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Preparer Issue: Adapting to Form 8949

Preparer Issue: Adapting to Form 8949

As the 2011 tax season draws to a close, many preparers have mixed emotions about the problems they encountered during the season. Between the economic plight of the United States, the rising number of late or unprepared clients (up from 39% last year to 46% this season), and the new requirements for form 8949, it is no wonder that many preparers are walking away from this tax season with a headache.

 One of the main issues of this tax season was the new requirement regarding 1099-B reporting for brokerage transactions and the new tax form 8949. There are several issues with form 8949, but many preparers are finding that the lack of specific reporting requirements for 1099-B is proving to be extremely time-consuming on the preparer end of things. Taxpayers and preparers alike have struggled with trying to reconcile 1099-B with accurate Form 8949 calculations, which proved to be no easy task.

 Perhaps the main problem with the 1099-B is that there is no standard for how brokers report the cost basis information. This has caused countless issues with taxpayers and preparers, because the information that they need to report on the 8949 comes in all shapes and sizes on a 1099-B. One broker might fit the entire year’s numbers for a client onto one piece of paper, while another puts the same information onto thirty pages. The preparer then has the tedious task of sorting and sifting through the information the broker provides in order to report it accurately onto the 8949 form.

 Many taxpayers and preparers feel that the lack of regulations and structure with the 1099-B is contributing to the confusion. A standard way of reporting information on a 1099-B from broker to client would greatly reduce the stress and effort from the preparer’s standpoint.

Another issue that the 1099-B is encountering is the simple fact that brokers do not always know the cost basis, particularly if it was purchased from a third party or many years previous. The information the client needs from the 1099-B in order to file Form 8949 correctly may not always be available or accurate from the brokers, and then it is the preparer’s responsibility to obtain the information, and report the discrepancy on the 8949. The reconciliation with the broker’s statement may take more time than just accurately reporting the calculated basis.

            One company that has been affected is GruntWorx, which is essentially designed to gather data directly from source documents, such as the 1099B, and import that data directly into tax software. Even though the idea behind GruntWorx is to streamline the data entry process, the lack of standards on 1099-B forms is proving to make things difficult. Julie Pierce, VP of GruntWorx, stated that, “The cost basis reporting changes were certainly a challenge for many people this tax season. Here at GruntWorx our customers have shared with us on how our Trades product helped them with this very issue. After seeing the many problems people were having in finding all the information needed from the brokerage statements, we redesigned the Trades product early in the tax season to properly extract all the needed data whether from the 1099-B section, the Realized Gains & Losses section, and in some cases both. Our customers have let us know that we helped them save hours of tax prep time. We share their hopes that next year we will see more consistency in the reporting of capital gains & losses data in the brokerage statements.”

            In this manner, companies have to redesign some of their software and especially their approach to how information is obtained from clients, all because of one new form in the tax return, the 8949. Hopefully by next tax season, there will be a more regulated way of reporting information from broker to client on a 1099-B, so that it will take the guesswork out of the whole process for the preparer.


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