2011 Schedule D and gratuitous basis information

[Don in Upstate NY]

Getting ready for the first of the update seminars today. Got my powerpoints all ready, but still on shakey ground since the final instructions for Schedule D haven't been released yet.

There's going to be mass confusion next season in properly filling out Schedule D and the new form(s) 8949. Individual capital gains transactions are no longer reported on the Schedule D, but are reported on the form(s) 8949. Initially you classify each transactions as a type A, B, or C, and then fill out a separate 8949 for each type. Classifying the transactions as A, B, or C looks deceptivly simple, but it is not.

The 8949 form indicates that if the basis is shown in box 3 of the 1099-B, it's a type A. If the 1099-B does not show basis in box 3, it's a type B. And if there's no 1099-B, it's a type C. However the draft instructions clarify that this refers to the 1099-B as submitted to the IRS, not necessarily the 1099-B as received by the taxpayers. Brokerages have the option of providing gratuitous basis information to the taxpayer even if it is not required by the new law. If they do so, it will be shown in box 3 of the taxpayer's 1099-B, but not in box 3 of the IRS's 1099-B. Fortunately there is another box (box 6) on the 1099-B that is checked if the basis shown in box 3 is gratuitous, and thus the transaction is a type B.

Preparers who simply follow the directions on the 8949 form will be wrong.

(Didn't this forum previously have a spel checker built in?)

[Catherine]

OK; that's it. It's official.

I am NOW going to go hide under my desk and whimper. And hit myself in the head with a brick while I'm there. AND cry.

Do they have any idea what a mess it will be for THEM (the IRS) if they drive all of US (professional tax preparers) out of the field with their convoluted and STUPID rules? How about ONE form and send a copy of the brokerage statement as a pdf attchment to the return or with an 8453? How can we work according to what THEY receive when we don't get the same info? Put everyone with any stock sale on extension until the 1099-B's are added to the account info on e-services late next summer or into next fall?

Rant over. Time to check on the plumber. Grrr.

[Lion EA]

I'm going to raise my prices!

[Margaret CPA in OH]

Yes, I agree that a price increase for all who have Schedule D is definitely in order. I haven't completed my packets and engagement letters yet (usually mail out January 2) so maybe I'll create an insert describing the additional requirements - and commensurate time and skill - to properly report these. I especially like the automatice extension, Catherine. And you might even get to enjoy your new bathroom more! Hope I get to see it next summer :)

[Catherine]

Margaret -- I will look forward to your visit and will be happy to show off a bathroom that is functional and pretty, too.

Lion -- great idea; my Schedule D price just doubled.

[TaxCPANY]

Wow, Don, thanks for the headsup! I hadn't a clue, and won't be attending an overall update seminar til next month -- just 'niche' entities & industries in the meantime, and none mentioning Form 8949, yet.

Btw, Catherine, if it's your water-heater that's just begun to leak a gallon/hour, as mine, I not just sympathize but also empathize.

[Catherine]

@TaxCPANY -- Not a water heater leak, but a bathroom remodel. We've spent the last 8 years with a marginally functional bathroom where the main source of winter heat was my hair dryer. It will be finished _before_ tax season starts up again.

My sympathies on your water heater leak!! Hope that it gets fixed _very_ soon.