New IRS Instructions Should Alleviate Tax Preparer Panic CLARIFICATION

The revised paragraph in the 2005 Schedule D Instructions have caused a significant amount of confusion. Regrettably, AccountingWEB may have added to that confusion with an article published briefly here on Wednesday, implying that the reporting requirements for Schedule D and D-1 have changed. They have not.

Investors and traders are required to provide all of the information related to transactions resulting in capital gains or losses including a description of property, date

acquired, date sold, sales price, cost/other basis and gain/loss. The revision of the instruction paragraph did not change this requirement. In fact, the Internal Revenue Service (IRS) intended the revision to remind taxpayers and preparers that ALL the information was required for all transactions.

The revised paragraph reads “You must enter the details of each transaction on a separate line. If you have more than five transactions to report on line 1 or line 8, report the additional transactions on Schedule D-1. Use as many Schedules D-1 as you need. Enter on Schedule D, lines 2 and 9, the combined totals from all your Schedules D-1. Do not enter “see attached” or summary totals from an attachment in lieu of reporting the details of each transaction directly on Schedule D or D-1.”

Transaction summaries are NOT acceptable. Neither is writing “details available upon request” on Schedule D. Statements prepared by brokerages are acceptable in lieu of Schedule D ONLY when they contain ALL the required information in a similar format.

More information on Schedule D can be found online at www.irs.gov/formspubs/article/0,,id=109875,00.html the clarification is the third item on the list.