Non Dividend Tax distribution

Forum|Forum|5 years ago
October 8, 2020
2 replies
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I received Dividend from a C cooperation but they list it as 100% Return of Captial. I got from from 8937 from their IR website.

How to report this non dividend distribution? I am assuming this is reportable but not taxable as I have reduce my basis ( I have NOT sold investment ).

Q. I live in TN and TN Hall income tax, taxes dividend and distributions. Are these taxable for state taxes?

Anonymous

you don't report it as a dividend. it is nontaxable return of capital that reduces your basis in that C-Corp stock.

Since you say you disposed of the stock you show the reduced cost on form 8949. Unless this was privately issued stock, you would get a 1099B from the brokerage holding it and they should automatically reduce your cost basis but you will have to check to make sure. If the sale was in 2020, there's nothing to report in 2019.

Anonymous

sorry my typo mistake. I have NOT sold investment yet.

If I don't report it. THen data from Tax retrun will not match data from 1099 and perhaps may get letter from IRS?

Do you have any suggestion for TN taxes?

Anonymous

how does it show up on the 1099? since the company filed form 8937 it should show up in box 3.

if they used box 1 it should issue corrected 1099's. the company should have filed 8937 with the IRS.

so that leaves several possibilities

1) don't enter the dividend if box 3 used (this absolutely proper). if box 1 and you get an IRS notice wryte back enclosing the notice and include a letter saying enclosed is form 8937 from xxx that reported the dividend as non-taxable.

2) on the 1099 input form - don't know if you can access it - use the adjustment section check box H - only enter the div on line 1

3) use the other income form line 22 and enter something like xxx Corp dividend non-taxable per form 8937

and enter the dividend amount as a negative number.

4) paper file and enclose form 8937 - this probably won't work because not be a standard form that's part of a 1040 the clerk entering your return will probably just throw out the form

Mawilli

Level 2

I entered my non dividend distribution from box 3 correctly into Turbo Tax in 2018, 2019 and 2020 and they incorrectly added it to my ordinary dividends and capital gains ( all entered separately in TT and all were reported in the correct boxes on my 1099) and told me I had to pay state taxes on it in TN. They correctly only included the ordinary dividends and capital gains on my federal return. . I had no idea non dividend income was not taxable in TN and I overpaid state taxes dearly for the past three years. I only figured it out this year when I used TT and it said I had no state income tax due. I found out that was due to the repeal of the Hall Act but as I understand it, Hall did not require taxes on non dividend distributions- only ordinary dividends and capital gains. Now I have to find someone who can file an amended return for those years and get it back. I will never use TT again!