Schwab Offers Insight and Resources for Investors Navigating Cost Basis Reporting Changes

Urges investors to know their default reporting method and expect new 1099-B Form

Thursday, January 26, 2012 5:30 am PST



Public Company Information:

"A shift of this size will undoubtedly leave many investors looking for answers when it comes to dealing with new tax forms and filing requirements"

SAN FRANCISCO--(BUSINESS WIRE)--Charles Schwab, a leading provider of financial services, is taking proactive steps to provide investors with the insights and resources they need to prepare for cost-basis reporting changes this tax season. These changes will affect anyone who trades securities, impacting how they file taxes and, potentially, how much they’ll owe. To help navigate these changes, Schwab is providing investors with online resources and informational webcasts for those who need help understanding their cost-basis reporting method and to know what to expect on the IRS’ new 1099-B Form. In anticipation of increased call volume, Schwab has also invested time and resources in training its representatives on how to help clients through these changes.

Cost basis laws passed by Congress in 2008 now require brokerage firms to track and report cost-basis information for its clients. The first of these changes has already taken effect and applies to equities acquired on or after January 1, 2011. Beginning January 1, 2012, these changes applied to mutual funds, exchange traded funds (ETFs) and dividend reinvestment plans (DRIPs), followed by fixed income and options on January 1, 2013. Investors will first see these changes when they receive a revised 1099-B Form in February 2012, which will include cost-basis data, some of which will be reported to the IRS (stocks purchased and sold after January 1, 2011). To help avoid tax reporting confusion among investors, Schwab is introducing resources to offer them guidance, including informational webcasts and video demonstrating the changes to the 1099-B Form.

“A shift of this size will undoubtedly leave many investors looking for answers when it comes to dealing with new tax forms and filing requirements,” said Brian Keil, Charles Schwab director of cost basis and tax reporting. “The good news is that the changes in cost-basis reporting will ultimately simplify the tax reporting process for investors. Schwab is now able to track and report this information for its clients, and we’ve developed our cost-basis resources with the goal of further simplifying the process and easing investors into the changes.”

Key steps Schwab recommends investors take when preparing for cost basis reporting changes in 2011 and beyond include:

  • Know Your Default Reporting Method. Investors need to understand how their capital gain/loss information will be reported; default methods may vary by broker. Schwab’s default methods are “First In, First Out” (FIFO) for stocks and average cost for mutual funds. Clients may choose other default methods, but are encouraged to talk with a tax professional before making an alternate selection.
  • Familiarize Yourself with the Revised 1099-B Form. Investors will use the information on the new form to prepare 2011 tax returns. To help simplify tax reporting, Schwab has revised clients’ Form 1099 Composite to include the new 1099-B Form with cost-basis information, as well as a year-end summary with realized gain/loss data, amortization and accretion information, and a summary of fees. Investors can preview the new 1099-B Form by visiting Schwab’s cost basis information center here.
  • Identify the Tracking Resources Available. Active traders may complete several thousand transactions each year, so they should give extra attention to their cost-basis reporting method and make sure it matches what their brokerage reports to the IRS. Schwab offers tools like realized gain/loss tracking and positions evaluation with cost-basis data to help traders determine what reporting method is best for their investments.
  • Look Ahead to 2012. More investors will be impacted by cost basis reporting changes in 2012 when reporting changes are phased in for mutual funds, most ETFs and DRIPs. As with stocks, investors should determine their broker’s default method and determine if it’s appropriate for them with the help of a tax professional.

Investors can find additional insights on cost-basis reporting changes and their impact online here. Educational videos, workshop webcasts and frequently asked questions about cost basis reporting are available to all investors who want additional preparation around some of the biggest changes for individual taxpayers in more than 20 years. Visit to register for informational webcasts and watch a video previewing changes to the new 1099-B Form.

For general informational purposes only and is not intended to provide specific financial, compliance, tax or legal advice.

It is your responsibility to choose the cost basis method appropriate to your tax situation. Failure to select the proper cost basis method may cause you to pay more tax than necessary. Schwab does not provide tax advice and encourages you to consult with your tax professional.

About Charles Schwab

The Charles Schwab Corporation (NYSE:SCHW) is a leading provider of financial services, with more than 300 offices and 8.6 million client brokerage accounts, 1.49 million corporate retirement plan participants, 780,000 banking accounts, and $1.68 trillion in client assets as of Dec. 31, 2011. Through its operating subsidiaries, the company provides a full range of securities brokerage, banking, money management and financial advisory services to individual investors and independent investment advisors. Its broker-dealer subsidiary, Charles Schwab & Co., Inc. (member SIPC,, and affiliates offer a complete range of investment services and products including an extensive selection of mutual funds; financial planning and investment advice; retirement plan and equity compensation plan services; referrals to independent fee-based investment advisors; and custodial, operational and trading support for independent, fee-based investment advisors through its Advisor Services division. Independent investment advisors are not owned, affiliated with or supervised by Schwab. Its banking subsidiary, Charles Schwab Bank (member FDIC and an Equal Housing Lender), provides banking and mortgage services and products. More information is available at and (0112-0634)

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New rules concerning cost basis reporting mean some of the biggest changes for individual taxpayers in more than 20 years.

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