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The SD-PFS*Ticker
Vol 1, Issue 5December 2011
PFS Holiday Photo
 Dear Clients and Friends:

The SD Wealth Management Personal Financial Services Team would like to wish all of you a safe and happy holiday season, along with best wishes for a healthy and prosperous 2012. Members of our team, shown above from left to right are, Nancy Hendrickson, Vicky Rogers, David Stephan, Beth Lynch, Don Linzer, Nancy Skeans, Pat Fisher and Karen Werley (not pictured, Theresa Sekely).

In this issue we're focusing on planning for year end. We hope you'll find something here of interest. As always, please feel free to call us with any questions at 412-697-5200.
The newest member of our team 

We are pleased to announce a new addition to our team.  David Stephan joined us November 28, 2011 as a Support Advisor/Financial Analyst.  David comes to us from BNY Mellon after completing his triple major at Duquesne University (Finance, Accounting and Investment Management).  David is also a Level II CFA candidate.  Please join us in welcoming him. 

Are You Ready for Cost Basis Reporting?Tax Forms
... Vicky Rogers



You've probably heard about the new rules regarding cost basis reporting.   How will this affect you?  What do you need to do to get ready? 


First a quick summary:

As part of the 2008 Emergency Economic Stabilization Act, custodians are required to report cost basis for securities sold on their 1099-Bs.  There is a three-year phase-in schedule depending upon the type of security. 


What is cost basis?  Cost basis or tax basis is the purchase price for an asset.  For a security it is the purchase price, plus any commissions.  Reinvested dividends are added to basis.  Corporate actions and return of principal can also affect basis.  When you sell the asset, the cost basis is deducted from the sale price and the proceeds are taxed. 


How is this different?  In the past, custodians reported cost basis, if available, on a supplemental form sent to you with Form 1099.  This supplement was for your use, and not filed with the IRS.   Custodians are now expected to verify and report cost basis on securities that were acquired and sold during the phase-in period.  For equities, that is the 2011 tax year, mutual funds in 2012, fixed income and other types of securities in 2013.  Eventually all cost basis will be reported. 


Securities with required reporting are considered "covered," those without are "uncovered".  Although the basis for holdings acquired before 2011 is not reportable by the custodian, you are still responsible for reporting basis on uncovered securities.


What changes should you expect?  Upon the sale of a "covered" asset, you can choose a tax lot identification method.  For instance, sell the first shares acquired (FIFO), the last shares acquired (LIFO), or those with the highest cost, which can minimize capital gains. There are several other methods available as well.  If you make no choice, the IRS mandates FIFO as the default.


If you prepare your own taxes, there are several changes.  Your 1099 will look different.  Although cost basis will now be reported on Form 1099-B, most custodians have elected to redesign the entire package which typically includes 1099-INT and 1099-DIV. Most have gone to a landscape format and are including other tax preference items such as fees and investment expenses.  The IRS has mandated several new fields in the 1099-B:

         Box 1b - Date security was acquired

         Box 3 - Cost Basis

         Box 5 - Wash Sale disallowed

         Box 6 - If this box is checked, boxes 1b, 3, 5, 7, and 8 may be blank

         Box 8 - Type of Gain or Loss, holding period (short or long)

Schedule D, Form 1040 will also receive a makeover.  New this year is IRS Form 8949 - Sales and Other Dispositions of Capital Assets.  This is a worksheet attachment to Schedule D to reconcile sale transactions. You may be required to attach multiple forms separating sell transactions into short and long term gains, further divided into those with reported basis, those without and those with undetermined or un-reconciled basis.


Be prepared to verify cost basis.  Whether you prepare your taxes or have a professional prepare them, make sure basis on the 1099-B matches your records.  If there is a discrepancy, use what the custodian reports, unless you can categorically prove your records are accurate.  In this case, notify your custodian to correct.  Missing basis is treated as zero so it is to your benefit to identify.


If you are a client of Schneider Downs Wealth Management Advisors, we are working to verify basis. We have historical records for every purchase made on your behalf. More importantly, the accounting methods and tax lot identification method will have to synchronize.  We are working directly with the custodians.  As always we will collaborate with your tax preparer. For you, cost basis accounting will be seamless. 


Contact your advisor or custodian with any questions.


Charles Schwab has put together an excellent eight-page booklet regarding these new rules.  Follow the link to the right and choose "Guide to Tax Reporting Requirements."    



2012 tax issues


To those of our clients who use Schneider Downs & Co., Inc. to prepare their individual tax returns, we want to inform you of a personnel change that was effective late November of this year.  Dennis Loughran, who has assisted in directing special tax services and signed many of your individual returns, has decided to leave Schneider Downs and join a local CPA firm.  We wish Dennis well in his pursuits.  Schneider Downs is committed to the private client group and intends to continue to provide the highest quality of service to you.  The tax staff that has prepared and processed your returns for the last several years remains intact.   The return process that you are familiar with will remain unchanged, but if you have any questions about the completion of your return, please do not hesitate to reach out to your investment advisor. 


The Schneider Downs Wealth Management Team

Don, Nancy, Beth, Patrick, Theresa, Vicky, Karen, David and Nancy
Quotation Marks

"Be always at war with your vices, at peace with your neighbors, and let each new year find you a better man."  ~Benjamin Franklin

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"The Immortal Life of Henrietta Lacks"
by: Rebecca Skloot


The true, emotional story of how medical science was changed by the unintentional cellular gift from a poor, southern, woman named Henrietta Lacks. This one will really make you think!

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Material does not necessarily represent the views of SDWMA, and all information is believed to be from reliable sources; however, we make no representations as to their completeness or accuracy.