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Are you in compliance?

Recently, the IRS introduced several new reporting requirements somewhat unexpectedly.  Four critical ones are outlined below.  All taxpayers should review them to judge whether they are affected by the changes and what to look for in order to comply with the new requirements.

1099-B:  New way to report securities sales:

As in the past, a Form 1099-B Proceeds from Broker and Barter Exchange Transactions will be sent to any taxpayer who sells stock.  But now the revised form will disclose the cost basis of those securities sold and acquired for the account through transfers or purchases after 2010.  What happens to those sales after 2010 on securities acquired before 2011?  We report them the same as we always did.

The added burden now is to determine if the 1099-B cost basis used to determine taxable gains or losses on those specific transactions are correct.  Some of those securities, for example, might be transferred into the account from another external account.  Is the cost basis the amount reported when the transfer takes place after 2010 or were the securities purchased/acquired before 2011?  The taxpayer needs to police the accuracy of the 1099-B information so corrections can be made.  A new IRS Form 8938 provides the means to report corrections.

Form 1099-K:  New way to report business revenues.

If you received business revenues greater than $20,000 or by way of more than 200 separate Credit Card/PayPal payments, those reported revenues must now be broken out by payments received via merchant credit-card accounts versus other forms of payment.  A Form 1099-K is created by the payment processors so that merchant credit-card companies and PayPal can summarize sales by month and for the calendar year according to the card used . . . AMEX, Discovery, Master Card, Visa, etc.  The credit-card processors have until February 15 to issue the forms.  This information is required in order to properly file Corporations, Partnerships and individual returns containing self-employed business activities (Schedule C's).

Form 8869:  One more way to report foreign accounts.

Penalties for non-disclosure of certain qualifying foreign accounts are very steep indeed:  Up do $10,000 or more per month.

2011 marked the introduction of new steps toward disclosing to the U.S. Treasury broader information about your foreign accounts.  Qualified accounts are those in your name or under your control or granted to you by a trust, domiciled outside the U.S., and containing assets of $10,000 or more anytime during the year.  Traditionally there have been two forms that address these accounts.

Schedule B, Interest and Dividends, Part III of your standard Form 1040 tax return asks if you have a foreign account or involvement with a foreign trust.

If you, a U.S. citizen, resident OR entity (corporation, partnership, trust, etc.) have signature authority for a foreign account containing $10,000 or more in assets, a U.S. Treasury Form TD  F 90-22.1 Report of Foreign Bank and Financial Accounts is required for each and every year the account meets those qualifications.  Foreign investments through domestic investment companies are exempt; foreign broker accounts are not.

NOW, the IRS has added Form 8938 Statement of Specified Foreign Financial Assets to cover foreign accounts that meet higher thresholds of assets over $50,000.  This form takes a microscopic look at those accounts.

Note that there are other reporting requirements tailored to the international jet set:

-  Form 5471 Information Return of U.S. Persons With Respect to Certain Foreign Corporations.

-  Form 3520 Annual Return to Report Transactions with Foreign Trusts and Receipts of Certain Foreign Gifts.


Form 1099-Miscellaneous Income:  New ways of assuring they are reported.

Traditionally, businesses of any kind have needed to issue Form 1099-Misc to any individual paid $600 or more for contract services of any type or for rental of property or equipment.  This excludes providers of services from entities having tax ID's other then Social Security numbers.  Now the IRS is asking in writing whether these 1099's were filed properly, allowing them to enforce penalties if found otherwise. 

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Last modified: November 24, 2018