Originally Posted by JMOK
I was subjected to backup withholding on an investment account. The 2013 form 1099-B indicated that there were transactions that cost basis could not be determined. I filed my 2013 tax without the form 8949 because I could not determine the cost basis at that time. I managed to trace back the cost basis recently. Hence my questions are:
1. How can I file the cost basis for the undetermined transactions now after I have already received my 2013 tax return?
2. Since I was subject to both federal and state withholding, how did the IRS calculate my tax return for undetermined-term transactions without 8949?
3. I may have missed entering my withholding tax during the filing as well, how can I make amendment for it now?
#1; You can’t enter information directly to Sch D anymore, as you must use Form 8949 for all line-by-line reporting, received from the brokerage firm. The cost basis of your investment acct is critical; it is used to calculate the capital gain or loss on your investment for tax purposes. The IRS requires financial organizations / taxpayers to send corrected form(s )with revised information as needed. When you file your federal income tax return, you are still required to provide the cost basis (including all gain and/or loss information) for all reportable (covered) investments disposed of by sale, exchange or redemption in your tax filing for the tax year in which the disposition occurs. you need to file a form 1040X and your related state amended return. You would need to correct the sch D/form m8949 and attach same.
They provide a section on the 1040X where you explain that why you are amending your return. So, if you have been notified that you under-reported investment income on your tax return, first you will need to determine whether you did, in fact, under-report your income. If so, you should file an amended income tax return as said above, reporting all the income and the backup taxes that were withheld. The financial institution should give you an information return for the year, for example, a Form 1099-div, that shows the income and any backup withholding taxes, reported as “Federal income tax withheld”.As you have filed a return, or an amended return, if necessary, or if you find that there was, in fact, no under-reporting, you will need to request a determination from the IRS to stop the backup withholding. You can do this through correspondence with the IRS, showing that at least one of the following situations applies in your case.There was no under-reporting.You have a bona fide dispute with the IRS about whether there was any under-reporting.Backup withholding will cause or is causing an undue hardship on you and it is unlikely that you will under-report interest and dividends in the future.
You have corrected the under-reporting by filing an amended return, and paid any taxes, penalties and interest due.
#2:I guess you need to contact the IRS for sure; only the IRS knows it.Once you find that backup withholding taxes are being deducted from your interest, dividends, or other investment income payments or etc, you will need to determine the cause of the withholding and take the necessary action to correct the situation that is causing it. If the IRS determines that the backup withholding should stop, it will send you a certification of that fact, and will notify the financial institution where you have your account that they should stop the backup withholding.
#3; Any backup withholding is done by the brokerage before sending you any funds, and is then reported to you and the IRS on the Form 1099-DIV or 1099-B sent at the beginning of the following year. The "backup" withholding simply increases the amount of federal withholding, and the amount is listed as federal withholding on the forms. You then report the federal withholding on your return is the same way you would from a Form W-2 for wages. Guess you can get professional help from an IRSEA/a CPA in your local area for more accuarate info in detail.