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Welcome to Wolters Kluwer Financial Services Cost Basis Reporting Resource Center, your source for cost basis intelligence expertise and technology solutions.
Cost Basis Reporting Is Now Law.
On Friday, October 3rd, 2008, President George W. Bush signed H.R. 1424, the Emergency Economic Stabilization Act of 2008 into law (the Act, Pub. L. No. 110-343). The law requires cost basis reporting by brokers to the Internal Revenue Service (IRS) and to taxpayers. The initial effective date for cost basis reporting for most stocks would applies to stock acquired on or after January 1, 2011; for mutual funds and dividend reinvestment plan stock (or similar arrangements) acquired on or after January 1, 2012; and for debt instruments, options and other covered securities acquired on or after January 1, 2013. The provision is scored to raise $6.67 billion over a ten year period.
To review the law, click here and go to Title IV, Section 403.
Ready or not, cost basis reporting legislation is here.
A simple review of the law reveals information and technology complexities that brokers, return preparers, tax advisors and taxpayers need to address immediately in order to comply.
Wolters Kluwer Financial Services has both the tax intelligence expertise and the technology to help you prepare to meet these requirements.
- Consider KEY CONCERNS around complying with the law.
- Read our WHITEPAPERS for details about cost basis reporting and this requirement.
- Visit our BLOG for conversation around the law, corporate actions and cost basis.
With the law’s initial effective date for stock acquired on January 1, 2011, brokers and others have only two years to develop, prepare, test and implement the system need to comply with the law. Since the types of system overhauls necessary to meet the legislation’s requirements are significant, often spanning many months to years, organizations need to take action immediately.
Failure to fully assess and address current system capabilities now could result in an inability to comply with basis reporting requirements. Noncompliance could incur both customer service disruptions and significant tax penalty consequences.
Because of the complexity of corporate action events affecting cost basis, it is essential that organizations have both an accurate, expert source of corporate action information and the technology to process the full ranges of these adjustments to comply with the law.
Read about the Top Ten Corporate Actions of 2007
Even if you have a cost basis system in place, obtaining and processing the detailed data necessary to comply with the law’s requirements will likely be more than most systems currently can handle.
Can your system process multiple tax accounting methods?
To comply with the law, systems need the ability to apply multiple tax accounting methods to different security types, such as the special rules pertaining to mutual fund shares via this legislation.
Does your system support wash sale sub-lots?
To comply with the wash sales rules, systems need to support tax sub-lots triggered by wash sale adjustments. These sub-lots could result in a 300 percent increase in data volume, exceeding the capabilities of many traditional database architectures.
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