Non Dividend Tax distribution

[Anonymous]

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 

[Anonymous]

Good News.  Non Dividend Distribution was reported on Box 3.  So I need to keep this information for future Sale cost basis adjustment but NOT reportable and Taxable this Time? Correct?

I imported my 1099 into Turbo Tax. Where do I see this information?

When I ran Step BY Step under Wages &Income then  Interest/div  100--int, 1099 Div. I do see items like tot ordinary div, qual dividend, Cap Gain Dist. But there was No box where I could see Box 3 numbers.

I did ran Forms and under Sch. B and then From 1099- Div. I did find All boxed listed.

I did remove Box 3 number, but it did NOT change my tax due amount. Non Dividend Distribution is NOT calculated for taxes? or is it possible item might be in more than 1 location?

[Critter-3]

Non Dividend Distribution is NOT calculated for taxes?   Sort of ... it is not directly entered in the program in the dividend section which is why you don't see a place to enter it.  However ... if you have received more in non dividend distribution ( ie return of capital) then you will report this as a sale with no basis.

For instance if you have a stock with $100 basis and you get $120 in non div dist then you reduce your basis to zero and report the $20 excess as cap gain on the Sch D using the $20 as the sales price and zero for the basis. Then when you finally sell the stock you have no basis any longer. 

[Anonymous]

there is nowhere directly on the 1040 to see box 3 only in the individual worksheets for the dividends. 

[Anonymous]

Thanks for your reply.

As I mentioned I did NOT manually enter information into TT. I did import directly from brokerage into TT.

I did find Box 3 information under Froms then Sch B then Form 1099- Div worksheet. I am assuming this is worksheet for TT to either show information or compute Taxes.

Should I or not delete Box 3 information from this worksheet? I did delete it but it does NOT show any tax impact.

Where else I can find Box 3 information in TT worksheets?

[Anonymous]

there is no reason to delete box 3 info from 1099-Div it goes nowhere.  That info is not sent to the IRS. Just an FYI. TT can ask for and may import a lot of information that goes nowhere on the tax return and is not even sent to the IRS.  

[Critter-3]

The only reason TT has a box for that informational only amount is so the users have a place to enter this amount ... if the box was missing then the users would be confused.   As mentioned already ... enter it or not makes no difference to the tax return ... as a tax pro I have not entered that box amount in any program for more than 20 years.  

[Mawilli]

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! 

[Mawilli]

I live in TN and TT included the non dividend income from box 3 that I listed separately in TT as non dividend income in the total taxable income for state income taxes.  From everything I can tell that was incorrect and I only owed state taxes on the ordinary dividends and capital gains. They correctly included only ordinary dividends and capital gains on my federal return but it appears they blew it and cost me about $2000 in state taxes that I actually didn’t owe.