Since the beginning of the year, brokerage firms have been required to report investor gains and losses for new holdings directly to the IRS.

That’s good news for individual investors—at least the ones that like to be up-front with Uncle Sam. Until now, the responsibility to accurately report that information—which requires often-complex cost-basis calculations—rested with the investors themselves.

But many investors are assuming that that headache is no longer their problem, period, said Nico Willis, chief executive of NetWorth Services, Inc., a financial software company in Phoenix. What most don’t realize is that the requirement doesn’t apply to securities bought before Jan. 1.

That means brokerage firms are not responsible for the countless shares that investors owned before 2011 dawned. In other words, investors are responsible for calculating, and then reporting to the IRS, adjusted cost basis information for any security purchased before the regulation went into effect. Brokerages are, of course, free to help clients with this task if they wish.

But they might not extend that offer very often, says Willis. Willis’ company—full disclosure—offers a tool for individual and institutional investors to easily calculate their cost basis. But he’s got a point based on how the cost-basis measure, part of the 2008 bailout bill, evolved. The brokerage industry “told the U.S. Treasury it was impossible for them to connect with every single customer on previous holdings’ cost basis,” notes Willis.

Under the resulting compromise, brokerage firms have to take over cost-basis reporting for securities on January 1 of this year, followed by mutual funds and dividend reinvestment plan shares in 2012, and instruments such as options, bonds and derivatives in 2013.

Willis sees a potential boon for his business in the federal government’s growing interest in accurate capital gains reporting. Missing or inaccurate cost basis information is believed to cost Washington several billions of dollars a year in capital gains taxes. The new brokerage requirements are an attempt to reap more of that missing revenue.

With the capital gains legislation starting to take effect, NetWorth does seem to be in the right place at the right time. The 14-year-old firm’s NetBasis product is an online application that helps investors accurately calculate their cost basis.

The company’s clients include brokerage firms, accounting firms and large companies, and Willis says business has doubled over the past year. Although he won’t reveal revenues or number of customers, he says NetWorth’s institutional clientele includes Wells Fargo, Edward Jones and H&R Block.

The new emphasis on cost-basis calculation has not exactly made the subject sexy, but it has raised its profile. Willis sees a potentially positive result of that for retail investors: They are learning that they can tell their broker or mutual fund company—all the way up to their trades’ settlement dates—which cost-basis method to use in tracking their adjusted cost basis. That, explained Willis, can have a positive impact on their after-tax results.

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