From Deb’s Desk – Insider Coaching

Hope this finds you well. It is that time of year when we are all gathering our tax papers, forms 1099’s, 1098’s, W-2’s, etc… Confusing and hectic time of year but also a good time to review, organize and educate yourselves in regards to your finances.

If what you thought was the best way to handle your finances turned out not to be, when would you want to know? And…if you knew, would you do something about it?

2011-2013 tax reporting changes: What you need to know

On January 1, 2011, new tax reporting requirements took effect based on the Emergency Economic Stabilization Act of 2008. The new tax law requires Schwab, and all other brokers, to report to the IRS the cost basis for investment gains and/or losses you incur during the tax year. The reporting changes will be phased in over a three-year period, beginning with tax year 2011. It’s important to understand which type of investments are subject to the cost basis method and how the requirements affect you.

Congress passed the Emergency Economic Stabilization Act on October 3, 2008, which requires firms like Schwab to report adjusted cost basis for taxable accounts to the IRS via Form 1099-B beginning with the 2011 tax year. Today, Schwab only reports gross proceeds on sales for taxable accounts.

The legislation applies to securities acquired on or after the effective date as follows:

January 1, 2011, for stocks and other equities

January 1, 2012, for mutual funds, ETFs, and Dividend Reinvestment Plan (DRIP) shares

January 1, 2013, for other securities (e.g., fixed income and options)

For further information, please login to your www.schwab.com or give us a call for assistance and/or questions.

If you agree with us and think taxes will be higher in the future, why postpone paying them? If you qualify for a Roth IRA, a contribution is taxed at your effective tax rate but your earnings will continue tax deferred and withdrawals tax free during retirement years. If you do not qualify, please give us a call, there are other strategies that you may qualify for. Remember, do you want to pay taxes on the SEED or the HARVEST?