Form 1099-B and Form 1099-DIV

Years ago my parents gave me their stock in Utah Power, which
later became Scottish Power and then Iberdrola S.A. I do not
understand stocks but each year I would receive a 1099 and
reported it on my taxes. The dividends were automatically
reinvested into the stock so I never received any money. Then
in 2007 they did all their splitting and I received a check for
$61920.56. I was in shock, I never had so much money. It was
my retirement and I wanted it reinvested but wasn't sure what to do.
Then when I went and had my taxes done I didn't realize what
that check would do to me. I only make 16,000.00 a year plus the
3000.00 or so I would get on the stock dividends, so taxes were
never a big deal. I was to pay 4000.00 federal and 4000.00 state
tax. I was in shock again so I filed an extention paying only the
4000.00 to the federal and wanted to find out if there were any
other options before I paid the state. It seems to me if you pay
taxes on all the dividends you shouldn't have to pay it again when
you actually receive the money. This was so painful I have put
off since April finding out but now that October is almost here I
need to face the truth. Thanks so much!

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Answer 1 / 2

Submitted 3 days ago...

Trove882

Contributor (86)

It sounds like you no longer have the stocks, and you were paid cash for your holdings. If this is correct then you have had a capital gains, which is the difference between what you paid for the stock (or what it was worth at the time you got it) and the sale price. This is NOT ordinary income, it is filed in the gains/losses section of your tax forms at a much reduced level, which has been changing every year (part of Bush's program).

The dividends you paid tax on each year ARE treated as ordinary income. However you reinvested them; this is, you bought more stock. Since the stock you bought will have a different price each year, the amount of stock you were able to purchase will have been different each year. However, you know it cost $3000 or so. That is the cost to be subtracted from the price you received. Somehow, you know your tax bill is $4000, which seems about right to me. You pay your taxes with some of the profit. Your state tax seems to be equal to your federal tax, which does not seem quite right. With the remaining money left you can do whatever you like including reinvesting it in something. You need a little more help with that, I think. You might consider a mutual fund company, like Vanguard or Fidelity or Schwab, or maybe a CD.

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Submitted 3 days ago...

siolrolyan

New User (2)

I took my taxes to another CPA and I didn't have to pay any federal and 1275 in state. I was glad
I just didn't pay the 8000 the first accountant said too.

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