For years cost basis has been used, mostly by mutual funds and brokerages, to voluntarily report cost basis to their shareholders. In the past they were required only to report the gross proceeds in the event of a sale. But the cost basis? That was voluntary. So, what’s the big deal?

During the course of the financial meltdown in 2008, the Internal Revenue Service let its realization be known that investors in securities markets have, for many years, “mis-reported” their cost basis to effect the amount of profit or loss they were willing to report to the IRS. This meltdown timeframe was an appropriate time in which to fix the problem. Therefore, The Emergency Economic Stabilization Act of 2008, also called the Bail-out Bill or the Financial Rescue Law, was signed into law by President George W. Bush. The Cost Basis Reporting provision within the bill is estimated to increase tax revenue from capital gains taxes by approximately $7 billion through 2018.

This law requires all “applicable persons” to report the cost basis to the IRS when securities are sold for all securities acquired after January 1, 2011. That is now only six months away.