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Get Covered with the Basics of Non-Covered Basis

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April 7, 2017
Get Covered with the Basics of Non-Covered Basis
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The fast-approaching April 18 tax deadline is looming in the not-so-distant future. You’ve received your 1099-B, so you’re all set to start filing your taxes. But then you review your 1099-B, and notice there is non-covered cost basis on your form, and some of it is missing. Yikes. Now what? Lucky for you, we’ve got you covered with the non-covered basis essentials.

Covering the Basics

Non-covered cost basis is cost basis for securities that were purchased prior to January 1, 2011 when broker-required reporting went into effect for different security types. Cost Basis reporting is required by brokers on the 1099-B and to the IRS for all purchases of the security types specified below beginning on the dates listed:

  • January 1, 2011: Equities
  • January 1, 2012: Mutual Funds and Dividend Reinvestment Plans
  • January 1, 2014: Fixed-Rate Debt Instruments and Options
  • January 1, 2016: Variable-Rate Debt Instruments and Other Complex Securities

Because the law doesn’t require cost basis to be reported by your broker prior to the date of regulatory implementation, cost basis is considered to be non-covered. So, if you hold securities purchased prior to the required reporting start date, those specific securities will have non-covered basis. To clarify, this doesn’t mean cost basis is not reportable at all; rather, it is not required to be reported by a broker to the IRS. Taxpayers are still responsible for reporting this in their own individual tax filing.

Applying Your Knowledge

Gone are the days when you tracked your cost basis on a general ledger notebook with a pencil (and a very large eraser). We offer a more efficient and easier way to track cost basis with the Gain/Loss page powered by GainsKeeper. All covered securities are automatically tracked in GainsKeeper with the adjusted cost basis. Adjusted cost includes your original cost basis that is tracked and adjusted for any wash sales, corporate actions, dividend reinvestments, return of capital, gift adjustments, inheritances, or any other adjustments that may affect your cost basis. Non-covered securities will be tracked, but depending on the year of purchase, the original purchase information may not have made it to GainsKeeper.

Having all of your cost basis information updated including non-covered basis will provide a simple one-stop shop for tracking your cost basis. While it isn’t required to have your non-covered basis updated in GainsKeeper, it is a convenient resource to have your cost basis easily viewable and tracked.

To access the Gain/Loss page, log in to your account at tdameritrade.com, go to "My Account" and click "Gain/Loss." All of your current cost basis information shown in GainsKeeper flows to the 1099-B for taxable accounts. Having the non-covered basis updated in GainsKeeper will ensure it displays in the non-covered section of the 1099-B, which could help provide a consolidated form for filing your taxes in the future. While your non-covered cost basis displayed on your 1099-B won’t be reported to the IRS, it does help consolidate all your information into one place, making your tax filing process as simple as possible. And simple is always good.

Take Action

Even if you have already reported your taxes for 2016 securities sold, you may still have other non-covered basis for securities you still hold. To avoid any future issues or missing basis, you can check all of your cost basis in the Gain/Loss page. If you have certain non-covered tax lots that show in GainsKeeper, click the "Edit your GainsKeeper cost basis" button to update. If there is missing basis you are unsure of, or the basis does not seem accurate, call a Tax Services Representative for help at 800-669-3900 Monday through Friday, 9 a.m. to 5:30 p.m. ET. 

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