What Is A Covered Security?

If you have ever heard someone mention a covered security, you may have found yourself wondering what this term refers to. A covered security is the term used to identify a class of securities that receive federally imposed exemptions from state restrictions and regulations. When dealing with stock trading in the United States, you will find that the majority of these are covered securities. Another term used for covered security is, “federal covered security.” If you are unsure if you qualify for any federally imposed exemptions through a covered security, the tax professionals at King Financial Services are here to help. Our team of qualified financial experts can help you to get the answers you need, ensuring you are filing properly and not missing out on any exemptions that you qualify for.


Understanding Covered Securities 

The IRS developed covered securities as a way to set a standard for security regulations and filings throughout the entire United States. The IRS felt that having companies go through the process of registering, filing, and complying with unique state regulations would be too hard to keep track of or fair for businesses. WIth this in mind the IRS created a uniform set of rules that provide the same exemption requirements and allowances.


Changes were made to the National Securities Market Improvement Act that in stricter terms defined what constitutes a covered security. This also granted federal regulators superseding authority over this class of security rather than state-level laws.


How Covered Securities Are Treated in Terms of Tax Filings

Designation of covered securities plays a role in reporting taxes. This means that brokers must report to the Internal Revenue Service the adjusted costs basis when those securities are sold. This must be reported on Form 1099-B. Taxpayers who sold covered securities must also report the transactions with their tax filings. If you have any questions or concerns about previously fiiled taxes, or taxes moving forward, the professionals at King Financial Services can help you. We work with businesses from all backgrounds to ensure they are getting all the tax breaks they qualify for and avoiding any potential misfiling with the IRS. Contact us today to learn more about the financial and tax services we offer.


Business Tax Filing in Dallas

When it comes to filing your business taxes, do not run the risk of misfiling. Work with the financial experts at King Financial Services. Our teams of professionals are here to help eliminate the stress of filing complex business taxes. When it comes to covered securities, we have all the answers to ensure you are getting every exemption you qualify for, so you do not have to spend any unnecessary money on your taxes. Sandra King is an enrolled agent, empowered by The United States Treasury to prepare your personal or business tax filing. While her services are offered nationwide, Sandra King locally serves the greater Dallas-Fort Worth area, including but not limited to Arlington, Bedford, Colleyville, Euless, Fort Worth, Grand Prairie, Hurst, Mansfield, North Richland Hills, and Richland Hills.



King Financial Services Inc
610 S Industrial Blvd. Suite 140
Euless, TX 76040
Phone: (800) 503-1343