NewsLetter
What's New in Finances
Health care law brings out scam artists
The new health care law is confusing to many, and the con artists are wasting no time in taking advantage of people's uncertainty about the new rules. State insurance commissioners warn that con artists are calling, e-mailing, and even showing up at people's doors trying to sell insurance policies they say are required under the new law.
The facts are that the requirement to have health insurance doesn't begin until 2014, and there is no jail sentence involved for those who don't carry insurance.
Scam artists are preying on people who are uninformed or confused about the new health care law. To protect yourself, become familiar with the main provisions in the law. And be sure to follow the general rules to avoid becoming a victim of fraud: Don't give your credit card, bank account, or social security numbers to anyone you don't know, and don't sign up for anything without checking its legitimacy.
Get ready for the new "basis" reporting rules
Beginning next year, new reporting rules could make it easier for investors to report the tax consequences of securities sales. Responsibility for establishing your "basis" is being shifted to brokers and other financial institutions. But don't discard your records just yet: the new rules are being phased in gradually and don't apply to any securities acquired before 2011.
Be aware that the new rules are complex. The IRS recently issued proposed regulations providing some clarity, and further guidance is expected.
Here's the basic premise. When you sell securities, you may realize a capital gain or loss equal to the difference between the sale price and the basis. Your basis is generally the acquisition cost plus certain adjustments like broker's commissions. If you've kept adequate records, it's relatively easy to figure out a gain or loss when you've acquired all the shares of a security at the same time and you sell all the shares at the same time.
But complications often arise if you buy or sell shares at different times and in different lots. The IRS presumes that basis is determined by using a "first-in, first-out" method for shares that are sold. You may use an average cost method for establishing the basis of mutual fund shares. Alternatively, you might identify shaes of a security you're selling as coming from a specific lot, thereby increasing your loss or decreasing your gain for tax purposes.Under the "Emergency Economic Stabilization Act of 2008," financial institutions must begin providing basis information to both investors and the IRS on Form 1099-B, as follows:
- Corporate stock acquired after 2010.
- Stock for which the average cost method is permissible - such as mutual funds or stock in a dividend reinvestment plan - acquired after 2011.
- Other financial products - including notes, bonds, commodity contracts, and options - acquired after 2012.
- Financial institutions are also required to report whether a gain or loss is short-term or long-term (i.e., held longer than one year). Currently, net long-term gain qualifies for favorable tax treatment. Under the proposed regulations, brokers may adjust your basis if the "wash sale" rule applies. This rule prevents a loss deduction if you acquire "substantially identical" securities within 30 days of the sale.
For details or assistance with the new reporting rules, call us.
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