U.S. agency tax collection requires brokers to track the cost basis of shares purchased after January 1

Investors forget what they paid for shares will be supported from next year, courtesy of the Internal Revenue Service.

It was then that the U.S. agency tax collection requires brokers to track the cost basis of shares purchased after January 1, and send to taxpayers and the government annually recording, when investors sell shares.

Brokers are already required to report income from sales of securities in which the IRS. Next year will also have to provide information on the purchase price, known as the cost basis of stocks.

"We've been really hammered home with our customers," said Brian Keil, director of the cost base and reporting in San Francisco, Charles Schwab Corp. "We hope our customers will get a 1099-B in 2012 and that could be a result not expected. "

Investors who buy shares of the same company on different dates or prices will be the biggest change, said Eric Smith, a spokesman for the IRS. Have to identify what actions are being sold before the sale settles, which usually means a period of three days for stocks.

About 46 percent of U.S. households stock ownership in 2010, including stocks, mutual funds, exchange-traded funds and variable annuities, according to the Investment Company Institute, a trade mutual funds based in Washington.

Tax Compliance

"This change in the law is designed to improve tax compliance and at the same time, reduce recordkeeping and reporting burden for millions of investors, ensuring that they receive the information they need to easily report their profits and losses correctly" said Smith.

Before this rule, the government had no way to verify if an investor was informed of the true profit of a sale unless there was an audit, said Greg Rosica, tax partner of Ernst & Young, which is headquartered in Tampa , Florida.

The regulation will come into force at a later date in other vocations. Starting January 1, 2012, runners will have to record the cost basis for mutual funds and stocks in dividend reinvestment plans, which require investors to reinvest at least 10 percent of dividends paid. reporting cost-base also applies to most ETFs in 2012, the IRS said.

The current rules for options and fixed income securities such as bonds, purchased after January 1, 2013, according to the IRS.

Look back

"Customers today often meet with your accountant, or when they are doing their taxes, and look back," Keil said Schwab, the largest independent brokerage, traded for client assets. "They select what many would have used a lot of hindsight. That will not be the case."

Brokerages including Schwab, Fidelity Investments and TD Ameritrade Holding Corp. will offer investors options for reporting cost basis including the use of the last stock bought or higher cost, the companies said. Investors can tell the company to sell shares whenever minimizing profits, for example, or specify the actions of a particular traffic before it is settled according to the IRS.

For taxpayers who do not choose, the broker must register the purchase price of the shares purchased first, known as the first in, first out or FIFO, according to the IRS. The company can choose the default average cost for mutual funds and stocks in dividend reinvestment plans, the IRS said.

Transfer records

Brokers are required to transfer cost information, the basis for shares purchased after January 1 if an investor changes the companies, said Gregg Murphy, senior vice president of products at Boston-based brokerage Fidelity. Firms incur a fine of $ 100 for sending the wrong way for the taxpayer and a separate $ 100 fine for sending a wrong way to the IRS, according to regulations.

Investors should review your tax situation before choosing a reporting method, said Sheryl Eighner, a director in the personal financial services group at PricewaterhouseCoopers LLP in Chicago. Taxpayers may want to identify certain actions without the need to offset gains with losses, for example, he said.

Depending on the amount of appreciation between the date on which the security is bought and sold, the choice of the method of notification, the right may result in a lower tax on capital gains, David Sands, a tax partner in New York, Buchbinder Tunick & Company, said. Picking the wrong one could result in a larger payment than necessary, he said. Gains in stocks, corporate bonds and investment funds out at least one year are generally taxed at a maximum rate of 15 percent federal. The short-term gains are taxed at the ordinary rate of an individual, currently up to 35 percent.

Extended Cut

The tax reduction plan signed by President Barack Obama on 17 December 2012 extending the tax cuts Bush-era income tax, capital gains and dividends. The capital gains tax was expected to increase from 1 January to 20 percent and dividends are set to be taxed as ordinary income in the Congress acted.

"It is very beneficial for the customer," said Stuart Rubinstein, director general of commitment to the customer in Omaha Nebraska Jersey-based TD Ameritrade City office of the IRS regulation. "They do not need any registration, as it will do for them."