On October 3, 2008, then-President Bush signed into law the Emergency Economic Stabilization Act of 2008. Although it was widely known as the “bailout” bill – it was the legislation that authorized the Treasury Secretary to use $700 billion under the Troubled Asset Relief Program (TARP) – the legislation also contained a number of measures to help bring in additional revenue to the Federal government.
Amongst those provisions was the establishment of a new requirement for financial intermediaries to track and report cost basis on securities transactions to the IRS on an updated Form 1099-B, to better ensure that taxpayers properly their gains and losses on investments and pay taxes as appropriate, and the new rules took effect for stocks that were purchased in 2011. Over the long run, the new rules will make it easier for clients to track the cost basis for most of their investments, simplifying reporting and preparing returns during tax season.
However, in the near term, the introduction of cost basis reporting brings new complexities and challenges to manage. To help support taxpayers through this process, the IRS has revamped Schedule D, and introduced the new Form 8949 – which may have to be done three times for many individuals! – for reporting capital gains and losses for the 2011 tax year.