Charles Schwab Advisor Services released Wednesday the latest in its series of Market Knowledge Tool (MKT) reports, this one focusing on the extension of new cost-basis reporting requirements for mutual funds, ETFs and dividend reinvestment plans (DRIPs) acquired and sold on or after Jan. 1, 2012.
The report also provides suggestions to advisors on how best to communicate these changes to their clients, particularly on the changes to Form 1099-B that will include cost basis information that must be reported to the IRS on covered equities sold in 2011.
The expanded reporting requirements were mandated by theEmergency Economic Stabilization Act of 2008, aka the $700 billion bailout bill, under which the adjusted cost basis of various securities must be reported on Form 1099, and then inserted on Schedule D of clients' Form 1040. Broker-dealers, transfer agents and custodians must also file their cost basis data with the IRS.