Monday, February 13, 2012

The IRS issues new rules for reporting stock sales

Last October the Internal Revenue Service (IRS) released a new version of the annual tax forms investors receive from their brokers, called the 1099-B. While the new version will require less effort from investors when filing their taxes, it could also curtail their expected profits.


Previously, brokers were only required to report on the 1099-B certain information relating to the sale of investments, such as the date of the sale and the amount of the sale proceeds, and it was the investors responsibility to figure out how much they paid for stocks that were sold. This made it extremely difficult for many investors, as they were responsible for keeping track of and reporting the cost basis on their tax return.

That changes this year due to the Emergency Economic Stabilization Act of 2008, which shifts the responsibility to the brokers to file the new 1099-B form which will include the cost basis. In addition the expanded form will also report the gain or loss of each transaction and whether or not the transaction was short term or long term.

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