Stevie Conlon As the mutual fund industry gears up for the next phase of the cost basis reporting law, which takes effect Jan. 1, 2012, there are a number of risks and challenges that fund companies must address to not only comply with the law, but keep their customers happy. Mutual fund boards should assess the impact of these new complex rules on a fund's management of its regulatory compliance and penalty risks, as well as its customer support systems and customer reputation.
Mutual fund companies that provide Form 1099-B and cost basis information to their investors face a massive new regulatory burden where the potential tax penalty risks are significant. Calculating cost basis correctly will be critical in order to avoid penalties. There are separate penalties for incorrect 1099s provided to the IRS and 1099s provided to taxpayers, and they aggregate to $200 per incorrect 1099 (with an annual ....