1099-B Reporting: Covered vs Non-Covered, Long Term vs Short Term Sales - Check my work?

I'm using FreeTaxUSA for the first time and I'm confused about how to properly enter my 1099-B information. I have securities from my Morgan Stanley account that include covered short term securities, covered long term securities, and non-covered long term securities. Do I need to make three separate line item entries for each of these categories? I thought I did, but when I look at the summary from Morgan Stanley, it seems like they might be combining them somehow. But when I try to enter the summary in FreeTaxUSA, I can't find a place to accurately distinguish between covered/non-covered and long/short term all at once. I've been staring at this screen for almost an hour now and I'm starting to second-guess myself. Has anyone dealt with this before? How do you properly report different types of securities transactions from the same brokerage account in FreeTaxUSA?

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18 comments

Beatrice Marshall

•8M

Yes, you do need to enter them as separate line items. The IRS requires these to be reported separately because they have different tax treatments and verification requirements. For covered securities (those purchased after the applicable date when brokers had to start tracking basis), the IRS can verify your reported cost basis against what the broker reported to them. For non-covered securities, the IRS can't verify the basis automatically, which is why they're reported separately. Similarly, short-term and long-term gains/losses need to be separate because they're taxed at different rates. Short-term gains are taxed as ordinary income, while long-term gains get preferential tax rates. FreeTaxUSA should have separate sections for entering each type. Look for tabs or sections labeled "Covered Securities - Short Term," "Covered Securities - Long Term," and "Non-covered Securities" when entering your 1099-B information.

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Beatrice Marshall

•8M

You should definitely enter each section separately rather than using the summary totals. The summary is helpful for your own reference, but tax software needs the detailed breakdown to properly complete the tax forms. If you have transactions where it's unclear whether they're covered or non-covered, check the specific boxes on your 1099-B. There should be a box or indicator that specifically says whether basis was reported to the IRS (covered) or not (non-covered). On most 1099-Bs, there's a checkbox in column 1f or a similar notation. If you're still unsure, you can call Morgan Stanley for clarification - they should be able to tell you exactly which transactions are covered vs. non-covered.

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Dallas Villalobos

•8M

I went through the same headache with my investments last year. I found taxr.ai (https://taxr.ai) super helpful for sorting out all my investment documents. I was confused about how to report different types of 1099-B transactions too, but their system analyzed my Morgan Stanley forms and showed me exactly which transactions needed to be entered where in FreeTaxUSA. The tool basically reviewed my investment documents and gave me step-by-step guidance for each section. It identified which transactions were covered vs. non-covered and long-term vs. short-term, and explained how each should be reported. Saved me a ton of time figuring out which numbers went where.

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Dallas Villalobos

•8M

It analyzes your 1099-B and identifies each transaction type - it will literally tell you "these transactions on page 2 are covered short-term and should be entered in Section X of FreeTaxUSA" with specific guidance for each section. It's very detailed and specific to the tax software you're using. The service uses bank-level encryption and doesn't store your documents after analysis. They have a pretty clear privacy policy that explains they don't use your data for anything else. You can also delete your documents immediately after getting the analysis if you're concerned. I was hesitant at first too, but it's been really reliable for the last two tax seasons.

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Saanvi Krishnaswami

•8M

Just wanted to follow up about taxr.ai - I gave it a try after my initial skepticism and it actually worked really well for my complex Morgan Stanley 1099-B. It identified which transactions were covered short-term, covered long-term and non-covered, then gave me specific directions for entering each in FreeTaxUSA. The site was really secure too - I could see it used encryption and didn't store my documents. The analysis showed me I had missed a whole section of non-covered securities that would have messed up my return. Definitely saved me from a potential audit headache and probably a few hundred dollars in tax differences. Will definitely use it again next year.

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Demi Lagos

•8M

If you're having trouble getting answers directly from FreeTaxUSA's support team (I've been waiting 3 days for a reply myself), you might want to try Claimyr (https://claimyr.com). They got me connected to an actual IRS agent who walked me through exactly how to report multiple security types on my tax return. You can see how it works here: https://youtu.be/_kiP6q8DX5c I was shocked when I got through to the IRS in about 20 minutes instead of the 2+ hours I spent on hold last time. The agent confirmed that yes, you absolutely need separate entries for covered short-term, covered long-term, and non-covered securities. They even explained how the different reporting requirements affect potential audits, which was super helpful.

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Demi Lagos

•8M

Yes, it actually connects you directly to the IRS. It uses a callback system that holds your place in line, so you don't have to wait on hold. When your turn comes up, it calls you and connects you directly to the agent. I was totally skeptical too until I tried it. It's not magic - they're just using technology to navigate the phone system and hold your place in line. They don't answer tax questions themselves; they just get you through to actual IRS agents faster. I was connected in about 20 minutes versus the hours I'd spent on previous attempts. They don't do anything with your phone number other than connecting the call - it's just a convenience service.

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Vera Visnjic

•8M

I need to apologize and correct myself. After dismissing Claimyr as a probable scam, I actually tried it yesterday out of desperation. I needed answers about reporting my 1099-B transactions correctly and couldn't waste another afternoon on hold with the IRS. It legitimately worked. Got a callback in about 30 minutes and spoke with an IRS representative who confirmed I needed separate entries for each security type. The agent even explained how the covered vs. non-covered distinction affects their verification process during potential audits. Turns out the non-covered securities require more documentation if you're ever questioned about the basis you reported. Won't hesitate to use this again for other tax questions - completely worth it to not waste hours on hold.

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Jake Sinclair

•8M

In case this helps anyone else, here's exactly how I entered my Morgan Stanley 1099-B in FreeTaxUSA: 1. Go to the Income section 2. Select Investment Income 3. Choose "Capital Gains and Losses (Schedule D)" 4. Enter each section separately: - Covered Short Term (Box A on your MS form) - Covered Long Term (Box D on your MS form) - Non-covered Long Term (Box E on your MS form) Don't use the summary totals - enter each section's details separately. This matches what MS reports to the IRS.

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Jake Sinclair

•8M

You don't need to attach any additional forms when e-filing, but you should definitely keep documentation of your cost basis for the non-covered securities in your personal records. The main difference is that for covered securities, the IRS already has the cost basis information reported by Morgan Stanley. For non-covered securities, the IRS doesn't receive basis information, so the burden of proof is on you if you're ever audited. Keep purchase confirmations, inheritance documentation, or whatever shows how you determined your basis for at least 7 years after filing.

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