Why do noncovered securities sales exist and what causes missing cost basis info?

This is helpful, but I'm still confused. I definitely bought all my stocks after 2018, so they should all be covered according to what you're saying. Could there be other reasons why some would show up as noncovered? Also, how am I supposed to figure out the cost basis if I don't have the original purchase confirmation anymore?

If you purchased all your stocks after 2018, they should generally be covered securities unless there's something unique about them. There are a few other scenarios that could cause this issue. If the shares were gifted to you, inherited, acquired through employee stock plans, or purchased on foreign exchanges, they might be classified as noncovered. For figuring out the missing cost basis, you have several options. Check your email for old trade confirmations or account statements from around the purchase date. If you have the approximate date and price you paid, you can estimate using historical price data from finance websites. Your previous brokerage should still have records they can provide even if the information didn't transfer. As a last resort, if you absolutely cannot determine the basis, the IRS may allow you to use a zero cost basis (meaning you'd pay taxes on the entire proceeds), or you might be able to make a reasonable estimate with documentation of your methodology.

How does it handle inherited stocks? My grandmother left me some shares that the brokerage lists as noncovered, and I have no idea what she paid for them originally. Does taxr.ai have some way of helping with that specific situation?

I've seen a few of these tax document analyzers before and they typically miss a lot of details. How accurate is this one for complex situations? I have some employee stock purchases and options that got transferred and everything's a mess with missing basis info.

For inherited stocks, taxr.ai can help determine the stepped-up basis by analyzing the fair market value on the date of death. You can upload the inheritance documents and it will extract the relevant dates, then calculate the proper basis using historical pricing data. This saved me a ton of research when I dealt with inherited shares. For complex situations like employee stock purchases and options, that's actually where it really shines. It's specifically designed to handle the complicated paper trails that come with ESPPs, ISOs, and RSUs. I had a mixture of regular purchases and employee stock that got transferred between brokerages, and it correctly identified the origin of each position and properly calculated the adjusted basis, even accounting for the special tax rules that apply to employee equity compensation.

How does this actually work though? I don't understand how a third-party service can somehow get you through the IRS phone system faster when everyone knows it's completely overloaded.

This sounds like BS honestly. If it was that easy to get through to the IRS, everyone would be doing it. I've been trying to resolve a cost basis issue for months with no luck. You're telling me this service magically gets you to the front of the line somehow?

The service doesn't get you to the front of the line - it just waits in the queue for you. Basically, their system places the call and navigates through all the IRS phone menus automatically, then stays on hold (sometimes for hours). When a human IRS agent finally answers, their system immediately calls your phone and connects you directly to that agent. It worked for me because I couldn't stay on hold for 3+ hours during my workday, but their system could. I was able to go about my normal day, and then got the call when an actual agent was available. I still had to wait my turn in the queue, but I didn't have to physically be on the phone the whole time.

Is there any official IRS form or documentation needed when you're reporting a noncovered security and calculating your own basis? I'm worried about getting flagged for audit if my numbers don't match what the brokerage reported.

There's no special IRS form specifically for noncovered securities. You report them on the same Schedule D and Form 8949 as your covered securities. The key difference is that you'll check box C (short-term) or box F (long-term) on Form 8949 to indicate these transactions were reported to the IRS without basis. The most important thing is maintaining good records of how you determined your basis. Keep documentation of your calculation method, especially for complex situations like corporate actions or inherited stocks. If you receive information from your brokerage that differs from your records, you can file Form 8949 with an adjustment explanation in column (g) and the correct basis in column (e). This creates a paper trail showing you made a good faith effort to report accurately.

That makes so much sense! I have some Canadian stocks that show as noncovered and I couldn't figure out why. Do you have to do currency conversion calculations too when reporting these?

Yes, you absolutely need to do currency conversion! For foreign stocks, you have to convert both your purchase price and sale price to USD using the exchange rates on the respective transaction dates. The IRS requires all tax reporting to be in US dollars. You can use the Federal Reserve's historical exchange rates or other reliable sources like XE.com for the conversions. Keep records of which exchange rates you used and from what source - this documentation will be important if you're ever audited. It's definitely more work than domestic stocks, but it's required for accurate reporting.

Great point about working with tax professionals early! I'm actually in my first year dealing with noncovered securities and feeling overwhelmed by all the record-keeping requirements. When you mention bringing "partial records" - what exactly should I be looking for in old statements? I have some old quarterly statements from my previous brokerage, but they don't show individual trade details. Are those still useful, or do I specifically need the trade confirmation emails/documents? Also, did your CPA charge extra for the additional work of reconstructing the missing cost basis information?