It’s Complicated: New Changes to Tax Code in Store for Advisors

Posted by adaniels in Blog on December 1, 2011

Fasten your seat belts. You’re about to have a bumpy tax season. reports that “with new cost-basis reporting requirements in effect for the 2011 tax year,” federal taxes are about to get even more complicated. The cause? Implementation of 2008’s Emergency Economic Stabilization Act, also known as the “bank bailout bill.”

First of all, the 1099-B form is very different this tax time. says that “the first phase of the rules will require custodians, broker-dealers and others to report the cost basis for all equities purchased on or after Jan. 1, 2011 on the new 1099-B form to the IRS and clients,” which means investors will be getting “an unfamiliar version of a vital tax document.”

The revised form “will now include details on cost basis, holding period, whether a lot is covered or not, acquisition date and disallowed losses from a wash sale,” OnWallStreet says.

Brian Keil, who works as director of cost basis and tax reporting at Charles Schwab, says that the new forms are the “biggest” changes he has seen in his 16 years with the company. He said that advisors should be prepared for many questions from customers about the new documents. Schwab is preparing to get anywhere between 250,000 and 400,000 calls early next year just on the new system.

And thanks to the law that enacted these changes, even more changes to the tax code are expected over the next two years. Schwab’s company has issued a white paper explaining to advisors how to digest what it all means.

Written by Lisa Swan


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