Tax season is coming up, and your firm’s accountants are crunching numbers. They are busy preparing to ensure that you pay the least amount of taxes necessary on business-related expenditures, assets and properties.

One thing that you have to keep in mind is reporting cost basis accurately. Under the Emergency Economic Stabilization Act of 2008, more commonly known as the “Federal Bailout Program,” there are now very strict guidelines that must be followed by any company when it comes to filing taxes.

So what exactly is cost basis, also known as basis? According to Publication 551 of the Internal Revenue Service (IRS), “Basis is the amount of your investment in property for tax purposes. Use the basis of property to figure depreciation, amortization, depletion, and casualty losses.”

It is vital that the proper cost basis reporting be implemented primarily in cases when stock dividends were reinvested rather than accepted as cash payments. When you reinvest your distribution, the cost basis of the investment you made is effectively increased.

In turn, the investment must be accounted for so that you can manage to pay lower tax amounts after having reported a lower capital gain. Failing to implement a higher tax basis would mean that you may likely have to pay taxes two times on distributions that were reinvested.

How can all this be accounted for? It certainly sounds complicated, but there are tools to help you out, especially your accounting team. Davidsohn Global Technologies offers a great tax lot accounting system called Active Trader Tax Lot Accounting System (ATTLAS).

ATTLAS will help you with tax lot accounting, profit (loss) optimization, reporting and making sure you meet global regulatory compliance.

Whatever you do, make sure you comply with all cost basis reporting requirements to prevent headaches down the road.

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