How does IRS know when did I buy stock and for how much?
I am filling up Schedule D for my federal tax return.
I called my stock brokerage company few times asking questions about stock information and tax consequences.
They mentioned several times that they don’t report any information about the price and date of stock purchase. Only the information about the sale (amount/date).
So how would IRS know what the base price was? Only from my schedule D?
I am not planning to cheat. But what is the lifetime chance of an audit for the particular tax year?
Let’s say by cheating someone gets an extra $GAIN amount. Penalty is $PENALTY amount.
Is the AuditChance*$PENALTY>$GAIN ?
At present, you keep your records to prove your cost basis. You don’t want the IRS deciding it’s $0.
In a few years, the IRS will require firms to supply the cost basis of items purchased through them. This will be a pain for the industry, but the IRS is convinced that 50% of schedule Ds contain errors, intentional or otherwise.
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