The IRS in October released a new form the 1099-B that will make it simpler for investors when they go to file their yearly tax return. Starting in January of next year this new Proceeds from Broker and Barter Exchange Transactions form will be expanded and include the cost basis for all stock that is sold and or exchanged during each calendar year.
Previously, the only data that was required by brokers to report to the IRS and investors was the actual sale price of the commodity. This made it extremely difficult for many taxpayers, as they were responsible for keeping track of and reporting the cost basis on their tax return.
Under the new regulations, the IRS will now require 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. This information is also critical in determining the tax treatment of gain or loss.
The new regulations are being implemented as part of the provisions of the Energy Improvement and Extension Act of 2008. Under the new regulations most stocks that are issued during the 2011 calendar year and all issued stocks starting in 2012 will fall under the new reporting laws. Any stocks issued prior to this time will be considered optional and brokers can choose to use the new form.
The regulations come with detailed descriptions to help brokers understand their new obligations so that they will know exactly what they need to look at. Guidelines explain what is subject to actual reporting, which transactions are reportable and what information needs to be included on the forms.
One of the main purposes behind the new regulations and reporting form is to make it easier for investors. “This important reporting change means investors will now receive the information they need to more easily and accurately report their gains and losses,” said IRS Commissioner Doug Shulman. “We will continue to work closely with stakeholder groups to ensure a smooth implementation of the new requirement, which reduces the recordkeeping and paperwork burden for millions of taxpayers.”
The new regulations will be in place for sales of stocks during the calendar year 2011 and the new forms are required to be filed with both the IRS and investors starting in 2012.
The IRS is hoping that the new form will also help keep errors down on investor’s yearly tax return forms. Data will now be in black and white and tax payers who are investors will have fewer calculations to make in the process of filing their tax return. The time and cost saving of accurate tax returns could be greatly impacted by these new regulations, in a positive way. The new form could also help to increase the percentage of timely tax returns, as the process is made easier for tax filers.