The first phase of the rules required custodians, broker-dealers, and others to report the cost basis for all equities purchased on or after January 1, 2011, on a new Form 1099-B, Proceeds from Broker and Barter Exchange Transactions.
The correct preparation of Schedule D and Form 8949 requires the taxpayer to separate transactions into six categories including short- and long-term transactions where broker basis is reported (1) on Form 1099-B and to the IRS, (2) on Form 1099-B and not to the IRS, and (3) not on a 1099-B at all The six categories are represented by designations "A," "B," and "C" in short- and long-term sections on Form 8949.
For taxpayers with numerous securities transactions, reporting involves additional work unless the Form 1099-B separates the transactions into A, B, and C categories.
For example, the legislative history of the 1997 Act suggests that Form 1099-B
(Broker Proceeds) should be employed as the designated form for reporting payments made to attorneys.
CPAs should read the detailed instructions in this announcement for changes in the following forms: 1997 Form 1099-DIV, Dividends and Distributions; 1997 Form 1099-B
, Broker and Barter Exchange Transactions; 1996 Form 2439, Notice to Shareholder of Undistributed Long-Term Capital Gains, for 1996-97 fiscal years ending after May 6, 1997; and 1996 schedules K and K-1 for partnerships, S corporations and estates with 1996-97 fiscal years ending after May 6, 1997.
Currently, matching is only done on Forms 1099-B, Proceeds from Broker and Barter Exchange Transactions, and 1099-S, Proceeds from Real Estate Transactions, but no matching is done for put-and-call stock option transactions conducted through a broker, because they are exempt from Form 1099-B reporting.
If Form 1099-B includes both gross proceeds and basis information and matching is done on an individual basis, the IRS could more easily monitor compliance on reporting the accurate amount of gains or losses.
This is in contrast to the legislative history, which suggested that Form 1099-B
should be used.
Although the legislative history anticipates that gross proceeds reporting will be required on Form 1099-B
, Proceeds From Broker and Barter Exchange Transactions, the IRS has decided that gross proceeds will be reportable on Form 1099-MISC, in Box 13, coded "A.