Standards for rounding?

I leave it up to you to determine if this differs from the GAAP method.

26 U.S.C. 6102 states "the Secretary is authorized to provide . . .{either a or b}"

Has the Secretary made such a provision? If so, do you know what it is?

"It's the principle (and principal ;->) of the matter. Just a curiosity," wrote qguy.

And then Pico Rico asks if the Secretary of the Treasury (U.S. income tax reference, I guess) has made any rules in this area.

This is a huge topic that ends up meaning almost nothing in the U.S. income tax world. The IRS itself does pretty much whatever it wants to; for example, I think it "truncates" - simply drops the pennies - in many of its records. How they justify that, I don't care. They seem not to care either. A buck, one way or the other, who's the wiser.

However, when you look for the Secretary's rules, you'll find this, inter alia, at Treasury Reg. § 301.6102-1: "Computations on returns or other documents. (a) Amounts shown on forms. To the extent permitted by any internal revenue form or instructions prescribed for use with respect to any internal revenue return, declaration, statement, other document, or supporting schedules, any amount required to be reported on such form shall be entered at the nearest whole dollar amount. The extent to which, and the conditions under which, such whole dollar amounts shall be entered on any form will be set forth in the instructions issued with respect to such form."

Please note the use of the term "shall" twice in this regulation. That - the use of "shall" - makes this A RULE THAT MUST BE FOLLOWED.

But if you keep reading in those regs, you'll find that there's an election *not* to follow this rule. So... Big Deal.

[An aside: I come from a scientific and engineering background, and there's a lot more to "rounding conventions" than just what to do with the cents when you only want/need to keep track of the dollars. Interestingly, qguy's question here never mentioned what units - like *dollars-and-cents*, maybe - he's asking about. Trust me, there's a whole lot more to "rounding" than this little pi*sant IRS/Treasury/"shall" rule in the Secretary's regulations.

And here's what the instructions say for Form 1040 and its schedules.

"You can round off cents to whole dollars on your return and schedules. If you do round to whole dollars, you must round all amounts. To round, drop amounts under 50 cents and increase amounts from 50 to 99 cents to the next dollar. For example, $1.39 becomes $1 and $2.50 becomes $3.

"If you have to add two or more amounts to figure the amount to enter on a line, include cents when adding the amounts and round off only the total."

I assume that only applies when you're adding amounts coming from your receipts. If the instructions say "Add lines 20 and 26 and enter the result in line 30", I've always assumed that I can put rounded values on lines 20 and 26, and then add them.

I use TurboTax, and I think it keeps the pennies throughout all the computations, so it hasn't been relevant to me for about 30 years. But for others doing their taxes by hand, I point this out.

[....]

FYI, the disparity has nothing to do with rounding algorithms per se, as I had assumed. Instead, I now believe it has to do with ensuring that the whole equals the sum of its parts.

(There was a much greater disparity of 0.05, which cannot be a rounding difference. I had mistaken explained it away by other means.)

I apologize for posting an accounting question in this tax forum. I was taking advantage of the fact that some of the active participants are CPAs, not just tax professionals and aficionados. I rationalized that it is remotely related to reporting capital gains for tax purposes; but I did not intend it be specific to IRS rules for rounding on forms, which I already knew. I am in the process of comparing figures reported by the broker with my records, since some of the securities had been held for 20 years, before changes in law that improved brokerage and fund record-keeping and reporting. And I thought the moderator would screen any posting deemed inappropriate for this forum's audience.

26 U.S.C. 6102 states "the Secretary is authorized to provide . . .{either a or b}"

Has the Secretary made such a provision? If so, do you know what it is? ========= Yes, because he has done so with the instructions for various forms, including 1040, 1041, 1065, 1120, etc..

I will continue to climb up on my crate and scream every time I see this or something similar. There's a big difference between what the law requires and what actually happens. Anyone who relies solely on what the broker reports is headed for trouble.

I intend to stay with my old-fashioned recordkeeping so that when I sell I can attach my sale confirmation to my purchase confirmation, which has been notated for any splits, etc. Not hard at all, and if one adds learning how to prepare the 8949, while other people are at a loss what to do when the broker misreports (we've had a couple here recently), all I have to do is check the instructions for the code(s) I need.

Phil Marti VITA/TCE Volunteer Clarksburg, MD

But Tax-Wise the CCH tax software the IRS distrubutes to VITA and Tax-Aide sites rounds off each amount as it is entered. Doesn't matter because as we all know the Tax Tables have $50 steps.

Love when the IRS is inconsistent.