This article was sourced from The Wall Street Journal. Article by Liz Hoffman.
Morgan Stanley said it had given a “significant number” of wealth-management clients incorrect information that caused them to underpay their taxes.
In its annual regulatory filing Monday, Morgan Stanley MS, +0.68% said it is in “advanced discussions” with the Internal Revenue Service to resolve the issues at no cost to affected clients. It said it had set aside $70 million to cover the costs, which include paying any taxes owed to the IRS by clients who underpaid, as well as reimbursing clients who overpaid.
“We are committed to making this right for our clients with minimal inconvenience to them,” a spokesman said in a statement.
The problem occurred because Morgan Stanley’s reporting systems in some cases generated the wrong cost basis for clients who owned a particular stock or bond, the firm said. That determines how much gain or loss is recognized when a security is sold, for example, which determines how much tax is owed. The errors affected returns filed for tax years 2011 through 2016, meaning some clients will prepare taxes for an April filing deadline with incorrect information. Clients won’t have to refile, and any settlement would cover this year’s returns, a spokesman said.
An expanded version of this report appears on WSJ.com.
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