Author Topic: LONG TERM TRANSACTIONS FOR NONCOVERED TAX LOTS - WTF ???  (Read 1730 times)

Thriftybugger

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LONG TERM TRANSACTIONS FOR NONCOVERED TAX LOTS - WTF ???
« on: April 04, 2019, 02:09:55 PM »
In the process of doing my taxes using turbo tax (of course we thrifty buggers don’t pay for tax prep). It came time to import details from an online broker account for  stock dividends etc. Initially I just entered the data manually using the info from DIVIDENDS AND DISTRIBUTIONS 2018 1099-DIV.

I then decided to use the automatic import where they, TurboTax logs into your account at the brokerage and slurps in the data. I noticed that when I did this our refund dropped bu about $2000! Looking at the PDF the brokerage firm created with my tax info on it I see am amount under LONG TERM TRANSACTIONS FOR NONCOVERED TAX LOTS.  I can only assume I am now being taxed on these items from the past? From my rudimentary understating of the above (5 mins of online research) I see that it refers to stocks bought before a certain date 2011 /12.

I did indeed buy a stock before this date and the major of my holdings were bought before 2011. Just curious why now this item  LONG TERM TRANSACTIONS FOR NONCOVERED TAX LOTS.  is showing up for my 2018 taxes and why I wasn’t asked (by TurboTax) to pay it previously. Perhaps I didn’t use the automatic import feature before and missed it like I almost did this year. Is this a new ruling with the IRS perhaps?

seattlecyclone

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Re: LONG TERM TRANSACTIONS FOR NONCOVERED TAX LOTS - WTF ???
« Reply #1 on: April 04, 2019, 02:30:14 PM »
A "non-covered tax lot" is one where the cost basis was not reported to the IRS. You are responsible for reporting an accurate cost basis on your tax return, but because it is a non-covered lot this basis information is probably not on the 1099-B that your brokerage generated.

My guess is that TurboTax is filling in $0 as the cost basis because it doesn't know any better, which is causing your tax to be calculated as though the entire proceeds of your sale was a capital gain. You should look back at your records to determine the actual cost basis and then figure out where to enter this information into TurboTax, so that you only pay tax on the actual gain rather than the entire sale amount.

nereo

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Re: LONG TERM TRANSACTIONS FOR NONCOVERED TAX LOTS - WTF ???
« Reply #2 on: April 04, 2019, 02:35:37 PM »
^^^ my thoughts as well, having had a similar experience with TT. 

It's a pain (but then again it's how everyone used to do it) - but go back in your records and determine what your basis is, and if held for > 1 year make sure you have 'long term' selected. 

secondcor521

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Re: LONG TERM TRANSACTIONS FOR NONCOVERED TAX LOTS - WTF ???
« Reply #3 on: April 04, 2019, 04:19:27 PM »
It's not new.  The most likely answer is that you sold some stock in 2018.  You're taxed on the gain (basically net proceeds - cost basis) in the year in which you make the sale.

It generally is your responsibility to track your cost basis.  A recent law requires brokerage firms to track basis for stock purchased after a certain date.  If you can't find your records, your brokerage firm may be willing to help you, but they may charge a fee for this service.

MDM

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Re: LONG TERM TRANSACTIONS FOR NONCOVERED TAX LOTS - WTF ???
« Reply #4 on: April 04, 2019, 05:24:16 PM »
Initially I just entered the data manually using the info from DIVIDENDS AND DISTRIBUTIONS 2018 1099-DIV.
...
Just curious why now this item  LONG TERM TRANSACTIONS FOR NONCOVERED TAX LOTS.  is showing up for my 2018 taxes and why I wasn’t asked (by TurboTax) to pay it previously. Perhaps I didn’t use the automatic import feature before and missed it like I almost did this year.
Re: "...why now..."
a) Stock sales are not documented using 1099-DIV, they are documented using 1099-B.  If you didn't hand-enter any of the 1099-B information, that is why the transactions are now appearing in your 2018 return from the automated import.  Previous posters have described how to handle this case.
b) If you always hand entered only the 1099-DIV information in previous years, and ignored any 1099-B transactions, that is why the 2018 return is now different from previous years' returns.  If this is (also) the case, you may want to 'fess up and file amended returns before the IRS "asks" you to do so.

 

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