Several tax reporting changes enacted a couple of years ago are finally coming home to roost.  Begining in 2011, financial institutions must begin providing the IRS with information on your "basis" when you sell securities.

However, don't toss out your records just yet. The new rules, which phase in over three years, don't apply to securities acquired before 2011. So you'll still need your old records for tax reporting after 2010.

First, here's some background information. A taxable gain or loss from securities sales equals the difference between the sales prices and the basis. The "basis" is usually the acquisition cost plus certain adjustments such as broker commissions. Also, basis must be adjusted for events like stock splits and mergers.

The tax computation for a securities sale may be relatively easy if you sell all the shares of a particular stock you own. But complications often arise if you hold multiple shares and only sell some of them. In addition, you might not have kept records showing the initial cost of the securities.

Currently, financial institutions report to the IRS the amount of proceeds received in a securities sale, but not the basis of the shares. The IRS has long maintained that investors have taken advantage of this situation by inflating the adjusted basis of securities. The higher the basis, the lower the resulting taxable gain or the higher the deductible loss.

• For corporate stock shares acquired after 2010
• For mutual fund shares and stock in dividend reinvestment plan acquired after 2011
• For other securities -- such as notes, bonds and commodity contracts and options -- acquired after 2012.

It's important to be able to substantiate taxable gains and losses from securities sales. 

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