Date: January 15th 2006

Two weeks ago, ever-vigilant Chapter member Peter Lingane brought this issue to my attention (thank you Peter). In the last few days, IRS has publicly addressed the issue and several sources, including NAEA, have reported the news. However, I do not think anyone has addressed the issue as well as Peter. In case you share my concern about the spotty reporting and, more importantly, the grey areas of what we're supposed to do with this IRS "clarification", I am reprinting the NAEA article (and links) below, and I am attaching an analysis Peter sent me. Note that the analysis is copyright RIA. I am not attempting to subvert RIA's intellectual property by sending this on. If anything, this might serve as a good advertisement for their research services.


FROM NAEA E@lert for January 13, 2006:
New Schedule D Instructions—update
Last week NAEA President Frank Degen sent IRS Commissioner Everson a letter outlining EAs' concerns (the AICPA sent a similar letter). NAEA's Sr. Director Government Relations has been in touch with IRS officials, who report that Commissioner Everson plans a written response.

In the interim, IRS has issued two clarifications of the Schedule D instructions. The first is a Sched. D instruction website clarification
http://www.magnetmail.net/images/clients/NAEA/attach/1040D_Instructions_Clarification.doc
(buried so deep that E@lert needed IRS assistance in finding it!) and the second is a Q&A document issued earlier today. http://www.magnetmail.net/images/clients/NAEA/attach/QA_Schedule_D_Instructions.doc

The pearls of wisdom from the two documents:

"The instructions on page D-3 for traders (and investors) have been unchanged since the year 2000. The new instructions on page D-6 were meant to highlight and clarify these rules, not to change them. Therefore, taxpayers may continue to use a substitute statement to provide all of the same information and in a similar format to lines 1 and 8 of Schedules D and D-1. They are not required to use the official version of Schedules D and D-1 to provide the details on each transaction. However, the details of each transaction still must be provided with the tax return and not just upon request."
"For electronically filed returns, filers may attach any necessary Schedules D-1, or acceptable substitutes for Schedule D-1, to the Form 8453, U.S. Individual Income Tax Declaration for an IRS e-file Return."

For the RIA analysis, please make sure you click on the correct spot to download the page instead of unsubscribing from this list.



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