Stock transactions

[AccTaxMan]

Client has hundreds of stock transactions in 2011. I know we can use the Form 8453 to mail in the Form 1099 provided by the brokerage firm for the details of the stock transactions. What I do not understand is that since the IRS has the Form 1099 directly from the brokerage firm and so they have all the details of the stock transactions already, why would they want us to mail in the paper copy to them again?

[mlinderEA]

Stock transactions

They only have the gross sales figure they have no idea what was made or lost.I have always used totals long term short term and total gains or losses.I have never been asked to send the total forms in yet.

[FEDUKE404]

And for 2011...

...there is that bothersome Form 8949 to match.

BTW: Isn't it a bit late in the season to be asking this question??

FE

[appelman]

What they want is the complete 8949 information

This is not usually on the 1099-B, but it may be on a gain/loss statement provided to the taxpayer by the broker, assuming the broker has all the basis info. However, most large brokers can provide an Excel or similar spreadsheet file that can be imported directly into most tax prep software.

[S T]

Preparing one now for the 10/15 deadline - what a "PITA" and it is more difficult to check totals with the new 8949 Form - so really takes time to cross-compare Proceeds and Cost

I prepared one last week and acquiesed to "totals" on 8949 - and sending in the 8453 with the photocopies from the Brokerage Stmt - as it had what seemed like a "zillion" $1 entries - and I do mean pages of entries.

FYI - Brokerage stmts did not have to report cost basis to IRS as I understand it prior to Jan 2011 - that is why we still have to send in with the Form 8453.

Still might be a year or two before this is implemented and IRS has the info that they are looking for.

Sandy

[FEDUKE404]

Cost basis of non-covered stocks remains a problem

Preparing one now for the 10/15 deadline - what a "PITA" and it is more difficult to check totals with the new 8949 Form - so really takes time to cross-compare Proceeds and Cost

I prepared one last week and acquiesed to "totals" on 8949 - and sending in the 8453 with the photocopies from the Brokerage Stmt - as it had what seemed like a "zillion" $1 entries - and I do mean pages of entries.

FYI - Brokerage stmts did not have to report cost basis to IRS as I understand it prior to Jan 2011 - that is why we still have to send in with the Form 8453.

Still might be a year or two before this is implemented and IRS has the info that they are looking for.

Sandy

I'm not sure that statement is completely correct.

Within the past couple of months, to simplify my life, I deposited some certificated stock shares into a new brokerage account with a national firm. Obviously they have NO idea what I originally paid for the stocks, and any sale of those stocks in the future will be reported to the IRS as "basis unknown" (aka "non-covered"). For any new purchases within that same account, the firm will automatically track/modify the cost basis as needed, and will also report the appropriate cost basis to the IRS for the sale of those "new" shares.

I do have the ability to enter (from my own records) the applicable cost basis for the stocks I recently deposited, and their software will obediently track my gains/losses as time goes by. (On the surface, the presentation will be identical to how any recently-purchased stocks are displayed.) Conversely, I can maintain the cost basis information on my file cards and no harm will ever occur other than "cost basis unknown" appears in the gain/loss calculations.

But the manager has confirmed to me that whenever those "old" shares are sold, the firm will *NOT* report any cost basis to the IRS....even though my year-end summary statement will show the gain/loss information (based upon my input of the historical cost basis).

While the new rules will eventually simplify the work for tax preparers and investors, I do not see any light at the end of the tunnel for reporting the sale of the "non-covered" stocks any easier. Form 8949 and its A/B/C issues will likely continue to irritate us for a very long time!

FE

[S T]

FE - I did make a "error" in my statement on prior post, not thinking about if a Client moved "investments" and did not provide the "Broker" with Cost Basis, and how the Brokerage was going to treat. Just am entering one!

So - the future Form 8949 will more than likely reflect Covered and Non-Covered, I have just so far been fortunate, that the Statements I am reviewing, somehow or another DO have a Cost Basis - which does assist on the Computer Input - and have to watch for the Covered/Non-covered Boxes.

It is that it is problematic - Baisis Provided - Not Provided OR No 1099B received, on the Form 8949 - I am just finding it more time consuiming to reconcile by Sched D - 8949 to the Brokerage Stmts, particularly when I have a client that deals with more than one Brokerage Firm. Wish I could sub-total by Brokerage Firm - it would make it easier for reconciling.

I am whining as I am trying to complete some for 10/15 filings and I am not so sure this new reporting simplifies anything for the "Preparer" other than the fact that maybe the Brokerage Firms will provide Cost Basis (not necessarily reported to IRS).

Sandy

[Burke]

But the manager has confirmed to me that whenever those "old" shares are sold, the firm will *NOT* report any cost basis to the IRS....even though my year-end summary statement will show the gain/loss information (based upon my input of the historical cost basis).FE

And I can understand why. If the brokerage cannot confirm the purchase cost thru its own transaction records, it would not want to assume any liability for incorrect info provided by the client. I can see it now; in the case of an audit where basis cannot be proved, "my broker said this is what it was." Of course, we have the same problem, but I do not make clients prove basis. Do you?

[FEDUKE404]

Getting the details

And I can understand why. If the brokerage cannot confirm the purchase cost thru its own transaction records, it would not want to assume any liability for incorrect info provided by the client. I can see it now; in the case of an audit where basis cannot be proved, "my broker said this is what it was." Of course, we have the same problem, but I do not make clients prove basis. Do you?

I think the underlying issue is the covered/non-covered issue. Obviously under the new rules for covered stocks the brokers will not only report the cost basis but be responsible (I'm sure with an escape clause here and there ) for its accuracy. On the flip side, rest assured there are many investors who are clueless in Seattle and will blindly use the stockbroker's historical cost basis (but not reported to the government) the same as always.

"Prove" is a bit of a strong word for cost basis. I will tell the client what is involved (multiple purchases/FIFO/splits/spin-offs) but once we have a clear understanding of the issues involved I will go with the client's information as provided to me.

Also, I will work through the relevant worksheets (often provided by corporate IR folks) for recent stock events, such as when Company A generates Company B, (sometimes + cash also), cash in lieu of fractional shares, etc.

I have found some clients have superb records, whereas others........

In so many words, I work with what is provided to me. Quite frankly, sometimes the SWAG method is the best for cost basis. (Think AT&T and its various permutations since the original divestitures.)

A few of my clients have even used "Plan B" by donating some shares here and there. Form 8283 is a piece of cake compared to ever finding a truly accurate cost basis for some stocks. I guess there could be some weight given to "Plan C," i.e waiting until death and (hopefully) stepped up cost basis.

Of course, an honest determination is at least a step in the right direction. I sleep pretty well knowing the IRS folks would be far more clueless than I re the history of some purchases.

FE

[Burke]

And to tell you the truth, I have never had nor known of any client of my colleagues who had an audit based on gains/losses on their sales of stock & bonds. (Other than a CP2000 for non-matching). Maybe real estate, yes.