If 'noncovered security' is checked on 1099-b, but basis was filled in, was basis actually reported to IRS?

Does that mean I could potentially get flagged for a mismatch if the numbers don't match up exactly? Like if my records show a slightly different basis than what's on the 1099-B? And do I need to attach any documentation to prove my basis amount?

There's minimal risk of a "mismatch" flag since the IRS isn't receiving the basis information for noncovered securities - that's why you're responsible for reporting it. You're essentially providing information the IRS doesn't already have. You generally don't need to attach documentation to your tax return to prove your basis, but you should keep all supporting records (original purchase confirmations, inheritance documents, gift records, etc.) in case of an audit. The IRS recommends keeping these records for at least 3 years after filing, though for basis issues, it's wise to keep them for the entire time you own the security plus that 3-year period.

Does it work well with more complicated situations? I've got some employee stock options and ESPP shares that are a nightmare to figure out the basis for. Can it handle that kind of complexity?

I'm skeptical about these tax tools. How does it actually verify your basis is correct? Sounds like it's just telling you what the form says, which I can read myself. Is it actually doing any verification or cross-checking?

It absolutely handles complex situations like employee stock options and ESPP shares. It's designed specifically for those tricky scenarios where basis calculation gets complicated. It even flagged that some of my ESPP shares had special holding period requirements I hadn't considered. As for verification, it doesn't just regurgitate what's on the form. It cross-references information across all your documents and applies the appropriate tax rules. For instance, it caught that some of my basis amounts needed adjustment due to corporate actions that my broker hadn't properly accounted for. It doesn't just take what's on the form at face value - it applies intelligence to identify potential issues.

This sounds like a scam. Why would I pay a company to call the IRS for me? And how would they have any better luck getting through than I would? The IRS phone system is universally terrible for everyone.

It's actually pretty straightforward - they use an automated system that continuously redials and navigates the IRS menu options until it gets through to an agent. When an agent answers, they connect you directly to that call. It's not a special number, just technology that handles the frustrating part of trying to reach someone. They don't provide tax advice themselves - they just connect you with actual IRS agents who can answer your specific questions authoritatively. It's especially useful for situations like these noncovered securities where the rules can be confusing and you want an official answer. I was skeptical too until I tried it and was speaking with an IRS agent within 20 minutes after trying for days on my own.

How does that even work? The IRS phone system is completely broken - I've tried calling multiple times and just get disconnected. Are they using some special number or something?

This sounds like a scam. Why would I pay a company to call the IRS for me? And how would they have any better luck getting through than I would? The IRS phone system is univers

That's really helpful - these were actually gifted to me while he was still alive, not inherited. Does that change how the basis works? And does the whole "noncovered security" thing still apply the same way?

For gifted securities, the basis rules are different than inherited ones. With gifts, you generally take the donor's original basis (what your grandpa paid). However, there's a special rule if the security's value at the time of the gift was less than the original basis - in that case, for calculating losses, you use the fair market value at the time of the gift. The "noncovered security" designation still applies exactly the same way regardless of whether the shares were gifted or inherited. The broker isn't required to report the basis to the IRS, so you need to report it yourself on Form 8949 with the appropriate code. Given that these were gifted shares from years ago, tracking down the original basis might be challenging - you might need to contact the executor of your grandfather's estate or find his old records.

Not a stupid question at all! Crypto is actually treated similarly but with some key differences. The reporting requirements for cryptocurrency have been evolving, but generally, crypto transactions on your 1099-B that are marked "noncovered" follow the same principle - the basis isn't being reported to the IRS even if it's on your form. However, there's an important distinction: cryptocurrency doesn't follow the same covered/noncovered security date rules as stocks. The classification is more about whether the exchange had sufficient information to calculate an accurate basis. Either way, you should report the basis yourself on Form 8949 with the appropriate codes.

This is exactly the clarification I needed! I was so confused about why they would fill in the basis but then mark it as noncovered. It makes sense now that it's about their reporting obligation to the IRS, not what they show me on my copy. I'll definitely need to dig up the original gift documentation to make sure I'm using the right basis amount. My grandpa was pretty good about keeping records, so hopefully I can find what his original cost was. Thanks for explaining the Form 8949 codes too - that part always seemed intimidating but knowing to use code "E" for long-term makes it clearer. One follow-up question though - if I can't find his original basis records, is there any way to estimate or research what he might have paid? Or do I need to have exact documentation?