IRS Issues Regulations for Investors
IRS Issues Final Regulations on New Basis Reporting Requirement;
For Investors, Reporting Gains and Losses Gets Easier Starting in
2011
IR-2010-104, Oct. 12, 2010
WASHINGTON — The Internal Revenue Service today issued final
regulations under a law change that will require reporting of basis
and other information by stock brokers and mutual fund companies for
most stock purchased in 2011 and all stock purchased in 2012 and
later years. The reporting will be to investors and the IRS.
This additional reporting will be optional for stock purchased prior
to these dates.
“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.”
These regulations, posted today in the Federal Register, implement a
provision in the Energy Improvement and Extension Act of 2008. Among
other things, the regulations describe who is subject to this
reporting requirement, which transactions are reportable and what
information needs to be reported. Besides providing numerous
examples, they also adopt a number of comments and suggestions
received since the proposed regulations were issued last December.
Form 1099-B, Proceeds from Broker and Barter Exchange Transactions,
long used to report sales prices, will be expanded in 2011 to
include the cost or other basis of stock and mutual fund shares sold
or exchanged during the year. Stock brokers and mutual fund
companies will use this form to make these expanded year-end
reports.
The expanded form will also be used to report whether gain or loss
realized on these transactions is long-term (held more than one
year) or short-term (held one year or less), a key factor affecting
the tax treatment of gain or loss. The expanded form, to be first
used for calendar-year 2011 sales, must be filed with the IRS and
furnished to investors in early 2012.
The IRS today also announced penalty relief for brokers and
custodians for reporting certain transfers of stock in 2011.
The relief is described in Notice 2010-67.