As part of their routine business stock broking and mutual fund companies buy and sell many stocks on behalf their clients. Internal Revenue Service (IRS) department has issued guidelines on reporting requirements on behalf of these companies. All details pertaining to sale and purchase of all the stocks need to be now submitted by these companies both to the IRS and to the investors. Any sale and purchase of stock before 1st Jan 2011 will not be required to be compulsory reporting.
It often becomes difficult and cumbersome for investors to calculate and report actual profits or losses made by them on account of trading in securities. To facilitate them and to monitor all the sale and purchase of securities transaction IRS wants broking firm to maintain proper records and provide this information to concerned parties so that proper and accurate tax returns could be filed. A good co-operation on all the parties involved would be required for smooth functioning of this reporting requirement.
IRS has already drawn detailed plans on how the entire reporting mechanism would work and formats in which the reports will have to be generated. All the doubts regarding the working of this model and who will be responsible of what is answered in detailed by IRS and this information is already available on the official website of IRS. Form 1099-B has already been created and will be required to maintain and report the required information. Once this new reporting mechanism gets implemented calculating gains or losses on securities trading could be calculated easily.