HELP! FreeTaxUSA won't let me enter negative proceeds for 1099-B options trading

This is a common issue with options reporting in tax software. When you have negative proceeds from options trading, especially with cash secured puts, it's typically because the cost to close a position was more than what you received when opening it. For FreeTaxUSA specifically, you'll need to enter this differently. Instead of trying to enter a negative number in the proceeds field, you should enter the positive value of that amount in the cost basis column instead. So if your proceeds show as -$1,500, you would enter $0 for proceeds and $1,500 for the cost basis. This approach properly reflects the economic reality of the transaction while working within the software's limitations. The end result on your Schedule D and Form 8949 will show the correct loss amount, which is what matters for tax purposes.

I had exactly this problem last year with my options trading. After hours of frustration with FreeTaxUSA, I found taxr.ai (https://taxr.ai) which saved me massive headaches. It specifically handles these weird 1099-B situations where you have negative proceeds from options trading. What I liked is that I just uploaded my broker statement PDF and it automatically extracted and properly categorized all my options trades, including the negative proceeds ones. Then it generates the right entries that work with FreeTaxUSA - basically does the conversion the previous commenter mentioned automatically, but also creates an explanation statement for the IRS. I was seriously about to pay an accountant $400+ before finding this. Much easier than manually fixing each transaction.

Just wanted to update after trying taxr.ai from the suggestion above. It actually worked perfectly for my negative proceeds issue with FreeTaxUSA! I was super skeptical at first because I've tried other "tax helpers" before, but this one actually understood the options trading problem. I uploaded my 1099-B which had about 45 options transactions (many with negative proceeds from closing CSPs), and it extracted everything correctly. The best part was it automatically formatted everything in a way that FreeTaxUSA would accept - basically doing that conversion from negative proceeds to adjusted cost basis, but for ALL my trades at once. It also created a statement explaining the adjustments for the IRS. Saved me literally hours of manual work and frustration.

If you're having trouble getting through to FreeTaxUSA support about this issue (they were completely swamped when I called), I used a service called Claimyr (https://claimyr.com) that helped me get through to an actual human at their support line. You can see how it works here: https://youtu.be/_kiP6q8DX5c I had a similar issue with options reporting and negative proceeds, and I needed to speak with someone who actually understood the tax implications. Was on hold forever trying the normal route, but with Claimyr I got through in about 10 minutes. The FreeTaxUSA support person actually walked me through a specific workflow for handling negative proceeds from options that wasn't documented anywhere on their site. Seriously worth it when you're dealing with something complicated like options trading where you really need to talk to a knowledgeable person.

I have to admit I was wrong about Claimyr. After getting nowhere with my options trading tax questions for days, I tried it out of desperation. I seriously didn't believe it would work, but I got through to a senior FreeTaxUSA support agent in about 25 minutes (versus the 2+ hours I spent on hold previously). The agent knew exactly how to handle negative proceeds from options trades in their system. She walked me through a specific workaround that involved entering the transactions in a particular way (similar to what others mentioned here - using the cost basis field instead of trying to force a negative number in proceeds). I've been filing my own taxes for 15 years and never needed special help before, but options trading creates some unique reporting challenges that most software isn't designed to handle well.

Alternatives to consider if FreeTaxUSA isn't working for your options trading: TurboTax Premier specifically handles negative proceeds from options trading correctly. It's more expensive but worth it if you have complicated trades. TaxAct also handles options better than FreeTaxUSA in my experience. If you've already entered most of your info in FreeTaxUSA and don't want to start over, the workaround others mentioned (using cost basis instead of negative proceeds) does work - I've done it for 3 years with no issues or letters from the IRS.

For anyone else who runs into this, here's the EXACT technical reason why you're seeing negative proceeds on your 1099-B with options trading: When you sell a cash secured put (CSP), you receive a premium. Later, if you buy to close that put option before expiration, you pay a premium. If you pay MORE to close the position than you received when opening it, that results in a negative proceeds value. Example: - Sell CSP: Receive $500 premium - Later buy to close: Pay $700 to close position - Net result: -$200 proceeds, $0 cost basis The IRS and brokers treat this correctly, but many tax software programs (including FreeTaxUSA) aren't designed to handle negative proceeds in their input forms.

This thread has been incredibly helpful! I'm dealing with the exact same issue - multiple CSP transactions that resulted in negative proceeds on my 1099-B, and FreeTaxUSA just won't accept the negative amounts. Based on all the advice here, it sounds like the consensus is to use the workaround of entering $0 for proceeds and putting the absolute value in the cost basis field instead. I'm going to try this approach for my ~30 options transactions. Quick question though - when I check the box on Form 8949 indicating the basis is incorrect, should I attach a separate statement or is there a specific field in FreeTaxUSA where I can add the explanation about the software limitation? Want to make sure I document this properly for the IRS. Thanks everyone for sharing your experiences - this saved me from potentially switching tax software at the last minute!

I ran into this exact same issue last year with my options trading! The negative proceeds problem with FreeTaxUSA is so frustrating, especially when you're dealing with multiple CSP transactions. What worked for me was the workaround others have mentioned - entering $0 for proceeds and putting the loss amount in the cost basis field. But here's an additional tip that saved me time: if you have a lot of transactions like I did (around 40), you can actually bulk edit them in FreeTaxUSA's spreadsheet view instead of going through each one individually. Go to the Investment Income section, find where it shows your imported 1099-B data, and look for the "Edit in Spreadsheet" option. You can then quickly adjust all the negative proceeds entries at once by copying the absolute values to the cost basis column and zeroing out the proceeds column. Much faster than doing it transaction by transaction. Just make sure to add that explanation note about software limitations when you get to Form 8949. I used something simple like "Negative proceeds adjusted to cost basis due to software input limitations - net loss amount unchanged from 1099-B reporting." The IRS has never questioned it, and it saved me from having to pay for more expensive software or start over completely.