Form 8949 New Filing Requirement on Sale of Securities

By November 29, 2011 Individuals

The IRS is facing budget cuts and is looking for new ways to shift the reporting burden to the taxpayer.  Currently, the IRS matches gross proceeds information received from brokerage firms with what is reported on Schedule D of individual tax returns, while basis is tracked by individuals and their brokerages.  Due to law changes, brokerages must now provide the gross proceeds AND cost basis to the IRS on stock sales. The IRS has developed a plan to help them continue their computer matching program.
Starting in 2011, the IRS is proposing a new form be filled out to record the sale of securities in addition to Schedule D. Form 8949, a new filing requirment on the sale of securities, will report the sale of all securities and the totals will flow through to Schedule D. The new filing requirement is in connection with the new basis reporting rules that went into effect for securities purchased after 2010.

A separate 8949 will be required for sales of securities where the basis is reported by the brokerage firm, for sales where the tax basis isn’t reported and for the sale of securities where no information is reported to the IRS. Depending on the different classification or reporting of sale of securities you may be required to file up three different 8949, one for each classification. It will be up to individuals and their tax preparers to discover what information brokers actually sent or didn’t send to the IRS. The requirement is to make it easier for the IRS to cross reference the basis reported on the return with the information reported by the brokerage house. The IRS has not finalized the instructions or the use of the form. The Tax Almanac, a free online resource has a discussion section concerning the new filing requirement.

We will keep you updated as we move closer to the 2011 tax filing season and more information is available regarding what this means to you.