Regulations proposed last week by the Internal Revenue Service would leave brokerage firms little time to begin reporting cost basis information to customers.
Regulations proposed last week by the Internal Revenue Service would leave brokerage firms little time to begin reporting cost basis information to customers.
The proposal, which was published in the Federal Register, would require brokerage firms to begin reporting cost basis information on stocks traded by their customers on or after Jan. 1, 2011.
“It's not a lot of time,” said Stevie Conlon, tax director for the GainsKeeper division of Wolters Kluwer Financial Services, which produces software used by brokerage firms and investors for keeping track of cost basis. “People were hoping the IRS would issue guidance in enough time so that operations systems and software could be updated,” she said.
Comments are due on the proposal by Feb. 8, which means the final regulations likely will not be out until May or June, Ms. Conlon said. That would leave only six or seven months for brokers to prepare for the new requirements, and most firms need a year, she said.
The legislation requiring brokers to provide the information to their customers was enacted last year.
The proposal does not exempt from reporting small “wash sales” in which losses are offset by purchases, or mass trades by active traders who use computer software to execute thousands of transactions at a time, Ms. Conlon said.
Corrections for minor errors also will have to be sent to customers, who could become alarmed, she added.
Representatives from the IRS were not available for comment.
