Intended to crack down on tax fraud, the new IRS reporting rules for investment sales are actually a good thing for most investors. They make it much easier to figure out your loss or gain on an investment, and to better manage your tax situation.

When you sold a stock or mutual fund in the past, the investment firm that held your account simply reported the total sales proceeds to the IRS and to you, on Form 1099. It was up to you, the investor, to figure out your “cost basis”—how much you initially paid for the investment— in order to calculate your taxable gain or loss.

This is changing, thanks to the Emergency Economic Stabilization Act of 2008, otherwise known as the bank bailout. Brokerages and fund companies are now responsible for reporting the cost of each share sold, as well as the total sales proceeds. This applies to all “covered” investments: all stocks bought in 2011 or after; all mutual funds and Dividend Reinvestment Plan shares bought in 2012 or after; and bonds, options and most other investments bought in 2014 or later.

To minimize taxes, you can ask your brokerage or fund company to calculate your cost basis in a variety of ways, known by their acronyms. Below is a roundup, starting with the two most common options.

First-In, First-Out (FIFO). The first (oldest) shares you bought are the first shares sold. If you don’t specify, this is usually what most brokerages use as a default. FIFO is best for shares that have lost value since you bought them. If you’re sitting on a profit, other methods (see below), are much more tax-advantageous.

Average Cost Method. Fund companies typically default to either FIFO or average the cost of all purchases over time. The drawback: You can’t take advantage of cost differences to reduce your tax bill.

Last-In, First-Out (LIFO). The most recently bought shares are sold first.

High-Cost, First-Out (HIFO). The highest-cost shares are sold first, regardless of when they were bought.

Low-Cost, First-Out (LOFO). The least-cost shares are sold first.

Loss/Gain Utilization (LGUT). Shares with losses are always sold before shares with gains. Short-term losses are prioritized over long-term losses, and long-term gains over short-term gains.

Best to Be Specific

The most effective way to minimize taxes is to identify exactly which shares you’re selling, known as “specific-lot identification.” While this approach requires a bit more work, it can pay off in lower tax bills, as you use losses in one account to offset gains in another.

Note that the specific-lot reporting method is available only to mutual fund investors. And you usually have the option of choosing a backup method, if specific shares are not identified.

Some fund companies even offer tax optimization— they sell your shares using the most advantageous method for that account. While that’s convenient, it could create problems since your accounts elsewhere can’t be factored into the equation.

Thinking Ahead. There’s a great deal of flexibility under the new reporting rules, allowing you to use one method for all securities or to designate specific methods for specific securities. You can always change the cost-basis method, usually in writing or online, for any of your unsold shares.