Wash Sales and a Common 1099-R Entry Mistake

2026-03-04 · RKube Services

Wash sale adjustments and 1099-R taxable amount entries are two areas that can easily cause reporting errors. Here is what they mean and what RKube checks to keep your return accurate.

What RKube checks when preparing your tax return

Last updated: March 2026

Many clients who invest in stocks or trade frequently see unfamiliar terms on their tax forms. Two common areas that create confusion during tax preparation are wash sales and 1099-R taxable amount entries.

This article explains both in simple terms so you understand what our team at RKube Services is reviewing when we prepare your return.

1. What Is a Wash Sale?

A wash sale occurs when you sell a stock or security at a loss and then buy the same or a substantially identical investment within 30 days before or after the sale.

The IRS does not allow you to immediately deduct that loss.

Instead, the loss is deferred and added to the cost basis of the new shares you purchased.

Simple example

• Step 1: You buy stock for $1,000.
• Step 2: You sell it for $800 (a $200 loss).
• Step 3: You buy the same stock again within 30 days.

Because of the wash sale rule:

• The $200 loss cannot be deducted immediately.
• The $200 is added to the cost basis of the replacement shares.

If the replacement shares cost $900, the adjusted cost basis becomes $1,100 ($900 + $200). When you sell later, that deferred loss is reflected in the gain or loss calculation at that time.

How this shows up on your 1099-B

Your brokerage usually reports wash sale activity on Form 1099-B. Common fields include:

• Proceeds
• Cost basis
• Wash sale adjustment
• Gain or loss

In tax preparation software (including Drake), the wash sale amount is typically entered in the wash sale adjustment field so the basis is calculated correctly for IRS reporting. Separately, when you sell the replacement shares later, the broker typically reflects the prior disallowed loss through the basis it reports for that later sale.

2. Why This Matters for Your Taxes

If wash sales are entered incorrectly:

• Your reported loss may be overstated or understated.
• Your cost basis may be incorrect.
• The IRS may flag inconsistencies with brokerage reporting.

Because brokers track wash sale adjustments, RKube reviews the 1099-B and supporting brokerage statements to help ensure the numbers in your return align with what was reported.

3. A Common 1099-R Entry Mistake We Prevent

Another frequent issue involves Form 1099-R, which reports retirement plan distributions (for example, from an IRA or 401(k)).

The issue

If the taxable amount box on a 1099-R is $0, it must be entered as $0 (not left blank). If it is left blank, some tax software may default to treating the entire gross distribution as taxable.

Key point: If the taxable amount is $0, enter $0. Leaving it blank can cause the software to treat the full distribution as taxable.

Quick illustration

4. What RKube Reviews When Preparing Your Return

Brokerage reporting

• Wash sale adjustments
• Cost basis accuracy
• Capital gain and loss totals

Retirement distributions

• Correct 1099-R taxable amount entries (including $0 when applicable)
• Rollover and non-taxable treatment when supported by documentation

5. What to Send RKube

To help us file accurately, please send:

• Your brokerage 1099-B (and consolidated 1099 package if provided)
• Any 1099-R forms
• Supporting brokerage statements if available
• Prior year return if this is your first year with RKube

Final Thoughts

Wash sales and 1099-R reporting are areas where small entry issues can create big tax differences. RKube's process includes reviewing brokerage reporting and ensuring tax form entries are completed correctly so your return is accurate and consistent with what was reported.

If you have questions about a brokerage form or retirement distribution before filing, contact the RKube team and we can review it with you.

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