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A new IRS rule for reporting investment transactions is causing filing headaches and delays, resulting in a tax preparation backlog.
For the first time, the IRS is requiring brokers and other investment advisors to report independently to the IRS all investment transactions including all gains, losses, and cost basis. That also means that they are sending various Forms 1099 to taxpayers for the first time.
Though the new rule was enacted last June, final guidance was not made available until January 27, 2012. Accordingly, this year the Form 1099 filing deadline was extended two weeks until February 15th. However, this did not change your mid-April deadline to file your individual income tax return.
This reporting change is causing processing problems both at the IRS and in the brokerage community. Some taxpayers are experiencing longer than expected delays caused by late and corrected/reissued broker Forms 1099. This can create a need to re-calculate tax records and amend already filed returns. Some clients are even receiving more than one corrected Form 1099!
What’s the result? As you might guess, the IRS rule change is creating a last minute income tax reporting rush. Many accounting firms that prepare complicated individual and business tax returns, as we do at McRuer CPAs, are receiving clients’ tax records much later than usual. This can create a backlog late in the tax preparation season.
What to do? If you are experiencing delays related to this change or have received corrected Forms 1099, we can help. The best option may be to request an automatic extension of time to file your 2011 individual income tax return. The extension is easy to request, it’s automatic, it’s free and most importantly, it provides both you and your tax preparer the necessary time to thoughtfully consider your tax situation. This assures that you are paying your proper tax liability and no more. This year, an extension allows a taxpayer to delay filing a completed tax return until October 15, 2012.
It is important to remember that when an extension is granted, it does not extend the amount of time you have to pay the taxes you owe. If you are unsure about this amount, we can help you by providing an estimated payment amount by the April 17th deadline. You may then file your completed return no later than October 15, 2012.
At McRuer CPAs we are available to help taxpayers who are experiencing these delays and confusion. If we may assist you, please contact us. 816-741-7882
