ESOP STOCK DIVIDENDS REPORTED ON FORM 1099-R (2024)

• 401K

‎March 12, 202010:57 AM

Gains and losses on securities held in qualified, tax deferred, retirements plans are not reported of claimed outside of the retirement plan. Your retirement plan will simply have more or less money to be taxed on when withdrawn.

Taxable distributions from those plans are taxed as ordinary income at your marginal tax rate.

**Disclaimer: This post is for discussion purposes only and is NOT tax advice. The author takes no responsibility for the accuracy of any information in this post.**

@jrpeter2wrote:

The way I understand your response there should be no difference between the two. Is that correct?

I did not say that there is no difference "between the two", but here is no "two" to choose from. ESOP reported oi a 1099-R can only be reported one way.

**Disclaimer: This post is for discussion purposes only and is NOT tax advice. The author takes no responsibility for the accuracy of any information in this post.**

Ok yes I get your point. Government wants R form income entered in the R box and DIV form income entered in the DIV Box......Then again reporting as a dividend in Turbotax takes your loyal customer to check boxes as follows:

Learn More link defines ESOP stock as follows: "An Employee Stock Ownership Plan (ESOP) is a retirement plan in which you can invest in the stock of your employer. Usually the purchases of stock are funded by contributions based on your compensation." That certainly described how I obtained the stock and how it ended up in my retirement savings account. Is my former employer (I am now retired) sending my ESOP dividend distribution information using the wrong form?

The "This is an ESOP distribution" checkbox is a vestigial checkbox that should have been removed from TurboTax 11 years ago. Prior to 1990, Form 1040A did not support the reporting of retirement distributions, so in 1985 the IRS allowed ESOP distributions to be reported on Forms 1099-DIV to avoid forcing those who would otherwise use Form 1040A from having to switch to Form 1040. The IRS permitted this alternative reporting of ESOP dividends on Form 1099-DIV through the 2008 tax year. Beginning with the 2009 tax year, the IRS no longer permits the payers of ESOP dividends to report the distributions on Form 1099-DIV.

See IRS Announcement 2008-56:https://www.irs.gov/pub/irs-drop/a-08-56.pdf

@dmertz I will report this as a bug.

**Disclaimer: This post is for discussion purposes only and is NOT tax advice. The author takes no responsibility for the accuracy of any information in this post.**