New rule puts a wrinkle in figuring taxes on stock sales

Most of you have investments and the belief that all tax documents are required to be reported to you by January 31st. Not always the case…

Those letter in the mail stating your investment tax documents have been delayed is actually something we’ve expected all year long.

Here’s why…

As surprising as it sounds, investors have long been trusted to use the honor system when it comes to reporting the size of their gains and losses to the IRS when they sell an investment.

But all that changes now, due to the passage of the Emergency Economic Stabilization Act of 2008. For the first time, the annual tax forms investors receive, called the 1099-B, from their brokers will contain dramatic changes. Beginning with the just-completed 2011 tax year, it’s up to brokers to track how much investors paid for stocks that were sold and report that information directly to the IRS. This so-called cost basis is what determines how much tax investors pay.

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