From: Vanderpool Cynthia A [ <mailto:_ Cynthia.Vanderpool@irs.gov_
(mailto:Cynthia.Vanderpool@irs.gov) ]
Sent: Fri 1/6/06 5:05 PM
Subject: Schedule D Reporting
Dear Tax Partners: [In context, the professional tax return prep. community]
Most of you know about the latest addition to the 1040, Schedule D instructions, meant to clarify existing policy regarding the reporting of
capital gains transactions. Following on the heels of our most recent discussions surrounding burden reduction, some have suggested we've lost
touch with reality. I assure you, we haven't!
In an effort to be responsive to your questions, we've worked 'round the clock to put together a document that hopefully answers many of your
concerns. This document is for information only and not meant to be the "official" response for those of you who've submitted formal letters to
Commissioner Everson or other IRS executives. Those letters will be handled in the professional manner we handle all official correspondence.
On behalf of NPL please accept my apologies for not providing a more expeditious communiqué regarding the Schedule D clarification. I am
always available to answer any additional questions you might have.
Regards,
Cindy Vanderpool
Chief, Stakeholder Relations
National Public Liaison
202-622-3099
Here is the document:
From: Vanderpool Cynthia A [mailto:_ Cynthia.Vanderpool@irs.gov_
(mailto:Cynthia.Vanderpool@irs.gov) ]
IRS KEY POINTS REGARDING SCHEDULE D INSTRUCTIONS
The IRS has received some inquiries about a revised paragraph in the 2005 Schedule D Instructions. We regret any confusion related to this revision. However, investors and traders always have had the same reporting requirements, and they still do. The following Q&As may be helpful.
Is there a new reporting requirement in Schedule D Instructions?
No, there is a clarification. Taxpayers always have been required to provide information related to sales and exchanges on lines 1 and 8 on Schedule D. However, some taxpayers provided only summaries of these sales and exchanges or attachments that did not contain all the transaction details required by Schedule D.
Which paragraph has been revised in 2005 Schedule D Instructions?
On page D-6 of the Instructions, related to lines 1 and 8 of Schedule D, the instructions state: "You must enter the details of each transaction on a separate line. If you have more than five transactions to report on line 1
or line 8, report the additional transactions on Schedule D-1. Use as many Schedules D-1 as you need.
Enter on Schedule D, lines 2 and 9, the combined totals from all your Schedules D-1. Do not enter "see attached" or summary totals from an
attachment in lieu of reporting the details of each transaction directly on Schedule D or D-1."
Why was the paragraph revised?
There is not a change in policy; it was intended to remind investors that they must include ALL transaction information as required on Schedule D.
Some investors were submitting copies of brokerage statements that did not include all the required transaction information, were attaching summaries or were writing "details available upon request."
Is there further guidance from the IRS in addition to the revised instruction?
Yes. Taxpayers may submit attachments in lieu of completing lines 1 and 8 on Schedule D or D-1 as long as the attachments contain all the required
information and are in a similar format. This means investors may follow the same format required of traders.
What are the reporting rules for traders?
On page D-3 of the 2005 Schedule D Instructions, under "Traders in Securities" the item states: "Like an investor, a trader must report each sale of securities (taking into account commissions and any other costs of acquiring or disposing of securities) on Schedule D or D-1 or on an attached statement containing all the same information for each sale in a similar format."
Will investors face penalties if they fail to comply?
Many factors, such as the facts and circumstances of the case, determine when the IRS applies a penalty. Generally, a tax return that is accurately and timely filed, with the correct amount of tax paid, is not penalized. However, investors must comply with long-standing reporting requirements about each transaction. Again, investors may submit attachments – other than Schedule D or D-1 – as long as the attachments contain the required information and are in a similar format.
What about previously filed tax returns?
A taxpayer may amend a tax return for the three previous tax years. The IRS assumes taxpayers submit accurate, timely filed tax returns. Again, a tax return that is accurately and timely filed with the correct amount of tax paid generally is not penalized.
Is this revision to Schedule D Instructions part of a new compliance initiative?
No. Taxpayers always have been required to file the transaction information. The revision was a reminder to taxpayers about existing requirements.
Doesn't the 1099-B information return cover this information?
No. Form 1099-B does not provide the date acquired or the basis of the securities sold. These transaction details are required to determine the accuracy of capital gains and losses claims by the taxpayer. <<
(mailto:Cynthia.Vanderpool@irs.gov) ]
Sent: Fri 1/6/06 5:05 PM
Subject: Schedule D Reporting
Dear Tax Partners: [In context, the professional tax return prep. community]
Most of you know about the latest addition to the 1040, Schedule D instructions, meant to clarify existing policy regarding the reporting of
capital gains transactions. Following on the heels of our most recent discussions surrounding burden reduction, some have suggested we've lost
touch with reality. I assure you, we haven't!
In an effort to be responsive to your questions, we've worked 'round the clock to put together a document that hopefully answers many of your
concerns. This document is for information only and not meant to be the "official" response for those of you who've submitted formal letters to
Commissioner Everson or other IRS executives. Those letters will be handled in the professional manner we handle all official correspondence.
On behalf of NPL please accept my apologies for not providing a more expeditious communiqué regarding the Schedule D clarification. I am
always available to answer any additional questions you might have.
Regards,
Cindy Vanderpool
Chief, Stakeholder Relations
National Public Liaison
202-622-3099
Here is the document:
From: Vanderpool Cynthia A [mailto:_ Cynthia.Vanderpool@irs.gov_
(mailto:Cynthia.Vanderpool@irs.gov) ]
IRS KEY POINTS REGARDING SCHEDULE D INSTRUCTIONS
The IRS has received some inquiries about a revised paragraph in the 2005 Schedule D Instructions. We regret any confusion related to this revision. However, investors and traders always have had the same reporting requirements, and they still do. The following Q&As may be helpful.
Is there a new reporting requirement in Schedule D Instructions?
No, there is a clarification. Taxpayers always have been required to provide information related to sales and exchanges on lines 1 and 8 on Schedule D. However, some taxpayers provided only summaries of these sales and exchanges or attachments that did not contain all the transaction details required by Schedule D.
Which paragraph has been revised in 2005 Schedule D Instructions?
On page D-6 of the Instructions, related to lines 1 and 8 of Schedule D, the instructions state: "You must enter the details of each transaction on a separate line. If you have more than five transactions to report on line 1
or line 8, report the additional transactions on Schedule D-1. Use as many Schedules D-1 as you need.
Enter on Schedule D, lines 2 and 9, the combined totals from all your Schedules D-1. Do not enter "see attached" or summary totals from an
attachment in lieu of reporting the details of each transaction directly on Schedule D or D-1."
Why was the paragraph revised?
There is not a change in policy; it was intended to remind investors that they must include ALL transaction information as required on Schedule D.
Some investors were submitting copies of brokerage statements that did not include all the required transaction information, were attaching summaries or were writing "details available upon request."
Is there further guidance from the IRS in addition to the revised instruction?
Yes. Taxpayers may submit attachments in lieu of completing lines 1 and 8 on Schedule D or D-1 as long as the attachments contain all the required
information and are in a similar format. This means investors may follow the same format required of traders.
What are the reporting rules for traders?
On page D-3 of the 2005 Schedule D Instructions, under "Traders in Securities" the item states: "Like an investor, a trader must report each sale of securities (taking into account commissions and any other costs of acquiring or disposing of securities) on Schedule D or D-1 or on an attached statement containing all the same information for each sale in a similar format."
Will investors face penalties if they fail to comply?
Many factors, such as the facts and circumstances of the case, determine when the IRS applies a penalty. Generally, a tax return that is accurately and timely filed, with the correct amount of tax paid, is not penalized. However, investors must comply with long-standing reporting requirements about each transaction. Again, investors may submit attachments – other than Schedule D or D-1 – as long as the attachments contain the required information and are in a similar format.
What about previously filed tax returns?
A taxpayer may amend a tax return for the three previous tax years. The IRS assumes taxpayers submit accurate, timely filed tax returns. Again, a tax return that is accurately and timely filed with the correct amount of tax paid generally is not penalized.
Is this revision to Schedule D Instructions part of a new compliance initiative?
No. Taxpayers always have been required to file the transaction information. The revision was a reminder to taxpayers about existing requirements.
Doesn't the 1099-B information return cover this information?
No. Form 1099-B does not provide the date acquired or the basis of the securities sold. These transaction details are required to determine the accuracy of capital gains and losses claims by the taxpayer. <<
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