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Tax changes every U.S. trader needs to know

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As the 2011 tax year winds down, traders will find their 1099-B and schedule D forms look superficially similar compared to years past. But beware: the IRS is rolling out a new cost basis reporting system for stocks purchased in 2011, so expect to see some apparent omissions. Under the new 1099-B rules, brokers will only include cost basis information for stocks purchased and sold during the 2011 year. Traders will have to keep track of the basis on what they bought in previous years until the securities are actually sold

If, for example, a trader purchased 100 shares of XYZ in 2010 and another 100 shares of XYZ in 2011, the 1099-B will include only the 100 shares purchased this year.

The 2011 rules will not include mutual funds or options, making the 1099-B an even more incomplete snapshot of every trader's portfolio for several years to come.

Brokerage firms and the IRS are not actively talking about the changes, but we did find Barron's has been trying to shed light on the issue. Its latest article on subject can found by clicking this link .

As always when it comes to taxes, please consult a certified tax advisor and/or accountant.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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