Taxes & Cost Basis


toggle Are there any IRS penalties if cost basis reporting information is not provided?

Issuers should consult with their tax advisors to ensure they understand the new legislation and potential IRS penalties.

toggle Can AST provide historical cost basis information?

EQ provides cost basis information for covered securities starting Jan. 1, 2011, the effective date of the new Cost Basis Reporting legislation. We will not provide historical cost basis information prior to this date.

toggle Does EQ utilize the DTCC CBRS Services to transfer cost basis information?

Yes. EQ is a DTCC limited participant and does utilize DTCC CBRS for transferring cost basis information to and from participating brokers. For more information on DTCC CBRS, click here.

toggle Were there any changes for S corporations under the updated legislation?

Yes. In the past, no broker or transfer agent reporting on IRS Form 1099-B was required for customers that are corporations, including S corporations. The updated legislation required broker and transfer agents to begin Form 1099-B reporting for S corporations (other than a financial institution) for sales of covered securities acquired on or after Jan. 1, 2012.

toggle What is a wash sale?

Under IRS rules, you cannot deduct losses from sales of stock or securities in a wash sale. A wash sale occurs when you sell stock or securities at a loss and within 30 days before or after the sale you replace the stock or security. For further information on wash sales, please refer to the final IRS regulations and IRS Publication 550 – Investment Income and Expenses.

toggle What is cost basis reporting and when was it implemented?

The term Cost Basis refers to the original value of an asset for tax purposes (usually the purchase price), adjusted for events such as wash sales, stock splits, dividends and return of capital distributions. This value is used to determine the capital gain or loss when an asset is disposed of. On Oct. 3, 2008, legislation was passed under the Emergency Economic Stabilization Act of 2008 that had a substantial impact on many areas of the financial services industry. As part of the legislation, there are more stringent requirements on financial intermediaries such as issuers, transfer agents, brokers, banks and mutual funds, to report customers’ cost basis in securities transactions to both their customers and the Internal Revenue Service (IRS). Recognizing financial institutions need to adapt their systems and processes to comply with the new rules, the law takes a phased approach, requiring them to report cost basis for:

  • Stock acquired on or after Jan. 1, 2011
  • Regulated Investment Companies and dividend reinvestment plans (DRIP) shares acquired on or after Jan. 1, 2012
  • Financial instruments such as debt securities and options acquired on or after Jan. 1, 2014


toggle What is a covered security?

A covered security is a specified security acquired for cash on or after the applicable effective date as per IRS Code §1.6045 (g)(3)(A).

toggle What is lot relief and what methods does EQ support? Does EQ support average cost?

Lot relief is a method of computing the cost basis of an asset that is sold in a taxable transaction. EQ supports FIFO (First-In-First-Out) and specific lot identification. As of Jan. 1, 2012, EQ has and continues to support Average Cost for Regulated Investment Companies and Dividend Reinvestment accounts.

toggle What is the current status of the cost basis reporting implementation at EQ?

As the next phases of Cost Basis Reporting become effective, financial institutions will continue to adapt their systems and processes to be compliant. EQ is currently compliant and is actively working on implementing Cost Basis Reporting solutions to be compliant with future phases of the legislation.

toggle What is a form W-9 and why is it required?

A Form W-9 certifies the Taxpayer Identification Number (TIN, also known as a Social Security Number or Employer Identification Number) listed on an account. A Form W-9 is required each time a new registration or new account is established. The IRS requires that EQ withhold a portion of the earnings on accounts that have not been certified by submitting a completed Form W-9.

toggle What is a 1099-DIV?

A 1099-DIV reports income paid to you from dividends on amounts of $10 or more; the exception to $10 rule is, in this case, where there is withholding applied to the dividends under $10.

toggle I sold my shares at the beginning of last year. Why did i receive a 1099-DIV?

You may have been paid one last dividend on the shares held in the account and the record date may have been prior to the sale.

toggle I was enrolled in dividend reinvestment for the entire year; why did I receive a 1099-DIV?

IRS regulations state that dividends that are reinvested are treated as if they were paid to the recipient in cash.

toggle Why was tax withheld?

Your Social Security Number or Employee Identification Number (EIN) may be missing or you have not certified your tax status using tax forms W8 or W9.

toggle Do I have to pay tax on reinvested dividends?

Dividend reinvestment plans let you choose to use your dividends to buy (through an agent) more shares of stock in the corporation instead of receiving the dividends in cash. If you are a member of this type of plan and use your dividends to buy more stock at a price equal to its fair market value, you must report the dividends as income. If you are a member of a dividend reinvestment plan that lets you buy more stock at a price less than its fair market value, you must report as income the fair market value of the additional stock on the dividend payment date. Other rules may apply. For additional information, refer to Chapter 9 of Publication 17, Your Federal Income Tax, and Tax Topic 404, Dividends.

toggle Why do I have to pay taxes on the fees and discounts applicable to DR accounts?

Fees and commissions that are paid for by the company are considered to be income by the IRS (money saved is money earned). Likewise, money saved because shares were purchased with a discount is also reportable as income.

toggle Do I have to pay taxes again on the stock acquired through a dividend reinvestment plan when i sell them?

After you report the dividends as income, you have basis in the shares acquired through dividend reinvestment. When you report the sale of the shares, you will be taxed only on the amount that the sales proceeds (minus commissions) exceed your cost basis (in this case, the amount of the dividends reinvested).

toggle How do I compute the basis for stock I sold when I received the stock over several years through a dividend reinvestment plan?

The basis of the stock you sold is the cost of the shares plus any adjustments, such as sales commissions. If you have not kept detailed records of your dividend reinvestments, you may be able to reconstruct those records with the help of public records from sources such as the media, your broker, or the company that issued the dividends. If you cannot specifically identify which shares were sold, you must use the first-in, first-out rule. This means that you deem that you sold the oldest shares first, then the next oldest, then the next to the next oldest, until you have accounted for the number of shares in the sale. In order to establish the basis of these shares, you need to have kept adequate documentation of all your purchases, including those that were through the dividend reinvestment plan. You may not use an average cost basis. Only mutual fund shares may have an average cost basis. Refer to Publication 550, Investment Income and Expenses, and Publication 551, Basis of Assets.

toggle How can I have errors on my 1099 changed?

If the error is a bad Social Security Number, the shareholder must submit a Form W-9 with the correct SSN and a copy of the 1099 that contains the error. If you believe the amount of your 1099 to be in error, we will verify the amount upon request in the form of a "write-up," showing you how the reporting occurred.

toggle What if I am not a U.S. citizen or do not have a social security number?

If you are not a U.S. citizen or do not have a Social Security Number, please use the appropriate Form W-8.

In this case, leave the Substitute Form W-9 section on the Transfer of Ownership form blank. If an account is not certified, the new owner, who is a non-U.S. taxpayer, will be subject to U.S. withholding from all earnings or sale proceeds as regulated by the IRS.

toggle How do I get a duplicate 1099 statement for any tax year?

For recent tax forms, you can log into Shareholder Central to download a copy. You can also email us at Please furnish us with the full name of the stock, account name, account number, social security number and tax year required. The 1099 will be forwarded to the mailing address reflected on your account. If we are unable to honor your request, we will email you with the particulars.