Traders are on their own when it comes to tax compliance for short sales. Brokers don’t report constructive sales on appreciated financial positions on 1099-Bs, and many miscategorize stock borrowing fees as interest expenses. Forbes blog posts: IRS Short Selling Rules Can Be A Taxing Matter How To Deduct Borrowing Fees When Selling Stocks Short How does your broker categorize hard to borrow fees? Are you familiar with the short sale tax rules?
If you report a capital gain from a constructive sale on an appreciated financial position for a short sale against the box, your Form 8949 will not reconcile with the broker 1099-B. So be it: There are many other reasons it won't reconcile like wash sale losses on substantially identical positions. Just explain the difference in a tax return footnote.
What confounds me is why brokers are required to make their own reports if ultimately the IRS would have to agree with what a trader is reporting anyway? And they don't even expect those two reports to reconcile.
They do reconcile for probably 98% of Americans with brokerage accounts, which allows the IRS to largely eliminate millions of returns from potential audits. Unfortunately the flip side of that is that you're probably more likely to be audited if you're the remaining 2%, but if you're the IRS designing a system for 300 million people is makes sense.