Yes. You have to report every transaction on Form 1099-B on your federal tax return, including sales that produced a loss and sales where you barely broke even. Your brokerage sends an identical copy of that 1099-B to the IRS, so any sale you leave off your return shows up as a mismatch in the agency’s automated system. The default assumption when that happens is not friendly: the IRS may treat the entire sale amount as taxable gain until you prove otherwise.
Why Leaving a Sale Off Backfires
The IRS already has your 1099-B data before you file. When its matching system compares the proceeds reported by your broker to what appears on your return, an omission triggers a CP2000 notice proposing additional tax.1Internal Revenue Service. Topic No. 652, Notice of Underreported Income – CP2000 These notices typically arrive 12 to 18 months after you file.
The math the IRS uses in that notice is the painful part. The agency knows your gross proceeds but does not always know your cost basis, so it may treat the entire sale amount as taxable income. If you sold $50,000 of stock that cost you $48,000, the CP2000 can propose tax on $50,000 rather than the actual $2,000 of gain. You then have 30 days to respond with documentation showing your real basis before the assessment is finalized.1Internal Revenue Service. Topic No. 652, Notice of Underreported Income – CP2000
This is why reporting a losing trade still matters. Skipping a sale that produced a loss feels harmless, but the IRS does not know it was a loss until you tell it. Silence gets read as a gain the size of the whole sale.
Penalties for Not Reporting
If a CP2000 becomes an assessment, several penalties can apply on top of the corrected tax:
- Failure-to-file penalty: 5% of the unpaid tax for each month the return is late, capped at 25%.2Office of the Law Revision Counsel. 26 U.S. Code 6651 – Failure to File Tax Return or to Pay Tax
- Failure-to-pay penalty: 0.5% per month on the unpaid balance, also capped at 25%.
- Accuracy-related penalty: a flat 20% on the underpayment when it counts as a substantial understatement, meaning it exceeds the greater of 10% of the correct tax or $5,000.3Office of the Law Revision Counsel. 26 U.S. Code 6662 – Imposition of Accuracy-Related Penalty on Underpayments
Interest runs on top of the penalties from the original due date until the balance is paid in full.1Internal Revenue Service. Topic No. 652, Notice of Underreported Income – CP2000
How to Report Your 1099-B
Two forms carry the load. Form 8949 lists individual sales, and Schedule D totals them and calculates the net gain or loss that flows to Form 1040.4Internal Revenue Service. About Form 8949, Sales and Other Dispositions of Capital Assets Every 1099-B transaction has to land somewhere on Form 8949 or on one of the summary lines of Schedule D.
Sorting Transactions Into the Right Checkbox
Form 8949 splits into Part I for short-term sales (held one year or less) and Part II for long-term sales (held more than one year).5Internal Revenue Service. Topic No. 409, Capital Gains and Losses Within each part, you check a box that matches how your 1099-B reports the transaction:6Internal Revenue Service. Instructions for Form 8949, Sales and Other Dispositions of Capital Assets
- Box A (short-term) or D (long-term): basis was reported to the IRS. Enter proceeds and basis as shown on the 1099-B.
- Box B (short-term) or E (long-term): basis was not reported to the IRS. Fill in the correct basis from your records.
- Box C (short-term) or F (long-term): you did not receive a Form 1099-B for the transaction.
Digital asset sales use a parallel set of checkboxes: G, H, and I for short-term and J, K, and L for long-term. Digital assets should not be reported under boxes C or F.6Internal Revenue Service. Instructions for Form 8949, Sales and Other Dispositions of Capital Assets The 1099-B itself carries an “Applicable checkbox on Form 8949” code that tells you which one to use.7Internal Revenue Service. Instructions for Form 1099-B – 2026
The Summary Shortcut
If you have a lot of trades where the broker reported basis to the IRS and no adjustments are needed, you don’t have to list each one on Form 8949. You can aggregate the totals and enter them directly on Schedule D, line 1a for short-term or line 8a for long-term.8Internal Revenue Service. Form 8949, Sales and Other Dispositions of Capital Assets The shortcut only covers Box A and Box D transactions (and the digital asset equivalents). Anything that needs a basis adjustment, or where basis was not reported, still has to be listed line by line.
Netting and the $3,000 Loss Cap
You don’t pay tax on each winning trade in isolation. Short-term gains are netted against short-term losses, long-term gains against long-term losses, and if one category is negative it offsets the other.5Internal Revenue Service. Topic No. 409, Capital Gains and Losses Short-term net gains are taxed at ordinary income rates; long-term net gains get lower capital gains rates.
When the final net figure is a loss, you can deduct up to $3,000 against ordinary income for the year, or $1,500 if you file married filing separately. Anything left carries forward indefinitely to offset gains or ordinary income in future years.5Internal Revenue Service. Topic No. 409, Capital Gains and Losses That carryforward is another reason to report loss trades: you can’t roll a loss into next year if you never claimed it.
When the 1099-B Numbers Are Wrong
Reporting the 1099-B correctly sometimes means overriding what it says. Adjustments go in Column (g) of Form 8949 with a reason code in Column (f), and the categories below are where those adjustments come up most often.
Wash Sales
If you sell a security at a loss and buy the same or a substantially identical security within 30 days before or after the sale, the loss is disallowed on the current return.9eCFR. 26 CFR 1.1091-1 – Losses From Wash Sales of Stock or Securities The disallowed amount is added to the basis of the replacement shares. Your broker tracks wash sales within a single account for covered securities and reports the disallowed amount in Box 1g of the 1099-B.7Internal Revenue Service. Instructions for Form 1099-B – 2026
Brokers are not required to track wash sales across different accounts. If you sold a stock at a loss in one brokerage and bought it back within 30 days at another, neither firm will flag it. Identifying that wash sale and adjusting Form 8949 is on you.
Inherited Stock
If you sold stock you inherited, your basis is generally the fair market value on the date the original owner died, not what they originally paid.10Office of the Law Revision Counsel. 26 U.S. Code 1014 – Basis of Property Acquired From a Decedent Inherited property also gets long-term treatment regardless of how briefly you held it.11Office of the Law Revision Counsel. 26 U.S. Code 1223 – Holding Period of Property The 1099-B rarely shows the correct basis for inherited shares, so you’ll need estate valuation records to fill in the right figure on Form 8949.
Gifted Stock
Stock you received as a gift generally carries the donor’s original basis, so long as fair market value at the time of the gift was at least equal to that basis.12Office of the Law Revision Counsel. 26 U.S. Code 1015 – Basis of Property Acquired by Gifts and Transfers in Trust If value had dropped below the donor’s basis at the time of the gift, the loss basis is the lower fair market value and the gain basis stays the donor’s cost. Box 1e will usually be blank; the donor’s records fill the gap.
Corporate Actions and Reinvested Dividends
Stock splits, mergers, spinoffs, and dividend reinvestments all shift your cost basis, and the 1099-B doesn’t always capture those events correctly. If the reported basis doesn’t match your records, adjust it on Form 8949 and hold on to your trade confirmations and account statements as backup.
A Boundary Worth Knowing: Digital Assets
Cryptocurrency exchanges and other digital asset brokers now issue Form 1099-DA rather than a traditional 1099-B.13Internal Revenue Service. About Form 1099-DA, Digital Asset Proceeds From Broker Transactions The reporting duty is the same: sales go on Form 8949 and Schedule D, using the G through L checkboxes noted above. And if you sold digital assets through a platform that never issued a form (many decentralized and peer-to-peer venues won’t), you still have to report the sale.
If You Already Filed Without Reporting a Sale
File Form 1040-X to amend the return, and attach a corrected Schedule D and Form 8949 so the IRS can match the new figures to the 1099-B data it already has on file. To claim a refund from the amendment, you generally have three years from when you filed the original return, or two years from when the tax was paid, whichever is later.14Office of the Law Revision Counsel. 26 U.S. Code 6511 – Limitations on Credit or Refund
If the amendment shows more tax owed instead of a refund, file and pay quickly. Interest and the failure-to-pay penalty run from the original due date, so each month of delay adds to the total. Amending on your own before a CP2000 arrives is almost always cheaper than waiting for the IRS to propose its own version of the numbers.