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Long Term Original Issue Discount Reporting Services
To assist firms with the computation of Original Issue Discount for either information reporting or portfolio accounting, Wall Street Concepts (WSC) offers a transaction based service that computes the accrual of income on specified tax lots.
Coverage  |  Annual Review  |  HPS OID Reporting  |  Proprietary Database Option
WSC identifies all the securities issued with OID, collects the fundamental information and computes the OID accrual rates. The services cover all issues (taxable and tax-exempt) that exceed a de minimis test where the original issue discount exceeds .0025 times the stated redemption price times the number of full years from the date of original issue to maturity.

The OID services cover three segments of the fixed income market:

  • Taxable OID Discount Bonds

  • All taxable discount securities, including Corporate and Government Bonds, Federal STRIPs, Eurobonds, and Taxable Municipal securities. This group covers all of the securities in Section 1A & 1B of Publication 1212. In addition, we include a significant number of issues (over one third of our database) that are OID reportable but are not part of Publication 1212. Special attention is given to Pay-In-Kind (PIK), Reset/Split rate, Contingent debt, Inflation Protection Bonds, Equity Units and instruments with Unit Factors. Rates for Treasury Bills and short-term Agency issues are also included here.
  • Certificates of Deposit

  • This segment covers brokered discount Certificates of Deposit (CDs). Issuers of these instruments are not required to file form 8281 with the IRS and thus, these rates are not included in Publication 1212.
  • Nontaxable Municipal OID Bonds

  • This third segment, by far the largest, covers all Municipal obligations with more than a de minimis amount of discount. The Municipal OID, while being nontaxable, can be furnished as a customer service. Investors receiving these annual OID accruals will have the information necessary for annually adjusting cost basis.
Annual Review
The Long Term OID Services include an Annual Review, which provides important detail about any new regulations, new security structures or special situations. The review is provided in December, allowing you to prepare for potential questions or special handling required in the upcoming tax-reporting season.
Holding Period Specific OID Reporting (HPS) Top
  • Transaction Based Service

  • Since tax year 1992, 1099-OID reporting for all long term discount securities has been required on a "holding period specific" basis (IRS Regulations Section 1.6049). The HPS service provides this calculation for each security held by each investor identified by a subscribing firm. WSC identifies all the relevant issues by providing a monthly file of CUSIP numbers. This file is used to update your security master, ensure cash payments are classified correctly and supply transaction activity to WSC to perform income calculations. To meet the January 31st 1099 reporting deadline, OID income calculations are performed annually in early January.
  • Custom STRIP and Secondary Market Adjustment Service:

  • If you have an interest in supplying information to your investors that goes beyond simple tax reporting compliance, WSC offers computation of OID income for Treasury STRIPs based upon an investor's purchase date and purchase price. Further, WSC will calculate whether other OID securities were purchase at a premium or discount and show over time the accretion of discount or amortization of premium along with the adjusted cost basis of an investment.
  • Additional Portfolio Accounting Option

  • Because the lifetime accrual schedule for OID securities can be calculated at the time of issuance, the 1099 reportable and investor level information can be calculated on a more frequent basis. This enables firms to incorporate the income, adjusted cost basis and unrealized gain/loss information into their portfolio accounting systems on a real time basis or as monthly statements. This service consists of receiving the HPS and Secondary Market Adjustment services on a more frequent basis coupled with bond premium amortization and market discount accretion information for municipal bonds and other long-term debt instruments without OID. This information is essential in evaluating the performance of one's current investments, to assist in future investment decisions and to help ensure that investors recognizes their correct taxable income. For municipal bonds, providing this information is imperative for investors selling positions prior to redemption. Further, it enables your firm to provide cost basis and unrealized gain/loss information for fixed income securities.
Proprietary Database Option Top
To cover additional securities, such as proprietary discount notes or market index CDs, firms may establish a proprietary database with WSC so that the OID income accrual process for these securities is handled within the same processing stream as public domain issues. For the proprietary database, the client provides an in-house CUSIP number and fundamentals of the issues being added to the database. WSC computes the OID accrual rates. In addition to proprietary issues, if a firm wants to cover specified de minimis municipal obligations, the proprietary database could be used for these issues for the HPS service.
 For more information, please contact wsc.ClientServices@fisglobal.com.
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