It arrives in February, twelve pages long.
It is corrected in March.
Most of the pages are not the ones that matter.
Here are the ones that do.
Welcome. We’re glad to serve you.
If you have an account at Schwab, Fidelity, Vanguard, Edward Jones or anyone else, you get one envelope in February called a consolidated 1099. Inside are four tax forms stapled together: the 1099-B for things you sold, the 1099-DIV for dividends, the 1099-INT for interest, and sometimes a 1099-OID or a 1099-MISC. Then come the supplemental pages, which are the broker’s own detail and are often more useful than the forms.
Every number on those forms was also sent to the IRS, which matches them to your return by computer. Leave one off and a letter follows in about eighteen months. Below is what each box means, which ones change your tax, and the handful of things the broker does not tell the IRS, which are the ones that save you money.
Every sale during the year is a line: what you sold, when you bought it, when you sold it, what you got (box 1d, proceeds) and, usually, what you paid (box 1e, cost basis). Gain or loss is the difference, and the broker sorts each line into one of four groups that map directly to Form 8949:
| Group | Means | 8949 box |
|---|---|---|
| Short-term, covered | Held a year or less; broker reported basis to the IRS | A |
| Short-term, noncovered | Held a year or less; basis not reported | B |
| Long-term, covered | Held more than a year; basis reported | D |
| Long-term, noncovered | Held more than a year; basis not reported | E |
Covered means the broker has tracked your basis since you bought the shares, which is required for stock bought since 2011, mutual funds and dividend-reinvestment shares since 2012, and most bonds and options since 2014. Noncovered means you own the problem: shares bought before those dates, shares transferred in from another broker without basis, or shares you inherited or were given. The IRS sees the proceeds on a noncovered sale and no basis. If your return shows no basis either, the whole sale is taxed as gain. Finding the basis is the most valuable thing we do with a 1099-B.
Totals by group are what go on Schedule D. If the broker reported basis correctly and there are no adjustments, the IRS lets you report the group total on one line instead of listing every sale. Noncovered and adjusted sales get listed.
↑ Back to topIf you sell a stock or fund at a loss and buy the same thing (or something “substantially identical”) within 30 days before or after, the loss is a wash sale. It is not deductible now. The broker puts the disallowed amount in box 1g, and the same amount is added to the basis of the replacement shares, so you get it back when you finally sell those. Dividend reinvestment is the usual culprit: you sell a fund at a loss in November and the December dividend buys more of it. Automatically. The loss on those few shares is washed.
Two things the broker can’t see. It only matches within one account. A sale in your taxable account and a purchase of the same fund in your IRA within 30 days is also a wash sale, and that one is permanent, because the IRA can’t hold the basis adjustment. And it only matches identical securities; selling one S&P 500 fund and buying a different company’s S&P 500 fund is, under current practice, not a wash sale, which is how tax-loss harvesting works.
↑ Back to top| Box | What it is | How it’s taxed |
|---|---|---|
| 1a | Total ordinary dividends | All of it goes on the return; some is taxed at your bracket |
| 1b | Qualified dividends (a subset of 1a) | Capital-gains rates: 0%, 15% or 20%, if you held the shares 61 days around the dividend |
| 2a | Total capital gain distributions | Long-term capital gains, no matter how long you’ve owned the fund; goes to Schedule D |
| 2b | Unrecaptured Section 1250 gain | Real-estate fund depreciation, taxed at up to 25% |
| 3 | Nondividend distributions | Return of your own capital; not taxed now, reduces your basis |
| 5 | Section 199A dividends | REIT dividends; eligible for the 20% qualified business income deduction |
| 7 | Foreign tax paid | A credit, dollar for dollar, up to $300 ($600 joint) without the long form |
| 12 | Exempt-interest dividends | Municipal bond fund income; federally exempt, reported anyway |
| 13 | Specified private activity bond interest | The part of box 12 that counts for the alternative minimum tax |
Box 2a surprises people every year. A mutual fund that went down in value can still distribute a capital gain in December, because the manager sold winners inside the fund. You owe tax on it even though your statement shows a loss. It is the strongest argument for index funds and ETFs in a taxable account; they rarely distribute gains.
Box 5 is a quiet one. REIT dividends don’t qualify for the low dividend rate, but they do qualify for the 20% QBI deduction, which brings a 22% bracket down to an effective 17.6%. The software handles it if the box is entered.
↑ Back to topBox 1 is ordinary interest: bank interest, corporate bonds, money market funds. Taxed at your bracket, federal and Colorado. Box 3 is interest on Treasury bills, notes and bonds and U.S. savings bonds: taxed federally, exempt from Colorado, and the Colorado software only knows that if box 3 is entered separately from box 1. Box 8 is tax-exempt interest from municipal bonds: not taxed federally, but it still goes on the return because it counts toward the Social Security and Medicare IRMAA calculations. Box 9 is the private-activity portion for AMT.
A 1099-OID appears if you own zero-coupon bonds, Treasury STRIPS, or bonds bought at a deep discount. It reports interest you were credited but never received in cash. It is taxable anyway, each year, which is why these belong in an IRA. If you bought a bond at a premium, the broker may show amortization in box 11 or on the supplemental pages, which reduces the taxable interest.
Interest and dividends over $1,500 require Schedule B, which also asks the foreign-account questions. If you hold more than $10,000 in a foreign account at any point in the year, a separate FBAR filing is required, with large penalties for missing it. Most of our clients’ “foreign” holdings are international funds at a U.S. broker, which do not count.
↑ Back to top| Taxable income (2026) | Single | Married filing jointly | Rate on long-term gains and qualified dividends |
|---|---|---|---|
| Up to | $49,450 | $98,900 | 0% |
| Up to | $545,500 | $613,700 | 15% |
| Above | $545,500 | $613,700 | 20% |
| Net Investment Income Tax, on modified AGI above $200,000 single / $250,000 joint (not indexed) | +3.8% | ||
The 0% bracket is real and underused. A retired couple with $60,000 of pension and Social Security and $38,000 of long-term gains pays nothing on the gains. Short-term gains and ordinary dividends are taxed at the regular brackets, up to 37%.
Losses offset gains without limit. If losses win, up to $3,000 a year ($1,500 married filing separately) comes off ordinary income, and the rest carries forward indefinitely. A carryover from 2009 is still good in 2026 if it was tracked; we see returns where it wasn’t.
The fund lost 8% and sent me a capital gain. The bond I never got a check from sent me interest. And the one thing that actually paid me, the Treasury, is the one Colorado won’t tax. I’ve stopped trying to find the logic.
↑ Back to topRuth’s 1099 shows: 1099-B proceeds of $62,000 on fund shares sold to pay for a roof, with $38,000 basis reported on the covered lots and $14,000 of proceeds on noncovered lots with no basis; 1099-DIV box 1a $9,200, box 1b $7,100, box 2a $4,300, box 5 $1,800; 1099-INT box 1 $2,400, box 3 $3,100 (Treasuries), box 8 $5,500 (Colorado munis).
The noncovered lots. Her late husband bought them in 2006. From his old statements, the basis is $11,500. Without that, the $14,000 would be gain; with it, the gain is $2,500.
Rates. Her taxable income lands at about $52,000, so most of her $16,800 of long-term gain and $7,100 of qualified dividends sits in the 0% bracket and only about $2,500 of it reaches 15%. The $1,800 of REIT dividends gets a $360 QBI deduction.
Colorado. The $3,100 of Treasury interest is subtracted on the Colorado return. The $5,500 of Colorado municipal interest is exempt from both. If any of it had been another state’s bonds, Colorado would add it back.
Net: federal tax on the gains and qualified dividends about $400. A self-prepared return that missed the old basis and entered the Treasury interest in box 1 would have paid about $1,900 more between the two returns.
Colorado starts from federal taxable income, so capital gains and dividends are taxed at 4.40% with no preferential rate. Two adjustments matter for investors. Interest on U.S. government obligations (box 3 of the 1099-INT, and the Treasury portion of a money market fund or bond fund, which the fund reports as a percentage on its supplemental pages) is subtracted on the Colorado return. Interest on municipal bonds of other states is exempt federally but Colorado adds it back; only Colorado-issued bonds are exempt from both. A national muni fund reports the Colorado percentage in its tax supplement; the rest is a Colorado addback. The capital-gain subtraction for long-held Colorado assets that used to exist is gone for most taxpayers.
↑ Back to topOnly if the return also shows no basis. The broker didn’t have it; you can supply it from old statements, purchase confirmations, or the fund’s records. For inherited shares the basis is the value on the date of death. We rebuild basis on most returns that have noncovered sales.
The fund sold holdings inside itself at a gain and is required to pass that gain to shareholders, regardless of what your shares did. It is taxable. Funds that distribute large gains in losing years are a reason to hold them in an IRA.
It isn’t taxed, but it counts in the formula that decides how much of your Social Security is taxable and whether you pay the Medicare IRMAA surcharge. The IRS requires it to be reported for those calculations.
If the account holds only stocks, Treasuries and bank interest, February is fine. If it holds mutual funds or REITs, corrected 1099s arrive through mid-March and we recommend waiting; an amended return costs more than a few weeks.
For the Tax Shop desk · forms, code sections, and the things that get missed
Bring the whole envelope, including the pages that look like filler. The supplemental detail is where the Treasury percentages, the muni state breakdown and the noncovered lots live. If there is a sale with no basis, bring whatever old paper you have, or tell us when and from whom the shares came and we will do the rest. Most of what we save on a brokerage 1099 is money the IRS never asked for; it is money the software would have paid because nobody filled in a blank.
Call 303-734-1040 or stop by the office in Lone Tree. We’ve been reading the footnotes for Douglas County and the Denver area since 1969.
Figures reflect the 2026 tax year as currently published and are rounded for readability. Items marked (verify) are to be confirmed against IRS or Colorado DOR sources before the figures freeze in December. Last updated October 15, 2026.
