The presenters of our Cost Basis Reporting webinar back in June weren’t too far off in their predictions. Less than three months before the first phase of the new Cost Basis Reporting law is scheduled to go into effect, the IRS at long last decided to release the final requirements. Aside from adding yet another tax-reporting rule, the IRS has also given the word procrastination a whole new meaning. With this new law, the IRS expects to recoup $6.1 billion in investment gains but not without keeping custodians, investment managers and broker/dealers in what seemed like a never ending guessing game of what they should be doing to prepare for the unknown. In their October 12, 2010 press release, the IRS stated that the regulations were posted to the Federal Register website, but after 20 minutes of searching, I abandoned the “Where’s Waldo” mission. The IRS does, however, provide a link to the description of penalty relief for brokers and custodians for reporting certain transfers of stock in 2011, so at least that’s clear. Aside from that irony, what I really don’t get is what’s so wrong about extending the deadline? There have been countless articles – even as recent as September – stating that brokerage firms are still scrambling to comply and investment firms are still in fear of how to handle client inquiries, but the IRS doesn’t seem to be informed about the reaction from the people it’s affecting because the title of their release states “For Investors, Reporting Gains and Losses Gets Easier Starting in 2011.” Considering that three months is not a realistic timeline for firms to prepare, why is the IRS determined to put this into effect in January 2011? I guess the obvious answer is they want to start collecting, but I feel like firms are being set up to fail or at least to get fined.
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