Tax_Message_Updated_July_2014 - Cost Basis Reporting for Bonds

Sep 19, 2026

Updated guidance on U.S. IRS cost basis reporting for covered securities beginning July 1, 2014 and effective January 1, 2014, including timelines for phased broker and mutual fund reporting to investors and the IRS under Form 1099-B and related forms. Explains how Trust Company of Oklahoma tracks and reports cost basis and bond amortization information for applicable bonds and options, and reminds taxpayers of their responsibility when selling securities in taxable accounts. Describes default bond amortization method choices, associated meanings, and how to keep defaults or contact the firm to change selections subject to IRS restrictions.

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CategoryLetters

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Pages2

Reading Time1 min

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IRS Regulations for Cost Basis Reporting

What the IRS Regulations Mean to You

Bond Amortization Method Defaults

Bond Amortization Method Choices

Updated Information Regarding Cost Basis Reporting for Bonds Beginning July 1, 2014 (Effective as of January 1, 2014) IRS Regulations for Cost Basis Reporting The Internal Revenue Service (IRS) has issued regulations requiring brokers and mutual fund companies to report cost basis information on covered securities (covered securities refers to securities acquired after certain effective dates as noted within this paragraph) to both investors and the IRS as part of Tax Form 1099-B. The third phase of these regulations will commence on January 1, 2014. Beginning on July 1, 2014, retroactive to January 1, 2014, Trust Company of Oklahoma will track and report cost basis information for less complex bonds and options (including warrants and rights) and will begin applying certain bond amortization methods for applicable bonds purchased on or after January 1, 2014.This tax information is reported to the IRS on specific tax forms, including Forms 1099-B, 1099-OID, and 1099-INT. The two prior phases pertained to equity securities acquired on or after January 1, 2011, and mutual funds and equities in Dividend Reinvestment Plans (DRIPs) acquired on or after January 1, 2012.The final phase will govern more complex bonds and options purchased on or after January 1, 2016. What the IRS Regulations Mean to You Trust Company of Oklahoma will track and report cost basis information for all covered securities on Form 1099-B and bond amortization information for applicable bonds on Form 1099-INT, Form 1099-OID, or other forms specified by the IRS, in accordance with the above timelines. As always, you are solely responsible for reporting accurate cost basis information to the IRS on your tax returns when you sell securities in a taxable account. Accounts for which a Tax Form 1099-B is not generated, such as IRAs and other retirement plans, generally are not affected by these changes. Bond Amortization Method Defaults There are several bond amortization methods from which to choose for determining income and cost basis. Trust Company of Oklahoma’s default methods for reporting bond amortization to you and the IRS are: 1. Do not treat all interest as original issue discount (OID) 2. Amortize Premium on Taxable Bonds based on Constant Yield Method 3. Accrue Market Discount based on Ratable Method (also straight line method) 4. Do not include Market Discount in income annually If you would like to keep the default methods listed above, you do not need to take action. Trust Company of Oklahoma will use the applicable methods for individual bond holdings acquired and sold after January 1, 2014. If you wish to make a different selection, please contact us at 918-744-0553. Subject to certain IRS restrictions (consult IRS Publication 550 and your tax advisor), you may change the default amortization selections to your preferred method for all applicable bond holdings acquired on or after January 1, 2014. Please review the table on Page 2 of this notice for additional explanation. ~~ 1 ~~ Updated Information Regarding Cost Basis Reporting for Bonds Beginning July 1, 2014 (Effective as of January 1, 2014) | BonD AMoRtIzAtIon MethoD ChoICeS1 | | | --- | --- | | MethoDS | WhAt It MeAnS | | treat All Interest as original Issue Discount (oID)2
Default Method: Do not treat all interest as OID | You may elect to treat all interest on a debt instrument (typically bonds) acquired during the tax year as OID and include it in income. Interest includes stated interest, acquisition discount, OID, de minimis OID, market discount, de minimis market discount, and unstated interest as adjusted by any amortizable bond premium or acquisition premium. If you choose to treat all interest as OID, then the bond premium will be amortized using the constant yield method and accrued market discount will be calculated using the constant yield method and included in annual income. | | Amortize Premium on taxable Bonds Default Method: Amortize p

FAQs

What effective dates apply to cost basis reporting changes for covered securities?

The notice states rules begin on July 1, 2014 but are retroactive to January 1, 2014. It also notes the third phase commences on January 1, 2014 and later phases apply to different categories of bonds and options.

Which IRS tax forms are referenced for reporting cost basis and bond amortization information?

The notice explains that cost basis information is reported to the IRS as part of Tax Form 1099-B and references additional forms such as 1099-OID and 1099-INT for related information, based on IRS-specified requirements.

Do retirement accounts like IRAs receive a Tax Form 1099-B under these changes?

The document states that accounts for which a Tax Form 1099-B is not generated, such as IRAs and other retirement plans, generally are not affected by these changes.

What are the default bond amortization methods, and can the defaults be changed?

Defaults include not treating all interest as OID, amortizing premium on taxable bonds using the constant yield method, accruing market discount using a ratable method (also straight line), and not including market discount in income annually. The notice says you do not need to take action to keep defaults, but you may change selections by contacting the firm and subject to IRS restrictions.

Sep 19, 2026

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