US Issuer FAQs- Cost Basis Reporting




Q: What is Cost Basis Reporting?


Answer


Effective January 1, 2011, equity issuers have new cost basis reporting requirements. The IRS regulation mandates two key responsibilities for issuers:

  • Form 1099-B reporting (administered by your transfer agent)
  • Corporate Action reporting (responsibility of issuer) Corporate actions include dividends, stock splits, mergers, acquisitions, and the like. Under the new regulation, you must furnish the IRS and all registered shareholders with a special report that details how the corporate action affects the cost basis of the underlying shares.

This report must be filed electronically to the IRS, and can be either mailed to shareholders or posted on your website. There are very strict guidelines for preparing and distributing this report.

IMPORTANT FACT

Issuers are subject to fines and penalties for failure to comply with this rule. If your transfer agent commits an error, you are still held liable. Therefore, it is essential that you are represented by a qualified transfer agent.


To read the regulation click here.


NOTE: Effective January 1, 2011, all transfer agents and brokers must track and report the cost basis of securities in accordance with the Emergency Economic Stabilization Act of 2008.

The information collected herein will be reported to the IRS and to all applicable taxpayers with a Form 1099-B. In addition, this cost basis information will be passed through to brokers and other transfer agents as required by law.


All Shareholders and Issuers must fill out the form below when transferring shares.


Supplemental Cost Basis Worksheet 
    (For both clients and shareholders)


Contact Chris Goodale with any questions you may have regarding this process.