Form 1099-B is the form that brokerage firms use to report securities trades to the IRS. Investors also get a copy of the form, which may help with their tax return preparation. The 2011 forms, which just came out, provide cost basis information on stock sales for the first time. (Your cost is crucial for determining how much of a taxable gain to report.)
You should check Form 1099-B carefully, to make sure the cost basis information is accurate. Brokers report confusion about reporting "wash sales." That is, if you sold a security at a loss but bought it back within 30 days, the capital loss won’t count on your 2011 return. Instead, the disallowed loss will add to your cost basis, reducing tax on a future non-wash sale.
Say you bought 100 shares of stock in 2010. In 2011, you sold the stock at a ss of $6 a share. However, you repurchased 100 shares of the same stock 20 days later. That’s a wash sale so the $6–per-share loss won’t appear on your 2011 Form 1099-B.
Say you repurchased the shares at $50 apiece. Your broker will adjust your cost basis so that your adjusted cost basis is $56 a share: the $50 you paid plus the disallowed $6 loss. With a higher basis, you’ll have either a smaller gain or a larger loss when you ultimately sell those shares and don’t repurchase them within 30 days.
