For an extra bit of humor, I thought the old Rockwell song title (showing my age) might be appropriate.
As of 1-1-2011 the US Federal Government (part of the Emergency Economic Stabilization Act of 2008) is now mandating purchase and sales cost basis be tracked and reported on end of year tax forms. Currently only sales are mandated.
This is a three-step process and begins with mandatory tracking and reporting of Equities. Step two begins on 1-1-2012 and mandates reporting of Mutual Fund holdings. Finally, step three begins 1-1-2013 and mandates reporting of Fixed income.
These recent mandates will not affect your tax filing this coming year (April of 2011 for 2010 taxes), but may shake things up a bit next year, April of 2012 for 2011 tax filings.
Inevitably there will be mistakes driven primarily by holdings established prior to the mandatory dates. This again, will not be a problem this year, but may cause a possible miss matching of information in the future.
Most of this will be very transparent for us as investors for 2011, but we are being “Watched” (Rockwell again…haha), and as such there may be some type of notifications or reporting as the year passes.
This reporting should not be any problem as we have very accurate records of cost basis information, and we are not down on the US Government for doing this, we actually had wondered why they have not done this sooner. However, the transition from old reporting systems to new US Government reporting systems may (most likely will) have a few snags.
Have a Great Day!