English

NetWorth Services and H&R Block PresentsCost Basis “Town Hall” Meeting Webinar to Eliminate Investor Confusion of the Cost Basis Legislation

Report this content

Phoenix, Ariz., February 1, 2012 – As if taxpayers aren’t confused and frustrated enough with cost basis reporting, they’ll have more to gripe about this coming tax season thanks to new Cost Basis legislation. Not only could calculating cost basis be a headache, but a mistake could cost thousands in penalties.

As with most tax laws changes, taxpayers are the last to fully understand the details of a new law and exactly how it will impact them. The cost basis legislation is one such tax law change which on the surface appears to simply be a mandate for brokers and other financial service intermediaries to report adjusted cost basis to their clients, but upon further inspection, the implications of what is not “covered,” will leave a lot of taxpaying investors scratching their head, or at worst, being slapped with a new hefty penalty for incorrect cost basis reporting.

Through blogs, emails Facebook and Twitter, taxpayers have been expressing their confusion about the new law in droves, so in order to help the general investing public as well as investment and tax professionals learn more about the details of the legislation, potential issues and solutions that can impact their investment and tax responsibilities, NetWorth Services and H&R Block will be hosting a FREE interactive “Town Hall” Meeting Webinar – “How Will the New Cost Basis Legislation Affect Me,” open to the public, on Wednesday, February 22, 2012 at 1:00 p.m. EST/10:00 p.m. PST.

“There is a sizeable disconnect between what the broker must report under the cost basis legislation and what the taxpayer is still responsible to accurately report to the IRS,” said Nico. R. Willis, President and CEO of NetWorth Services, “Brokers are only responsible for cost basis for securities purchased after 12/31/10 but the taxpayer is responsible for the cost basis no matter when it was purchased. The majority of current stock holdings were purchased before last year, so different investment scenarios can potentially cause confusion.”

Among other important cost basis topics, the webinar will address:

Top 5 Issues that can impact investor/taxpayer’s investment and tax responsibilities:

1. Taxpayer Responsibility -- Covered vs. Non-Covered:

Investors are still responsible for accurate reporting of their cost basis for the entire holding period of a security regardless of how far back the purchase was made, even though brokers are only held to reporting cost basis for the “covered” periods (January 1, 2011 going forward). With the IRS stepping up their compliance efforts, it is more important than ever for investors and tax professionals to properly report capital gains and losses this coming tax season.

2. Minimizing Tax Responsibility - Sales Method Selection vs. Default Method:

Investors only have 3 days after a security is sold to select the most advantageous sales method for their tax strategies. If a choice is not made and their brokerage firm properly notified within the required time period, the brokerage firm is allowed to use their default sales method, which is usually FIFO (First-In-First-Out), which is often not the best option for minimizing capital gains tax liabilities.

3. Don’t Rely on the Broker - Wash Sales:

When a security is purchased and then sold at a loss, and within 30 days a substantially identical security is repurchased, a wash sale violation has occurred and the loss allowed must be added to the replacement purchase and an accurate cost basis can be properly determined. As per the new tax law, the broker is not responsible for reporting the cost basis for wash sales when the purchase or sale date of the security that triggered the wash sale violation is considered to be “non-covered.” Also, taxpayers are responsible for reporting wash sales of identical as well as similar securities across the same account, different accounts, and even different brokerage firms.

4. Gifting & Inheriting Securities:

The Cost Basis legislation states that brokers do not have to report the cost basis on gifted or inherited securities. They are only responsible for providing the fair market value. The adjusted cost basis for securities that were acquired either as a gift or through inheritance must be reported by the taxpayer. There are very complex IRS business rules that apply specifically to the sale of gifted or inherited shares and the accuracy of the adjusted cost basis could be compromised if these business rules are not properly applied.

5. Repercussions – Fines & Penalties for Incorrect Cost Basis Reporting:

Taxpayers’ ignorance of the new law does not alleviate their responsibility. Incorrect calculations submitted to the IRS could result in fines up to $1,000 per occurrence. If the IRS determines that an investor knew of the law’s requirements, but acted with “willful disregard,” they could be fined up to

$5,000 per occurrence.

For more information on the Cost Basis “Town Hall” Meeting Webinar, click Here, or visit http://www.eshareholder.com/event-registration/?ee=7

To register for the Cost Basis “Town Hall” Meeting Webinar, click Register Now, or visit:

Website: http://www.eshareholder.com/event-registration/?ee=7, or

Website: http://www.netbasis.com/basis/events

Or call (602) 222-6380

# # #

NetWorth Services, Inc. (NWS) (www.networthservices.com) is an award-winning financial web application and database software company, headquartered in Phoenix Arizona, with offices in New York and Philadelphia, PA. In response to the increased demand for an accurate and efficient automated cost basis calculation solution, NetWorth developed its flagship product, Netbasis in 1997, which quickly and accurately determines the adjusted Cost Basis or original price of financial securities regardless of their history of capital changes. Financial solutions developed by NetWorth have been adopted by many leading financial institutions, transfer agencies, tax preparation software companies, accounting firms, money managers, government agencies, Fortune 500 companies, universities, endowments and individual investors.

Marisa K. Diaz

NetWorth Services, Inc.

602-222-6380

diaz@networthservices.com

www.netbasis.com

www.eshareholder.com

NetWorth Services, Inc. (NWS) (www.networthservices.com) is an award-winning financial web application and  database  software  company,  headquartered  in  Phoenix  Arizona,  with  offices  in  New  York  and Philadelphia, PA.  In response to the increased demand for an accurate and efficient automated  cost basis calculation solution, NetWorth developed its flagship product, Netbasis in 1997, which quickly and accurately determines the adjusted Cost Basis or original price of financial securities regardless of their history of capital changes. Financial solutions developed by NetWorth have been adopted by many leading financial institutions, transfer agencies, tax preparation software companies, accounting firms, money managers, government agencies, Fortune 500 companies, universities, endowments and individual investors.

Tags:

Capital Gains Cost Basis Legislation 8949 Form Schedule D Form Cost Basis Calculation

Documents & Links

Quick facts

Top 5 Issues that can impact investor/taxpayer’s investment and tax responsibilities: 1. Taxpayer Responsibility -- Covered vs. Non-Covered: Investors are still responsible for accurate reporting of their cost basis for the entire holding period of a security regardless of how far back the purchase was made, even though brokers are only held to reporting cost basis for the “covered” periods (January 1, 2011 going forward). With the IRS stepping up their compliance efforts, it is more important than ever for investors and tax professionals to properly report capital gains and losses this coming tax season. 2. Minimizing Tax Responsibility - Sales Method Selection vs. Default Method: Investors only have 3 days after a security is sold to select the most advantageous sales method for their tax strategies. If a choice is not made and their brokerage firm properly notified within the required time period, the brokerage firm is allowed to use their default sales method, which is usually FIFO (First-In-First-Out), which is often not the best option for minimizing capital gains tax liabilities. 3. Don’t Rely on the Broker - Wash Sales: When a security is purchased and then sold at a loss, and within 30 days a substantially identical security is repurchased, a wash sale violation has occurred and the loss allowed must be added to the replacement purchase and an accurate cost basis can be properly determined. As per the new tax law, the broker is not responsible for reporting the cost basis for wash sales when the purchase or sale date of the security that triggered the wash sale violation is considered to be “non-covered.” Also, taxpayers are responsible for reporting wash sales of identical as well as similar securities across the same account, different accounts, and even different brokerage firms. 4. Gifting & Inheriting Securities: The Cost Basis legislation states that brokers do not have to report the cost basis on gifted or inherited securities. They are only responsible for providing the fair market value. The adjusted cost basis for securities that were acquired either as a gift or through inheritance must be reported by the taxpayer. There are very complex IRS business rules that apply specifically to the sale of gifted or inherited shares and the accuracy of the adjusted cost basis could be compromised if these business rules are not properly applied. 5. Repercussions – Fines & Penalties for Incorrect Cost Basis Reporting: Taxpayers’ ignorance of the new law does not alleviate their responsibility. Incorrect calculations submitted to the IRS could result in fines up to $1,000 per occurrence. If the IRS determines that an investor knew of the law’s requirements, but acted with “willful disregard,” they could be fined up to $5,000 per occurrence.
Tweet this

Quotes

“There is a sizeable disconnect between what the broker must report under the cost basis legislation and what the taxpayer is still responsible to accurately report to the IRS,” said Nico. R. Willis, President and CEO of NetWorth Services, “Brokers are only responsible for cost basis for securities purchased after 12/31/10 but the taxpayer is responsible for the cost basis no matter when it was purchased. The majority of current stock holdings were purchased before last year, so different investment scenarios can potentially cause confusion.”
Nico R. Willis, President, NetWorth Services, Inc.