When a dealer issues a 1099‑B for a precious metals sale, how should a taxpayer reconcile that with their own cost basis and Schedule D reporting?
Executive summary
When a precious‑metals dealer furnishes a Form 1099‑B showing gross proceeds, that document is a third‑party report to the IRS but not the final word on tax liability; the seller remains responsible for determining and reporting the correct cost basis and resulting gain or loss on Form 8949 and Schedule D [1] [2]. Dealers must file 1099‑B for reportable bullion transactions under IRS rules, but exclusions and quantity thresholds mean a 1099‑B may or may not be issued for every sale [3] [4].
1. What the dealer’s 1099‑B actually reports and why it matters
A dealer’s 1099‑B reports the gross proceeds of a brokered sale to the IRS and to the seller; it’s meant to help the IRS verify reported capital gains but is a reporting mechanism—not a determination of taxable gain [1] [5]. The IRS instructions and industry summaries make clear that dealers must furnish 1099‑B for “reportable” precious metals transactions that meet FORM and CFTC‑related criteria, while many small or non‑deliverable coin sales can be excepted from reporting [3] [1] [6].
2. The taxpayer’s duty: establish and document cost basis
Taxpayers bear ultimate responsibility for calculating gains and losses: the cost basis is generally the original purchase price plus transaction costs, and that basis must be substantiated if the 1099‑B does not include it [2]. Even where a dealer issues a 1099‑B that shows proceeds (and in some cases a dealer‑reported basis), taxpayers must verify that the basis on file matches their records because not all 1099‑Bs for bullion include basis information [2] [5].
3. How to reconcile the 1099‑B on tax forms (Form 8949 → Schedule D)
The normal flow for reporting a precious‑metals sale is to enter the transaction on Form 8949, using the gross proceeds from the 1099‑B as the sale price and then entering the taxpayer’s calculated basis to compute gain or loss, with totals carried to Schedule D [2] [7]. If the dealer’s 1099‑B reports basis or marks the sale as “covered,” the taxpayer still must confirm accuracy; if basis is not reported, the taxpayer must manually report the basis on Form 8949 and check the appropriate box for “basis not reported to IRS” so Schedule D reflects the correct result [1] [2].
4. Common mismatches, disputes, and documentation to keep
Mismatches arise when the dealer reports proceeds (or an incorrect basis) that differ from a seller’s purchase records, or when a sale is reportable by dealer rules but the taxpayer sold non‑reportable items; the IRS can use the 1099‑B as a trigger for inquiry, so retaining receipts, invoices, shipping records, and any dealer communications is essential to substantiate the cost basis [3] [8] [2]. Industry guides and dealers advise customers that even if no 1099‑B is filed for a particular sale, the taxpayer’s reporting obligation remains—nonreportable sales do not excuse failure to report gains [8] [9].
5. Practical steps and caveats for reconciling and filing
First, compare the 1099‑B gross proceeds line‑by‑line with personal records; second, compute basis as purchase price plus acquisition costs and enter it on Form 8949, marking whether basis was reported by the broker; third, aggregate totals flow to Schedule D as capital gains or losses [2] [7]. Seek professional help when dealer basis disagrees with personal records or when unusual issues arise—such as inherited bullion, lot‑by‑lot basis allocation, or transactions near the reportable thresholds—because the IRS instructions and dealer practices contain exemptions and technical rules that materially affect reporting [1] [3]. Reporting a gain on precious metals may trigger the collectibles maximum tax rate on long‑term gains, so confirming correct classification and basis is not merely clerical [2].