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

The short answer is no - when "noncovered security" is checked on your 1099-B, the IRS does NOT receive the basis information from your broker, even if they included it on your form. "Noncovered" means exactly what it sounds like - these securities aren't covered by the rules requiring brokers to report basis to the IRS. This typically applies to securities acquired before certain dates (like stocks purchased before 2011) or certain types of securities that aren't subject to basis reporting requirements. So even though your broker was helpful by including the basis information on your form, you are still responsible for reporting that basis to the IRS yourself. Make sure you enter this information correctly in your tax software. If you don't, the IRS might think your entire proceeds are profit, which would result in you paying more taxes than you should.

I ran into the same issue last year and found a great solution with https://taxr.ai which helped me sort through all my investment tax documents. Their system automatically identifies noncovered securities and flags them so you know which ones you need to manually verify the cost basis for. When I uploaded my 1099-B forms, the system immediately highlighted all the noncovered securities and explained exactly what I needed to do with each one. It saved me hours of research and prevented me from making costly mistakes on my return.

Just wanted to follow up - I tried https://taxr.ai after seeing this recommendation and it was incredibly helpful! The system immediately identified all 6 of my noncovered securities and guided me through entering the correct basis information. I had no idea I was overpaying on taxes because my broker's listed basis was too low on two positions I'd held for years. The best part was how it explained everything in plain English instead of tax jargon. It even created a detailed report I can keep with my tax records that explains my basis calculations. Definitely using this again next year!

If you're having trouble figuring out your correct basis or getting contradictory information, you might want to try calling the IRS directly. I know that sounds painful, but I used https://claimyr.com and got through to an IRS agent in about 15 minutes instead of waiting on hold for hours. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c The agent I spoke with walked me through exactly how to report noncovered securities and confirmed that I needed to report my own basis figures since the broker wasn't required to send that info to the IRS. Really helpful for clarifying confusing tax situations like this.

I have to admit I was wrong. After seeing the comments here, I tried Claimyr for an issue with my noncovered securities reporting AND a missing 1099-R form. Got a callback in about 17 minutes and spoke with an IRS agent who was surprisingly helpful. She confirmed exactly what was mentioned above - the basis for noncovered securities isn't reported to the IRS even if it's on your 1099-B. She also helped me understand how to document my correct basis since some of my positions were from a transfer from another brokerage. Saved me from potentially getting a CP2000 letter and having to deal with an audit!

Your tax software should handle this correctly if you indicate it's a noncovered security. When I enter these in TaxAct, there's a specific checkbox for "noncovered" and it then prompts me to enter the basis manually. The software then generates the appropriate form to report this to the IRS. Just make sure you don't skip that step, because the default assumption is that if you don't report a basis, your basis is $0, meaning you'd pay taxes on the full amount of the sale as if it were all profit.

Is anyone else annoyed that brokers can just check "noncovered" and push the responsibility onto us? I just discovered several old stock positions from my grandfather that are "noncovered" and I have absolutely no idea what the original basis was from 15+ years ago. What am I supposed to do in that case?

Tip from someone who deals with this every year: Take screenshots or save PDFs of the historical stock prices for any noncovered securities you sell, especially if you're using stepped-up basis or had to research the original purchase price. Keep these files with your tax records. The IRS has been paying more attention to capital gains in recent years, and having documentation ready if you get questioned will save you massive headaches. I learned this the hard way after getting a CP2000 notice for some old stocks I sold.

This is exactly the kind of confusion that trips up so many people! I went through the same thing last year with some old mutual fund shares. The key thing to remember is that "noncovered" literally means the IRS isn't getting that basis information from your broker, so it's 100% on you to report it correctly. One thing I'd add to the great advice already given - make sure you're consistent across all your noncovered securities. If you have multiple sales throughout the year, use the same method for calculating basis (FIFO, specific identification, etc.) and document your approach. The IRS wants to see consistency in your reporting methodology. Also, if you're using TurboTax, it should walk you through this step by step. When it asks about the noncovered securities, just make sure you're entering your actual basis, not necessarily what's printed on the 1099-B. The software will handle the rest and make sure it gets reported properly on your Schedule D and Form 8949.