Legacy Management & Dominick Sartorio Bulletin:IRS Issues New Tax Reporting Rules For Broker-Dealers

Nov. 10, 2010 - PRLog -- " These new rules will specify how broker dealers in securities will include and report data on the Form 1099-B issued to their clients." stated Dominick Sartorio, Director of New Business at Legacy Management Consulting Group LLC. The 2008 Energy Act requires the IRS to issue rules specifying how broker-dealers in securities that provide Form 1099-B  are to include data on the tax basis in securities sold on behalf of their clients, directly to their clients on the Form. These rules are to take effect January 1, 2011.

It is a difficult task for taxpayers to determine their adjusted tax basis and then further calculate the resulting gain or loss in any given lot of securities sold during the year.  These difficulties are compounded in the case of securities received in non-conventional ways, such as by gift, from an estate, stock splits, and stock dividends.   These difficulties have motivated Congress to now require broker-dealers to report adjusted tax basis to their clients.

"New reporting rules will require issuers of Form 1099-B to report adjusted tax basis in stocks disposed of during the year, as well as reporting any gains or losses as long-term or short-term." stated Anthony Urbano, Principal at Legacy.

The rules apply, generally, to securities in accounts opened at the broker-dealer on or after January 1, 2011, and to securities transferred to an account opened after that date from another account covered by the new rules.  However, this is only if the receiving broker receives a statement from the transferring broker providing the tax data necessary by the receiving broker to issue a Form 1099-B with respect to those securities under the new rules. The regulation defines stocks in general, so that all stocks, both U.S. and foreign issued, are covered.
Clients of broker-dealers will want to exercise prudent business and record keeping practices. Being proactive and keeping timely and accurate records will be essential in reconciling a client's records to the Form 1099-B received. Also, in instances of discrepancy and error, copies of schedules may need to be filed with tax returns.

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U.S. Treasury Circular 230 Notice:  Any U.S. federal tax advice included in this communication is not intended or written to be used, and cannot be used, for the purpose of avoiding U.S. federal tax penalties.

The information contained herein was prepared by Legacy Management Consulting Group, LLC from public documents for general informational purposes.  Its contents should not be construed as professional advice, and readers should not act upon the information contained herein without consulting a professional.  This information is presented without any representation or warranty as to its accuracy, completeness or timeliness.  Transmission or receipt of this information does not create any relationship with Legacy Management Consulting Group, LLC.  Electronic mail or other communications with Legacy Management Consulting Group, LLC cannot be guaranteed to be confidential and will not imply nor create any relationship with Legacy Management Consulting Group, LLC.

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Dominick Sartorio is a veteran sales and operations executive who instigated significant growth at several companies before joining NewYork-based Legacy Management Consulting Group in 2008. Dominick Sartorio holds the position of Director of sales.