If you sold shares of a mutual fund—even just once during the year—you’ll get a Form 1099-B from your broker or fund company. This isn’t just paperwork; it tells the IRS whether you made or lost money and whether you owe capital gains taxes. So, let’s break this down step by step.
Table of Contents
📄 What Is Form 1099-B?
Form 1099-B is the IRS form your brokerage sends to report any mutual fund shares you sold in a taxable account (not an IRA or 401(k)). The fund company also sends this to the IRS, so whatever it says must match your tax return.
It includes:
- Sale date and purchase date
- Sales proceeds (what you got from selling)
- Cost basis (what you originally paid)
- Capital gain or loss (based on the difference)
- Holding period (short-term vs long-term)
🧾 What Does a 1099-B Report?
Here’s a quick table of the most relevant boxes on your 1099-B related to mutual fund sales:
| Box | Description |
|---|---|
| 1a | Description of the property sold (e.g. “ABC Mutual Fund”) |
| 1b | Date you acquired the shares |
| 1c | Date you sold the shares |
| 1d | Sales proceeds (total you got from the sale) |
| 1e | Cost or other basis (what you originally paid) |
| 1g | Adjustments (like wash sales or market discounts) |
| 2 | Indicates if gain/loss is short-term or long-term |
📅 Short-Term vs Long-Term Matters
This part really affects how you get taxed:
- Short-term capital gains (held for less than 1 year): Taxed as ordinary income
- Long-term capital gains (held over 1 year): Taxed at lower rates (0%, 15%, or 20%)
So, the holding period listed on your 1099-B matters.
🧮 Example Calculation
Let’s say:
- You bought 200 shares of a mutual fund at $40 each = 200 \times 40 = 8000 cost basis
- You sold them for $11,000
- You held them for 3 years
Here’s your capital gain:
\text{Capital Gain} = 11000 - 8000 = 3000Since you held the fund longer than a year, this is a long-term capital gain. You’d report this on Schedule D and pay capital gains tax on $3,000.
🔁 What About Reinvested Dividends?
If you reinvested dividends over time (instead of taking them in cash), those dividend amounts add to your cost basis. Many people miss this and end up overpaying taxes.
For example:
- Original cost: $8,000
- Reinvested dividends over time: $2,000
- New cost basis: 8000 + 2000 = 10000
- Sale price: $11,000
- Actual gain: 11000 - 10000 = 1000
Make sure your 1099-B reflects this, or adjust it manually on Form 8949.
🧾 Where to Report on Your Tax Return
Here’s how it fits into your return:
- Most people will enter this on Form 8949, where you list each sale
- Then totals from Form 8949 go onto Schedule D, which calculates overall capital gains/losses
- If you use tax software like TurboTax, H&R Block, or TaxAct, you can often import the 1099-B directly
🚫 What You Don’t Report
You don’t need to report:
- Buying mutual fund shares
- Holding mutual funds (unless they pay dividends or capital gains)
- Mutual funds held in tax-deferred accounts like IRAs or 401(k)s
1099-Bs only apply to sales in taxable accounts.
🔍 What If the Basis Isn’t Reported?
Sometimes, your 1099-B will say “basis not reported to the IRS.” In that case, you’re responsible for figuring it out, based on your records. That sale goes in a separate section of Form 8949.
✅ Quick Checklist for Mutual Fund Sales on 1099-B
- Did you sell shares of any mutual funds last year?
- Did you get a 1099-B from your broker or fund company?
- Does the cost basis reflect all your reinvested dividends?
- Are the gains listed as short-term or long-term?
- Did you input the information correctly on your tax return?
🧠 Final Thoughts
Form 1099-B is one of those forms that seem more confusing than they really are. If you sold mutual fund shares, the IRS wants to know how much you made (or lost), and when you made it. The form gives you everything you need to figure it out—just be sure your cost basis is accurate and you report each sale correctly.
