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Effective January 1, 2011, equity issuers have new cost basis reporting requirements. The IRS regulation mandates two key responsibilities for issuers:
- Form 1099-B reporting (administered by your transfer agent)
- Corporate Action reporting (responsibility of issuer)
Corporate actions include dividends, stock splits, mergers, acquisitions, and the like. Under the new regulation, you must furnish the IRS and all registered shareholders with a special report that details how the corporate action affects the cost basis of the underlying shares.
This report must be filed electronically to the IRS, and can be either mailed to shareholders or posted on your website. There are very strict guidelines for preparing and distributing this report. |
A word of caution if you are not a ClearTrust issuer yet:
Issuers
are subject to fines and penalties for failure to comply with this
rule. If your transfer agent commits an error, you are still held
liable. Therefore, it is essential that you are represented by a
qualified transfer agent.
If your transfer agent
has ever committed errors in certificate processing or record-keeping,
you should carefully consider whether or not that agent is qualified to
manage your new obligations to the IRS.
Take this opportunity to move your business to a proactive, robust transfer agent that you can confidently rely on.
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We have read, analyzed, and outlined the new IRS regulation and the direct impact it has on issuers of equity securities, including details of the new corporate action reporting requirement.
To request a free copy of our exclusive
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