An update note to tax preparers and traders about incorrect 1099-Bs and 2011 tax filings

By Robert A. Green, CPA

Many tax preparers and traders have put 2011 tax return filings on hold awaiting corrected 1099-Bs from securities-broker clearing firms. Unfortunately, many clearing firms are struggling and they simply can't provide a 1099-B that is correct, or adequate for tax preparers to rely on. So, what's a tax preparer and traders to do, considering that 2011 extended-tax returns are due September 17 for pass-through entities and October 15 for individuals?

Taxpayers can't hold out for corrected 1099-Bs any longer, they probably will never come. By law, taxpayers are responsible to report their securities trading gains and losses correctly on Form 8949, whether or not they receive a 1099-B, or if that 1099-B is right or wrong. If the broker has botched the 1099-B, it may help a taxpayer seek abatement on late-filing and late-payment penalties, but it won't excuse taxpayers from reporting their trading gains and losses, and paying the taxes they owe, with interest if late.

When taxpayers receive an incorrect Schedule K-1, they can file a Form 8082 Notice of Inconsistent Tax Treatment when they report a different amount, and or different tax treatment. A Form 8082 is not necessary with botched 1099-Bs in connection with the new IRS

rules.

Our firm ended the tax-filing bottleneck a month ago. It's time to start filing 2011 tax returns and to go with the army you have. That means using

software for trade accounting and any available broker profit and loss reports if they are in good shape and they can help you reconcile and double-check TradeLog.

We still work with the most recently received "corrected" Form 1099-B, but mostly just to reconcile the totals and explain the differences on Form 8949 and in our tax return footnote. We published an

on our blog dated August 17, 2012.

. We suggest that you use TradeLog and our footnote, and

with us if you have questions. Otherwise, you need to resign your account. It's not fair to keep a client waiting, because they could be hit with large penalties, interest and tax bills that don't make any sense. See our

resources for more back ground information.