How to Report 1099-A and 1099-B Data on Your Tax Return

What to Do With Forms 1099-A and 1099-B at Tax Time

Form 1099 includes a whole family of tax documents. Each type of 1099 reports various sources of income that a taxpayer might receive during the year. Each variation relates to a specific type of income. Forms 1099-A and 1099-B are two variants of the 1099 form, and they're both related to your real estate holdings, but in two distinctly different ways.

Form 1099-A

Form 1099-A is for the "Acquisition or Abandonment of Secured Property." Homeowners who have been foreclosed upon might be surprised to find one of these turning up in their mailboxes after year's end.

It means that the loan you took out was secured by tangible or real property. You no longer have the property, either because the lender took it back or because you walked away from the obligation, such as by offering a deed in lieu of foreclosure.

Either way, the Internal Revenue Service takes the position that the associated unpaid loan represents income to you because you accepted money under the terms of the loan contract and you're keeping it—you're not paying it back. The IRS doesn't care what you did with the money or that you no longer have the enjoyment of the property. Thus, you'll receive Form 1099-A.

A Form 1099-A Loophole

The good news here is that the Mortgage Debt Relief Act of 2007 provides that you don't generally have to include the amount of your unpaid loan balance as income on your tax return. The bad news is that this tax provision has been on-again-off-again since its inception. It's back, at least through December 2020 under the terms of the the Further Consolidated Appropriations Act.

Unpaid loan balances can be considered capital gains and therefore be subject to capital gains tax in addition to or other than income tax, but a home sales exclusion provided by the IRS should protect against this in many cases.

You can calculate whether this "income" will be forgiven for tax purposes by using the information included on your Form 1099-A to complete Schedule D. Use this form if it was your personal property. Use Form 4797 if it was business property. This table provides an overview of the form, along with instructions and other informational resources. 

Form 1099-A Summary

TYPE OF INCOME:

Reports the abandonment of property that was secured by a loan.

WHAT TO DO WITH IT:

Report this data either on Form 4797 or Form 8949 with the net capital gain or loss carried over to Schedule D and Form 1040.

WHO FILES THE FORM:

Banks, financial institutions, and businesses who acquire property in full or partial satisfaction of a debt secured by that property must issue Form 1099-A to the borrower taxpayer and forward a copy to the Internal Revenue Service.

WHO RECEIVES IT:

Borrowers who defaulted on their loans during the tax year and who gave up or relinquished the property that was securing the debt in exchange for full or partial satisfaction of the loan. This 1099 represents "forgiven" debt.

INSTRUCTIONS:

Instructions for Forms 1099-A and 1099-C

 

General Instructions for Certain Information Returns

BLANK FORM:

Form 1099-A, Acquisition or abandonment of secured property

PUBLICATIONS:

Pub. 4681, Canceled Debts, Foreclosures, Repossessions, and Abandonments

Form 1099-B

This form deals with capital gains tax. It includes information about transactions of property or securities that were handled by a broker. You would use this information to complete Schedule D, and possibly Form 8949 as well. Form 8949 details "Sales and Other Dispositions of Capital Assets." 

The form will tell you whether your gain or loss was short-term or long-term. This is an important distinction because short-term gains are taxed at ordinary income rates, while long-term gains are taxed at more favorable rates of 0%, 15%, or 20% as of tax year 2020, depending on your overall taxable income.

You would have a short-term gain if you owned the asset for less than a year and made money on it when you sold it.

The dividing line between short-term and long-term gains is whether you held the asset for longer than one year. One year or less is a short-term gain.

Not all brokerages will issue multiple 1099s for investments, while some will issue them for interest, and some for dividends. They might issue Form 1099-B as well, or include all this information on a "Composite 1099 Form."

These composite forms are sometimes lacking critical information, so you might want to ask a tax professional for help if you receive one.

Form 1099-B Summary

TYPE OF INCOME:

WHAT TO DO WITH IT:

Sales price of stocks and bonds in box 1d, of cost or another basis in box 1e, and adjustments in box 1g

Form 8949 or Schedule D, whichever applies; See the Instructions for Form 8949

Aggregate profit or (loss) on contracts (box 11)

Form 6781

Bartering (box 13)

See Publication 525

   

WHO FILES THE FORM:

Brokerage and investment firms

WHO RECEIVES IT:

Investors in stocks, bonds, mutual funds, and other types of securities.

INSTRUCTIONS:

General Instructions for Certain Information Returns

 

Instructions for Form 1099-B

 

Instructions for Form 8949

 

Instructions for Schedule D

 

Instructions for Form 4797

BLANK FORM:

Form 1099-B, Proceeds from Broker and Barter Exchange Transactions

PUBLICATIONS:

Pub. 550, Investment Income and Expenses

 

Pub. 554, Sales and Other Dispositions of Assets

 

Pub. 525, Taxable and Nontaxable Income

Note: Always consult with a tax professional for the most up-to-date information and trends. Tax laws and rules can change periodically. This article is not tax advice, and it is not intended as tax advice.