IRS regulations have failed to meet cost basis reporting needs according to a new report.
Fayetteville, GA (PRWEB) June 11, 2013
Over two years into the new cost basis reporting requirements for 1099-B and the situation is not looking good. A new report published on June 10, 2013 by Armen Computing, Ltd., the makers of TradeLog software, exposes what they believe to be serious flaws in IRS reporting requirements. The 25-page report is titled "The 1099-B Problem: Why IRS Regulations Have Failed to Meet Cost Basis Reporting Needs" and is available at http://www.tradelogsoftware.com/1099b-special-report.
This report highlights the challenges faced by many active traders and investors who need to file accurate capital gains taxes. The current IRS regulations for 1099-B are examined along with real examples to assess how well they meet the needs of taxpayers. The report also includes key recommendations to improve the information provided to taxpayers in 1099-B and help accomplish the objectives of the federal cost basis legislation passed in 2008.
Armen Computing, Ltd. has been dealing with the complex IRS rules for traders in securities since 1999 when they published TradeLog software. Since the new 1099-B reporting requirements have gone into effect the TradeLog team has been on the front lines trying to help taxpayers understand the new reports and, most challenging, produce the needed tax reporting.
David N. Eich, president and founder of Armen Computing, Ltd. states: "We believe that the IRS failed miserably in implementing the requirements of the cost basis legislation. In addition, we have seen major brokerage firms struggle in providing 1099-B reporting that is useful for taxpayer needs."
The special report attempts to explain in detail some of the most serious problems seen by the TradeLog software team. Section 3 of the report, for example, is titled: "Flaws in 1099-B and Form 8949 requirements."
Jason M. Derbyshire, the Business Development Manager at Armen Computing, Ltd. and key author of the report, states: "Even if a broker reports the 1099-B perfectly according to IRS rules, we believe the report itself is seriously flawed and is bad information from an accounting perspective."
The report uses an example along with probing questions to reveal why the author feels the 1099-B fails to meet the accounting principles of verifiable and objective information, which could be a serious concern for CPAs. It also examines the system designed by the IRS - using the 1099-B to complete Form 8949. The report asserts that the current system may actually make it easier for taxpayers to use wash sales to illegally reduce their taxable gains – and likely not be caught. It highlights why the wash sale rules are important to prevent such tax evasion and where Armen Computing, Ltd. believes the IRS system has failed.
The special report also details differing IRS rules for the reporting from taxpayers and that required by brokers on Form 1099-B. Armen Computing, Ltd. believes that the often-overlooked differences in the rules mean that many 1099-B reports may not include all of the needed adjustments to cost basis required by taxpayers. Most notable are the wash sale rule differences. Seven situations are listed in the report in which the 1099-B may have incomplete wash sale reporting because of those differences. If taxpayers are unaware of the differences the result could be inaccurate tax reporting with understated capital gains.
Anomalous 1099-B reports are examined in the report, with examples from actual taxpayer 1099-B statements. Also revealed are statements published on various IRS instructions and publications as well as other sources, which Armen Computing Ltd. believes are often misleading and confusing and could contribute to more problems for taxpayers trying to make heads or tails of their reporting.
"We hope this report can help open the eyes of taxpayers but more importantly those of legislators and IRS regulators," says Eich.
Armen Computing Ltd. does more than just expose the problems. Section 4 of the report includes key recommendations based on over a decade's experience reporting wash sales and capital gains.
"We believe that the IRS can get this right," says Derbyshire. "Active traders and investors need accurate reporting to help them with their taxes and we believe brokers should be required to provide that information. But the information needs to be verifiable and objective, and the current 1099-B requirements do not provide that."
The special report "The 1099-B Problem" is available as a free download from the TradeLog Software website at http://www.tradelogsoftware.com/1099b-special-report/. The company also plans to host future events discussing these problems and the action needed within the industry.
Armen Computing, Ltd. of Fayetteville, Georgia, is the publisher of TradeLog® Software for active traders. The company has published extensive content on tax issues affecting active traders and investors which is available at the company's web site: http://www.tradelogsoftware.com.