The 1099 information reporting has existed for a long time in the ‘‘traditional‘’ financial world. All 1099 reporting serves the same general purpose: to report non-employment related income to the IRS, i.e., income earned outside of a W2 form.
1099-B is a specific type of 1099 that reports capital gains and losses from securities or property involved in a transaction handled by a broker.
Some examples of brokers you may know from the traditional finance world include eTrade, Charles Schwab and Robinhood. These securities brokers are required to send you and the IRS a copy of your 1099-B at the end of each year reporting your cost basis, proceeds and associated gains or losses from each of your transactions that occurred on the broker’s platform. (“Cost basis” refers to the original value of an asset or investment for tax purposes.)
You as the taxpayer use this 1099-B to report your capital gains or losses on your taxes, and the IRS uses it to verify that you reported the correct amount of income.