Archive for the ‘Basis reporting legislation’ Category

Cost Basis Reporting Takeaway: Identifying Debt

Thursday, September 11th, 2014

The operational challenges of cost basis reporting compliance have not yet fully abated. “There will likely be a tsunami of calls
from confused investors who don’t understand their tax reports and some incorrect reporting by financial firms which will need to redo their work,” describes cost basis expert Bob Linville, Scivantage Director of Product Management, in a recent FinOps Report piece.

As Linville lays out a recommended gameplan for firms, there are even more challenges ahead as complex debt instruments come into play in January 2016. Looking towards this milestone, there is a fundamental list of data necessary to identify debt covered in 2016—this includes:

  • -The variable rate, inflation indexed and contingent payment debt
  • -Debt with a stepped interest rate
  • -Convertible debt
  • -A stripped bond or stripped coupon subject to section 1286
  • -Debt that requires payments of either principal or interest in a currency other than the USD
  • -Certain tax credit bonds
  • -Debt with a payment-in-kind feature
  • -Debt issued by a non-U.S. issuer
  • -Debt, the terms of which are not reasonably available to a broker within 90 days of acquisition
  • -Debt that is issued as part of an investment unit
  • -Debt evidenced by a physical certificate unless such certificate is held (whether directly or through a nominee, agent, or subsidiary) by a securities depository or a clearing organization described in section 1.1471-1(b)(18)

Is your firm grappling with issues regarding simple and complex debt instruments? Share your questions and thoughts at our Cost Basis Reporting Forum.

Cost Basis Reporting Takeaway: FinOps Reports on the “Final Lap” of Regulations

Friday, August 15th, 2014

While Phase III Cost Basis Reporting regulations were implemented in January 1, 2014, firms are still grappling with the operational toll of compliance, particularly as it relates to simple debt instruments. In this in-depth FinOps Report piece, industry expert Bob Linville, Director of Product Management at Scivantage, takes a focused look at the final phase of regulations with a recommended game plan for firms:

  1. Test the rules you are using to define bonds as covered in 2014. Have you correctly identified bonds that have variable rates, tax credits or contingencies that make them reportable in 2016 rather than 2014?
  2. Test the default methods. Are you applying the constant yield method to all bonds acquired at a premium and the ratable method to bonds acquired at a discount?
  3. Test the rules applied when elections are made. If the election for constant yield method is made, it should change the basis calculation for a bond acquired at a discount, but it should not change the calculation for a bond acquired at a premium.
  4. Audit your results. These calculations are not new. These rules have been in the tax code for thirty years. The only thing that has changed is that brokers now have to apply these calculations according to the tax code and report the results. Whatever auditing firm you use should be able to audit your results and tell you whether your calculations are accurate.

How is your firm dealing with this final leg of cost basis reporting compliance? Share your thoughts and join the conversation at our Cost Basis Reporting Forum.

Read the full FinOps article here.

Hear from the Experts

Wednesday, February 20th, 2013

Our video interview series featuring financial industry analysts and technology experts continues this month with an interview of Alex Camargo, Wealth Management Analyst at Celent. In this video, Mr. Camargo shares his insights on the main challenges for firms using in-house cost basis reporting systems.



File under “did not see this coming”… IRS Delays Fixed Income and Options Reporting

Wednesday, May 2nd, 2012

The Internal Revenue Service today announced a delay in the proposed effective dates for reporting for debt instruments and options from January 1, 2013 to January 1, 2014.

Since the proposed regulations and effective date were published, the Treasury Department and IRS have received numerous requests to delay the proposed effective dates for debt instruments and options. Brokers have argued that the proposed effective date of January 1, 2013, “did not provide sufficient time to build and test the systems required to implement the reporting rules” for these securities.

After consideration of these comments, the Treasury Department and IRS have confirmed that the rules in the proposed regulations will now not apply until January 1, 2014, giving the industry more time to prepare.

For the complete notice, visit: Notice 2012-34

What is the Best Way to Fix 1099 Corrections? Start with Accurate Data

Tuesday, April 17th, 2012

Several recent news articles have outlined the impact a delay in sending out 1099s to investors had on their ability to file taxes on time as the April 17 deadline approached. Something like this, undoubtedly, can cause a detrimental blow to client satisfaction levels of the brokers in question. These events are yet another example of why data accuracy is so important when it comes to cost basis reporting (CBR).

In addition, the fact that this year is the first time brokerages had to include adjusted cost basis on the 1099 forms, should have been a signal that extra due diligence is a must. Data accuracy is crucial when it comes to getting clients’ cost basis information on time for filing taxes.

Recently, we announced that Scivantage Maxit® retail and institutional clients using the custom 1099 tax extract module had a 100% success rate in getting their IRS Form 1099s out to investors on time and using accurate data, ahead of the Feb. 15, 2012, deadline, avoiding an influx of client complaints and maintaining their high standard of customer service.

Although it may look as if this year’s tax season is coming to a close, the new reality is that it is tax season year-round. Following the implementation of Phase 1 and 2 of the CBR regulations, experts believe the industry should expect to see an influx of corrections that brokers will be burdened with fixing. Having access to accurate data, through our Scivantage Maxit platform, will make it easier for firms to issue these corrections to their clients.

Scivantage Maxit is the only fully automated, real-time solution to provide accurate, adjusted cost basis reporting through a highly configurable platform. Maxit enables broker-dealers, mutual funds, custodians and prime brokers to streamline tax and portfolio reporting and deliver a superior client experience, while reducing operational costs and meeting regulatory requirements.

Scivantage featured in Ignites article, “The Moral of Brokers’ Cost Basis Mistakes”

Thursday, March 29th, 2012

In this article, Ignites journalist Jackie Noblett reviews the major challenges associated with new cost basis reporting rules that the brokerage industry has implemented this tax season. The 2011 tax year is the first year these rules came into effect and they have added focus on firms’ systems and operations. The same challenges are awaiting fund firms next year when phase two, affecting mutual funds, takes effect.  Cameron Routh, Senior VP and Managing Director of Strategic Products at Scivantage, together with other industry experts, highlights takeaways and lessons learned to make next year’s tax season smooth when mutual fund cost basis tax reporting requirements begin. To read the full article click here. 

Staying Ahead of the Curve – Scivantage and SunGard Wall Street Concepts Webinar Recap

Monday, March 19th, 2012

With all the new regulation impacting this year’s tax reporting season, we recently partnered with SunGard Wall Street Concepts for a Webinar to look at the future of fixed income and options reporting requirements. Artie Wolk, Senior Vice President, Product Strategy at SunGard Wall Street Concepts, and Cameron Routh, Senior Vice President, Managing Director Strategic Products at Scivantage, discussed lessons learned from the 2011 tax reporting season and how to tackle the next critical phase as it gets increasingly complicated with financial instruments such as Original Issue Discount (OID) securities. Based on the questions and feedback from the audience, it was evident that the first phase of cost basis generated issues and challenges related to data management.

Firms will need to make sure they can rely on their current technology systems to ensure compliance with the new rules. As we have already seen this year, it is imperative to prepare as early as possible in order to mitigate errors and service clients best.

As noted in our most recent announcement, 100% of Scivantage Maxit clients using our custom tax extract module were able to mail their 1099s by the IRS deadline of February 15, 2012. This was a result of proper preparation and looking at these new rules as a long-term project. In order to duplicate these results for the fixed income and options reporting requirements, it is imperative for brokerages to start preparing early to avoid any confusion and errors in the future.

Listen to a recording of the Cost Basis Reporting: Looking Ahead. A Critical Look at the Proposed Fixed Income & Options Reporting Requirements Webinar and let us know what you think!

USA Today: New Rule Puts a Wrinkle in Figuring Taxes on Stock Sales

Thursday, March 1st, 2012

In case you missed it, Cameron Routh, our Senior Vice President and Managing Director of Strategic Products, spoke to Matt Krantz of USA Today for an article on the tax implications of recent cost basis reporting regulations that investors are facing this year. Following the passage of the Emergency Economic Stabilization Act of 2008, 1099-B forms that investors receive from their brokers will be different from what they used to be. Cost basis rules will apply to the way gains and losses on investments are reported to the IRS. Read the full article on the impact of cost basis reporting.

Upcoming Webinar: Scivantage and SunGard Wall Street Concepts to Host a Webinar on the Proposed Fixed Income & Options Reporting Requirements

Tuesday, February 7th, 2012

As the industry moves through this 1099 tax reporting season, it is essential that we look ahead at the Fixed Income and Options reporting requirements on the horizon. These complex security types will undoubtedly create additional compliance challenges and require substantial technology modifications to existing systems.

Join us for a live Webinar, titled: “Cost Basis Reporting: Looking Ahead. A Critical Look at the Proposed Fixed Income & Options Reporting Requirements”, to hear Artie Wolk, Senior Vice President, Product Strategy at SunGard Wall Street Concepts and Cameron Routh, Senior Vice President, Strategic Products at Scivantage share their thoughts on this tax reporting season and offer critical insight into the proposed regulations for Fixed Income & Options.

This interactive, one-hour webinar will take you through the major provisions of the proposed requirements and offer observations on key areas that will have an immediate impact on your customers, and your business. Key topics covered during this webinar will include:

  1. Lesson learned from this tax reporting season―from resource readiness and technology integration to data processing and the impact on client service
  2. Critical insight into the proposed regulations for Fixed Income and Options
  3. Deep dive from industry leader Wall Street Concepts on Original Issue Discount (OID) securities and their complex calculations
  4. Question & Answer session where we encourage your participation and questions!

You can register here for full access to listen on Thursday, February 23, at 4:00 PM EST.


IRS Alert: IRS Issues Final Instructions for Form 8937 – Report of Organizational Actions Affecting Basis of Securities

Thursday, January 12th, 2012

The IRS has issued instructions for Form 8937, the form that issuers of a specified security will use to report organizational actions affecting the basis of securities. Links to the current form and the instructions are below. The filing requirement applies to organizational actions after 2010. However, regulated investment companies (RICs) need to file Form 8937 only for organizational actions after 2011. Issuers are also required to furnish a written statement to shareholders containing the same information. The filing of this form with the IRS and the sending of written statements is not required if, by the due date, the issuer posts a completed Form 8937 in a readily accessible format in an area of its primary public website for 10 years.

Form 8937 (Dec. 2011) –
Instructions for Form 8937 (Rev. Dec. 2011) –

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