and Maximize Short-Term Loss(MSTL).
- Gain & Loss Categories: An additional requirement to the cost basis reporting is the capital gain or loss category. The gain or loss category of equities is determined by the length of time in which the security was held, known as the "holding period."
- Short-Term: Holding periods of one year or less are categorized as short-term.
- Long-Term: Holding periods over one year are categorized as long-term.
Note: Changing your tax basis is effective immediately. The basis selected will be applied to all subsequent trades on the account statements and tax reports. Updates will not affect previously closed trades nor the TWS profit and loss data displayed.
Year End Reports
The following statements and reports display cost basis information that will be reported on Form 1099-B for eligible accounts.
Monthly Account Statements
Annual Account Statements
Worksheet for Form 8949
Note: Unlike the Account Statements, the Gain & Loss Worksheet for Form 8949 may consolidate sell trades. The cost basis will be adjusted, as required for 1099-B reporting.
U.S. legislation from 2008 included new guidelines for tax reporting by U.S. financial institutions. Effective January 2011, U.S. Brokers are required to report cost basis on sold assets, whether or not a gain/loss is short-term (held one year or less) or long-term (held more than one year). U.S. brokerage firms, Interactive Brokers LLC (IB) included, implemented changes to comply with the legislation.
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.