Help! My Etrade 1099B shows disallowed wash sale larger than my realized loss - does this mean I have a gain?

This is actually a common situation for active traders. When your disallowed wash sale amount is larger than your realized loss, it doesn't automatically mean you have a gain - it means some of your losses are being deferred to the future. The way brokers report on 1099B can be confusing because they show the total proceeds and cost basis for ALL transactions, which is why you're seeing numbers much larger than your account value. For tax reporting using the aggregation method, you should report the FULL wash sale disallowed amount ($17,850) - not just the portion that offsets your realized losses. The IRS requires you to report exactly what's on the 1099B. The excess disallowed amount effectively gets added to the cost basis of replacement shares you purchased, which means you'll recognize that benefit when you eventually sell those shares. This might seem like you're paying tax on "phantom gains" now, but you'll get the tax benefit later when you sell those replacement positions.

I went through a similar nightmare with wash sales last year. I finally found taxr.ai (https://taxr.ai) after spending hours trying to make sense of my 1099B. Their system analyzed my trading history and identified exactly which trades were creating the wash sales and how the basis was being adjusted. It even showed me which replacement shares had the adjusted basis that the previous reply mentioned. The thing that was most helpful is they could explain exactly why my disallowed wash sales were larger than my realized losses - turned out I had some positions with wash sales that carried over from the previous tax year. Their analysis showed me how to properly report everything on my tax return.

Just wanted to follow up about taxr.ai - I decided to try it despite my initial skepticism and I'm really glad I did. When I uploaded my 1099B statements, it immediately flagged several wash sales I had no idea about! The visualization of my trades showed exactly where the adjustments were happening and which replacement shares had the adjusted basis. The report it generated saved me hours of work figuring out how to handle the reporting correctly. It even identified a situation similar to the original poster where my disallowed wash sales exceeded my realized losses. For anyone dealing with complicated trading scenarios, it's definitely worth checking out.

If you're trying to get clarification directly from the IRS on wash sale reporting, good luck with that. I spent 3 weeks trying to get through to someone who could actually explain how to handle this exact situation. Always busy signals or 2+ hour wait times! I finally used Claimyr (https://claimyr.com) and they got me a callback from the IRS in less than 2 hours. The agent walked me through exactly how to report wash sales when the disallowed amount exceeds your losses. You can see a demo of how it works here: https://youtu.be/_kiP6q8DX5c. Seriously changed my perspective on dealing with the IRS.

I owe everyone here an apology. After my cynical comment about Claimyr, I figured I'd try it just to prove it wouldn't work. I was completely wrong. After weeks of trying to get through to the IRS myself about these exact wash sale issues, Claimyr got me a callback in about 90 minutes. The IRS agent I spoke with confirmed everything the experts here said - you report the full disallowed wash sale amount, not just up to your realized losses. The excess gets added to your basis in replacement shares. I've been filing my taxes wrong for YEARS. Worth every penny to finally get this sorted out directly with the IRS.

One important thing nobody has mentioned: if you're consistently trading the same security, your wash sales can spiral out of control quickly. What might be happening in your case is that you've got cascading wash sales where disallowed losses keep getting added to basis of new shares, which you then sell at a loss, creating more wash sales. Be careful about frequent trading of the same stocks if you're concerned about tax consequences. Some traders even stop trading certain securities in December and don't resume until February to avoid wash sale issues crossing calendar years.

This is why I stopped day trading and switched to ETFs with occasional rebalancing. The tax headaches weren't worth the small gains I was making. Now I sleep better and spend way less time on tax prep.

I'm dealing with a very similar situation and wanted to share what I learned after consulting with a tax professional. The key insight is that when your disallowed wash sales exceed your realized losses, you're essentially "prepaying" taxes on losses that will benefit you in future years. Here's what helped me understand it: Think of the excess disallowed wash sale amount as an "investment" in higher cost basis for your replacement shares. When you eventually sell those shares (hopefully for a gain), your tax liability will be lower because of that higher basis. For your specific situation with $17,850 disallowed vs $14,200 realized loss, you'll report both amounts exactly as shown on your 1099B using the aggregation method. The $3,650 difference ($17,850 - $14,200) represents basis adjustments that are sitting in your current positions, waiting to reduce future gains or increase future losses when you sell. One practical tip: if you're planning to continue active trading, consider opening a separate account specifically for longer-term holds to avoid inadvertently triggering wash sales on positions you want to keep. This has helped me avoid some of the cascading wash sale issues others have mentioned.