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I owe taxes on 1099-DIV from ESPP when in fact the dividends were reinvested and I sold none of the stock. TT page says don't have to pay any taxes until sell the stock?

 
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GeorgeM777
Expert Alumni

I owe taxes on 1099-DIV from ESPP when in fact the dividends were reinvested and I sold none of the stock. TT page says don't have to pay any taxes until sell the stock?

You will owe ordinary income tax on your ESPP dividends in the year when you receive them.  Usually, the plan discount does not apply to shares purchased with reinvested dividends, although you should check with your plan administrator regarding whether reinvested dividends also get the plan discount.   Further, these shares may be treated as regular stock, not part of your Employee Stock Purchase Plan.  Again, your plan administrator will know how the shares purchased with reinvested dividends are treated.

 

While you will pay tax on the dividends received for the year in which you receive them, you will not owe any capital gains tax until you decide to sell your shares (and only if you sell the shares at a profit).   Thus, if all you have are dividends, then you only need to pay tax on those dividends.  

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