Covered & noncovered shares
Find out what "covered" and "noncovered" mean and how this designation will affect the way we report your cost basis to the IRS.
For tax-reporting purposes, the difference between covered and noncovered shares is this: For covered shares, we're required to report cost basis to both you and the IRS. For noncovered shares, the reporting is sent only to you.
Definitions vary by investment type
Stocks & certain exchange-traded funds (ETFs)*
Bought on or after January 1, 2011, and subsequently sold.
Bought before January 1, 2011, and subsequently sold.
Mutual funds**, ETFs***, and dividend reinvestment plans (DRIPs)
Bought on or after January 1, 2012, and subsequently sold.
Bought before January 1, 2012, and subsequently sold.
Less complex bonds and most options†
Bought on or after January 1, 2014, and subsequently sold.
Bought before January 1, 2014, and subsequently sold.
More complex bonds and certain related options††
Bought on or after January 1, 2016, and subsequently sold.
Bought before January 1, 2016, and subsequently sold.
You remain responsible for reporting your cost basis information to the IRS every year on Form 1040, Schedule D, for all shares sold, whether they're covered or noncovered. You should use your own records in addition to the cost basis information we provide.
In addition, for covered shares, the information you report in column (e) of Form 8949 must match what we send to the IRS on Form 1099-B.
A special note about bonds
To determine if a bond you hold is covered or noncovered, follow these steps:
- Log on to your account.
- From the My Accounts menu, choose Cost basis.
- Choose either Unrealized gains & losses or Realized gains & losses.
- Beneath the holding you'd like to check, select Show details.
For holdings under Unrealized gains & losses, an indication of whether the shares are covered or noncovered should appear immediately beneath "Show details." For holdings under Realized gains & losses, shares are considered to be covered if there's a blank space under "Date acquired."
The automatic reinvestment of shareholder dividends into more shares of the company's stock.