Steven Eliach quoted in "Cost-basis Reporting Requirement Delays 1099 Filings"April 6, 2012
Steven Eliach quoted in "Cost-basis reporting requirement delays 1099 filings" in Long Island Business News, April 6, 2012.
Just as electronic filing of income tax returns promises to speed the filing process, new reporting regulations are slowing the flow of information, putting the screws on CPAs and increasing taxpayers' costs.
The Internal Revenue Service for the first time is requiring brokerages to provide the cost basis of stock sales on 1099 forms, which document sources of income other than wages.
After brokerages said they couldn't meet their deadlines, the IRS granted them an extension from Jan. 31 to Feb. 15 to provide 1099 forms, creating a massive backlog in tax information and a slew of corrections and filing extensions.
Accountants said they're getting more last-minute information than ever, compressing the tax season from nearly four months to a matter of weeks, delaying filings and increasing the number of extensions at an additional expense to taxpayers.
"Clients aren't ready as fast," said Andy Cohen, partner in charge of the Long Island office of WeiserMazars in Lake Success. "You don't get a lot of information until the end of February. I see the busy season now instead of 13 weeks as six or seven weeks."
Steve Eliach, principal in charge of Marks Paneth's Long Island tax group in Woodbury, said the IRS' appetite for additional information, at least this year, led to a major deadline extension for the brokerage industry.
Similar extensions could occur next year, leaving taxpayers and accountants in the lurch as they wait for crucial information.
"The issue is a better balance from the IRS on the effects of additional regulatory compliance," Eliach said. "There's a general trend, asking for more information and increasing the compliance burden."
The delay in receiving data from brokerages is only part of the problem. Brokerages that provide information early often send corrected data afterward, triggering the need for an amended return, an additional cost.
Other accountants said returns increasingly involve numerous 1099s, with at least one being re-sent with corrections.
"Just this week, I got a bunch of corrected 1099s," said Michael J. Garibaldi, president of Israeloff, Trattner & Co., in Garden City. "Even if you prepare the return and are ready to file, it's prudent to wait and make sure you don't wind up with a corrected 1099."
Cohen said delays are also due to more complex returns, involving data from partnerships, such as real estate, and hedge funds, whose own returns must be done before data can be sent to individual taxpayers.
"People's investments are sophisticated," Cohen said. "I've been doing this a long time. When I started, by Jan. 5 we were already working on tax returns, when they weren't so complicated. You should see some of these returns."
Even the technology that speeds the transfer of data may be leading to a backlash. Clients, who once got their information to tax preparers earlier via snail mail, now procrastinate, confident they can just click and send.
"Clients can email things quicker. They're not as concerned about getting it over to you," Eliach said. "Technology solutions have made things more instantaneous. I don't know if there's as much planning that goes on."
Other accountants speculated some taxpayers may simply be procrastinating because they're more overworked.
"There's probably a lot more anti-government sentiment. People are putting off filings," said Jeff Davoli, a partner at Albrecht, Viggiano, Zureck & Co. in Hauppauge. "People are working two jobs, if they can find two jobs, to pay the mortgage. This is low on their priority list."
Rather than wait until they have all the documents, accountants are adjusting, asking clients to provide whatever information they can as early as possible: Better incomplete than all at the last minute, they say.
"I encourage my clients to send me information early or mid or late February, even if they don't have it all. If I have 50 or 75 percent of your information, I could still put it into your return and make sure the only thing we're missing is the thing we agree we're missing," Garibaldi said. "When that piece of information comes in, I'm not starting from scratch."