Usually I do not feel sorry for the Internal Revenue Service (IRS), but this time I do. The IRS has instituted a new matching program to reconcile the cost basis on 1099s. A client of mine had an audit where the IRS’ reason for calling the audit was due to the fact that the cost basis on the 1099 reported to the IRS did not match what we reported. During the audit, I showed the agent the cost basis we had on the 1099 provided by the brokerage firm. It was off by about $500 from what the IRS received. The agent was very frustrated and gave the taxpayer the higher cost basis.
The entire system seems to have kinks causing many people to be subject to unnecessary audits at the expense of taxpayers!
