Discussion Archives:If I just summarize stock sales on Schedule D, rather than attach a detailed schedule to a paper return or to an 8453, what is the worst that can happen?!?!?

Does anyone know what the penalty for not doing it the way the IRS wants me to do it is?

I really don't see the logic as to why they are making a fuss out of this all of a sudden. If I am going to have my client send an 8453 with a detailed schedule of stock sales, why e-file at all? May as well just send in a paper return.

It is this kind of thing that makes this business so frustrating some times!

That said, you have always been required to provide the detailed information.

If you have broker's statements with all of the required information, you can summarize the transactions on Schedule D and send in the statements with the 8453.

The IRS didn't so much change the rules as clarify them. When they said, at the end of 2005, that they wanted each transaction separately listed on Schedule D, the pronouncement wasn't exactly popular. They then compromised by letting folks go back to what they had essentially been doing already -- summarizing the transactions on the Schedule D and attaching the appropriate detail to the return (or 8453). At least, that's what everyone was supposed to be doing.

The point of e-filing was never to send less information. If you don't want to mail in an 8453 with the required detail, enter the individual transactions on Schedule D.

Has nobody read the revised instructions to schedule D - go to page D6, 2nd paragraph under the heading "specific instructions". It is very clear. Also last year the AICPA tax section put out an alert bulletin to bring this change in the instructions to peoples attention. Providing the detail is a requirement - not an option.........

We've all seen what happens when a brokerage sells a mutual fund held for years at that brokerage house: every reinvestment is split out with a computation of gain and loss and sometimes a total is not given. In cases like that it might be easier to copy and cut apart that part of the statement and paste it on something else [or try to scan it into Excel].

There's really no sensible way to raise a failure-to-file issue in processing. They can return the entire document to the t/p, stating an incomplete return is no return, but that potentially leaves them open to a waste of a nonfiler case should t/p not resubmit. If a refund return, that tactic will cause workload on the 800-number, and maybe thence workload for the Taxpayer Advocate. A t/p may also write to a member of Congress, and IRS must respond in writing defending its actions. If attachments can't be easily tied to what's on Sch D, the most they should do is send a letter asking t/p to do so. If no response, they're still wise to assess as timely, making any corrections within the statutory definition of math correction. They then have the option of referring it to the Exam function in the Center to look at, for disposition at their discretion. Any easy out for them is select on other issues, and let an Area Office examiner putz with Sch D.

Massachusetts mandates e-filing for most preparers, so I just e-file the retrun without the summary. I never have had a problem as of this writing.

Example: When the client brings in 10 Goodwill receipts for $75-$100 each. Sure, I am breaking the rules when I just input them all as one donation dated July 1, 2006. But at the same time, I am also meeting my goal of efficently processing their tax return. I consider all risks (the 0.0000001% chance the IRS will say, "You did not do this the right way") and the reward (higher realization of my billable time).

i see your average fee is $600.

have you developed a set minimum fee for new clients regardless of how simple it is? (i.e $300 minimum, even if only 2 w-2's and one 1099 ?

or is $600 average helped out by good fees from corporate returns?

Thanks

Will

States have very different enforcement requirements with a low rate of tax. IRS, however, imposes much higher tax and has a policy of treating similarly situated t/p's uniformly. Both efilers and paper filers are similarly situated, as to just getting something processible in on time.

So I have this theory. When an efile is accepted, it is of course assessed, lump Sch D figures and all plus anything else requiring supporting paper. IRS cannot take attachments to 8453 later and do any sort of math error correction. It's an audit. However, junk attached to a paper 1040 can be analyzed and corrections to net gain/loss made without statutory notice, following Regulatory appeal procedures. Accordingly, the two classes of t/p's are being treated differently. So, it's not a matter of mere revenue, but uniform treatment. One solution is to newly ignore gibberish in support of mere totals on a paper-file return. T/p is in the same footing as jibberish attached to 8453, which of course are merely sent off to a Federal Records Center, available if audited. However, IRS is not comfortable with ignoring sloppy paper filings with statutory authority to make unappealable corrections.

So it sounds like what IRS has been struggling with is announcing requirements for what to attach for any Sch D detail, paper or efile. If t/p's comply, it tends to be self-enforcing.

Yes there are CP-2000 audits for missing proceeds, but of actual 'bring your records in' type audits I have seen two: both involving the flipping of T Bills which ended in no change. And the CP-2000 audits happen to both efiling and mailed in returns.

Based on my experience, I've not seen different treatment. Maybe IRS employees are looking, and maybe I am SOOOOOOOO proficient that nothing is wrong, but if you believe the latter, I've a bridge you might like to buy.

I have, on the IRS side. Does not happen that often at all, nor returns prepared by professionals (self-prepared occasional "pieces of work"). That is why I don't understand IRS' recent fussing in announcements and instructions. Returns can later be audited following the usual selection methods. Processing and audit functions are rather discrete functions. Exam says this stuff is simple, and you have 6213(b)(1). Processing says you try processing tens/millions of paper on insufficient staffing.

An oddity occurs where a Fortune 500 company files a basic 1120 with everything "See attached." Center can't find the balance sheet on a filing standing 10 inches tall, nor dare try. They are simply coded, math unverified, as "no balance sheet" class of 1120.

My statement meant I've never seen IRS give a math error notice on the details, not that none has ever been made. I used to wonder how they ever read my handwriting!

And to boot - the client transfered everything from one institution to another who then input the data cost basis incorrectly and then sold every single holding previously security held in the account - 24+ hours later to review all of this and your complaining! Clients rely on us to get it right - it is part of the business.

And so begins my campaign. Please, please, obey the rules, and send all the detail. My preference is that you'll staple the 57 pages to an 8453 and mail it in.

Can we also put "See attached" on the 8283 and send them copies of all the Goodwill receipts?

We forbid you from typing all transacations into Lacerte.

Thanks,

Then there are the idiot states that want a COMPLETE copy of the Federal return (listening, Governor Schwarzenegger)(Minnesota too) and the only income that pertains is a 850 W-2 form, or a K-1 with $500 of rental income.  For them I bring out the Stanley Bostitch sliding scale stapler...the type you need pliers for when you must remove a staple from the package.

For many years, we have been attaching the 1099 or the sales summary to the Schedule D. The Schedule D always reconciles to the attachments.

1) Send just the summary figures, no backup 2) If the client will pay for the data entry I do it -- usually $3/trade 3) Some brokers will send the info in spreadsheet form which I can suck into my software. If so, I charge a flat fee -- it takes some work.

The IRS should require brokers to provide statements in sched D format. This would be an easy format change since it's data they are already providing.

I understand that in the future brokers will be required to provide basis info to the client and the IRS. I don't see why they don't require that right now, with an exception for cases where the broker doesn't have the info. Again, it's data the broker is already giving to the taxpayer. There may be some inconsistencies, eg average cost basis or adjusted price on bonds, but it would still be better than what we've got now.

If there is a regulation that when transferring securities between brokerages, that the cost info is also required to be transferred in, it will be done. Yes, the new brokerage who manages the money wants to track how they did, and sure, do this, but this is just an additional cost column in their program.

If a client is transferring stocks in, they should be required to provide the basis as they have it.

This isn't and shouldn't be rocket science. Simple administrative work requirement for the companies that handle the accounts. If they cannot provide this information, make them find a different line of work.

I truly hate charging clients a few hours of my time for something that should be simply summarized by these brokerage houses. Simple friggin common sense.

Cost tracking by brokerages should be a relatively simple thing. If I can track depreciation with a program that can spit out 7 to 12 different methods, the technology is there for these firms to track multiple costs as well.