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Reporting Wash Sales Correctly


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I tried searching online and in the forum here first but didn't see it address WITH a reference to the authority.

When reporting ST/LT (Code A/D) Stock sales with a Wash reported, do you need to attach the statement and note code MW (alphabetically) to indicate multiple stocks with wash?

I thought my previous employer did attach the wash sales, but my current one is thinking otherwise. Granted, the previous employer was back in 13 when the changes were pushed down.

The strongest argument I've seen is that Code W puts it on the 8949 which should be the itemized sales, not grouped ones. The solution to this as referenced below was to subtract the wash sales out of the Code A/D totals and list them separately on 8949 and let the remaining ones stay on Sch D....How the IRS could track that I have no idea. I'm also NEVER put code M for grouped securities, so I suspect the IRS doesn't care whatsoever.

 

This was some discussion per Tax Pro Talk 

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CalGalCPA

I just pull out the one wash sale and report that separately. Then everything else can go in the normal spot so you don't have to list each one. You should be able to attach in a PDF attachment as well. I use Lacerte and there are several different links to Sch D and 8949.

Kendrick

Yes, if you are entering one stock sale with a wash sale component, you are fine. But if you are putting the sum of several pages of, say, covered short-term sales in, and out of all of those sales there is one with a wash sale component, and you scroll down and put the miniscule amount into your software, yes, on the 8949 you will see your sum totals, with the miniscule little wash sale component, and a W. But then your sum totals are on Form 8949. The only time, from what I can tell, that you can put sum totals on Form 8949 is if you attach schedules supporting the sum totals, either by PDF or by sending a Form 8453 to Austin TX with the supporting schedules.

I still like the idea of CalGal separating the wash sales separately, then subtracting those proceeds amounts and basis amounts from the sum totals and putting these revised sum totals in as "basis reported" amounts - no Form 8949 except for the separately listed wash sales.

But wanting to do it right, until I am convinced otherwise, I will probably continue to put the sum totals of those several pages of stock sales with the one wash sale amount and a code M on the Form 8949, and check the "schedule attached" box (Lacerte), and then make photocopies of all the pages and send them with a Form 8453 to Austin TX.

 

This is per the 8949 Instructions

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Column (e)—Cost or Other Basis
The basis of property you buy is usually its cost, including the purchase price and any costs of purchase, such as commissions. You may not be able to use the actual cost as the basis if you inherited the property, got it as a gift, or received it in a tax-free exchange or involuntary conversion or in connection with a “wash sale.” If you don't use the actual cost, attach an explanation of your basis.

 

The 8453 instructions don't say anything.

 

 

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This is covered in the instructions to form 8949, line 1 where it says that listing individually is the requirement unless the taxpayer meets the exceptions to that reporting.  A transaction with a wash should be reported separately.

Most of the time our members do not provide references or cites, especially for answers that are found in the forms' instructions, so if that is what you expect from posters here you may be disappointed. 

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Thanks Judy, that's understandable since everyone has a job to do. I do appreciate you pointing me to the right place though! I've noticed you always try to be as thorough and detailed as possible. When I bring it up to my employer, I won't be using old memories from 6 years ago 🙂

 

 

8949 Pg 3 - Box A (TIP)

If you don't need to make any adjustments to the basis or type of gain or (loss) reported to you on Form 1099-B (or substitute statement) or to your gain or (loss) for any transactions for which basis has been reported to the IRS (normally reported on Form 8949 with box A checked), you don't have to include those transactions on Form 8949. Instead, you can report summary information for those transactions directly on Schedule D. For more information, see Exception 1, later.

Exception 1. Form 8949 isn't required for certain transactions. You may be able to aggregate those transactions and report them directly on either line 1a (for short-term transactions) or line 8a (for long-term transactions) of Schedule D. This option applies only to transactions (other than sales of collectibles) for which: 

• You received a Form 1099-B (or substitute statement) that shows basis was reported to the IRS and doesn't show any adjustments in box 1f or 1g;

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15 hours ago, Matthew WaitingOnWA2BaCPA said:

• You received a Form 1099-B (or substitute statement) that shows basis was reported to the IRS and doesn't show any adjustments in box 1f or 1g;

A member on another forum (Drake?), said they ignore this and enter all (codes A & D) on Line 1a/8a.  Then they list the cumulative wash totals as a single entry on the appropriate line of 8949.  A few others agreed that they also did this, and none have ever had any problems. YMMV!

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On 9/30/2020 at 7:47 PM, Lion EA said:

List the wash sales individually.

I import, so all sales are listed individually. But, I know some preparers break out the wash sales individually and then enter the others in bulk.

Why? All you need is totals on the 8949 with codes MW. Anything else is a waste of time.

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8 hours ago, Jim Oh Bkkr said:

A member on another forum (Drake?), said they ignore this and enter all (codes A & D) on Line 1a/8a.  Then they list the cumulative wash totals as a single entry on the appropriate line of 8949.  A few others agreed that they also did this, and none have ever had any problems. YMMV!

That's... something I would never do. Two lines on the 8949, one for code A and one for code D with MW code is the proper way.

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