How to Report Long Term Non-Covered Securities on Tax Return When Basis Isn't Reported to IRS

Thanks for the info. I'm in a similar situation but with etrade. Quick question - does this mean the non-covered securities get reported on a different part of Schedule D than the covered ones? And is there any advantage to grouping similar transactions together instead of listing each one individually?

Yes, non-covered securities are reported in a different section of Form 8949 than covered securities. For long-term transactions, covered securities go in Part I (Box A or B), while non-covered securities go in Part II (Box E or F). This separation helps the IRS match what they received from brokers with what you're reporting. Regarding grouping transactions, while you can technically group similar securities with the same buy/sell dates and same basis reporting status, I generally recommend entering them individually when you have the detailed information. This provides a clearer audit trail if questions ever arise. However, if you have dozens of similar small transactions, grouping them can save time without significantly increasing risk.

How accurate is it with extracting the dates and cost basis info? I've got nearly 50 non-covered transactions and I'm worried about making errors when entering them manually.

I've heard of these document scanning tools but I'm skeptical about security. Are you uploading your entire 1099-B with all your personal info to their servers? How do you know it's safe?

The accuracy is really impressive - I had 38 transactions and it got every single date, amount, and CUSIP number correct. I just spot-checked about 10 of them against my original document to verify and they all matched perfectly. It even correctly identified which ones were covered vs non-covered. Regarding security, I had the same concern initially. They use bank-level encryption for all document transfers and don't store your documents after processing. You can also delete your data immediately after you export it. I researched them before using the service and they have a solid privacy policy that specifically prohibits selling or sharing your data.

Wait, how does this actually work? Does it just automate the hold process somehow? I need to talk to someone about a similar issue but can't sit on hold all day.

Sorry but this sounds too good to be true. The IRS phone system is notoriously impossible. You're telling me some third-party service can somehow magically get through when millions of people can't? I'm extremely doubtful this actually works as advertised.

It basically acts as a virtual placeholder in the IRS phone queue. Instead of you sitting on hold, their system waits in line and monitors the hold music/messages. When it detects that an agent is about to come on the line, it calls your phone and connects you to the IRS agent. So yes, it's automating the hold process. I was skeptical too, but it's not "magic" - it's just clever technology. It doesn't give you special access or let you cut the line - you still wait the same amount of time overall, but you don't have to actively sit there with a phone to your ear. The service worked exactly as described for me - I got a callback after about 2.5 hours (which was actually faster than my previous attempts waiting on hold myself).

Thanks for this reminder about marking them as "Basis not reported to IRS" - I almost forgot to check that box! Do you know if FreeTaxUSA automatically puts them on the right part of Form 8949 when I check that box? And good point about the reinvested dividends - I'll need to review my older statements to see if those were included in the basis Morgan Stanley provided.

Yes, FreeTaxUSA will automatically put them on the correct part of Form 8949 when you check that box. The software is designed to handle this specific situation. The transactions will appear on Part II of Form 8949 rather than Part I, which is exactly what you want. For the reinvested dividends, you'll need to look at your transaction history going back to when you purchased the securities. If you see regular small purchases that align with dividend payment dates, those were likely reinvested dividends. Compare the total cost basis on your Morgan Stanley statement with your own records to see if they included these. Pre-2011 records sometimes didn't track this as precisely as newer statements do.

I e-filed with FreeTaxUSA last year with about 30 non-covered security transactions and had no issues. The key is making sure they're properly marked as "basis not reported to IRS" so they go on the right form. If you have a truly massive number of transactions (like hundreds), you might need to include a summary statement instead of listing each one, but for normal amounts, e-filing works fine.

Thanks for the insight! That's reassuring to hear. I have about 25 transactions so sounds like I should be fine with e-filing. I'll make sure everything is marked correctly.

This is so important! I messed this up last year with some stocks I inherited from my grandmother. The broker had the original purchase price from 1987 listed as the basis, not the stepped-up value from when I inherited them in 2022. Cost me an extra $3,000 in taxes before I caught it and filed an amendment.

Great point about wash sale adjustments! I'm new to dealing with non-covered securities and hadn't even thought about that complexity. When you say FreeTaxUSA has specific fields for wash sale adjustments, do those show up automatically when you're entering each transaction, or do you have to look for them? I want to make sure I don't miss anything like you initially did. Also, is there an easy way to identify which transactions on my 1099-B have wash sale adjustments, or do I need to go through each one carefully?