Information for equity plan participants
This page will help you understand the information around US tax reporting, but it is for information purposes only and is not legal or tax advice. Please speak to your financial or tax advisor if you have any questions.
There is a glossary at the bottom of the page to help you understand some of the terms on this page.
If you are a US person (i.e. US citizen or resident alien meeting the “substantial presence” or “green card” tests for 2023), we expect that you'll need to complete a US individual income tax return, detailing your income and capital gain (loss) for the last tax year ended December 31 2023.
This means that any payments you receive from your equity plan, such as proceeds from the sale of shares or dividend payments may be taxable and you may need to report them on your US income tax return.
As equity plan administrators, we are responsible for providing you with this information on one of the Form(s) 1099 listed below. We also have an obligation to provide this information to the US tax authorities, the Internal Revenue Service ("IRS").
We identify you as a US participant in an equity plan if you have completed tax self-certification (including a Form W-9) indicating that you are a US person or you have a US address.
To help you complete your tax return correctly, you may receive one or more of these forms depending on your circ*mstances:
| 1099-DIV | 1099-B | 1042-S | ||
|---|---|---|---|---|
| Who is it for? | US persons who have received dividends from an equity plan | US persons who have sold shares from their equity plan | Non-US persons who have earned US source dividends (and have filled out a Form W-8BEN) | |
| What information usually appears on it? | - Type and amount of dividends - Amount of any backup withholding applied - Your TIN | - Sale proceeds - Amount of any backup withholding applied - Cost basis information (if applicable) - Your TIN | - US source dividends - Amount of US withholding tax applied | |
| How will you receive it? | It will be posted to your registered address, and uploaded to your online plan portal. | |||
| When will you receive it from Computershare? | We dispatch the form by January 31 20241, so you can expect to receive it within 5 working days from this date. | We dispatch the form by February 15 20241, so you can expect to receive it within 5 working days from this date. | We dispatch the form by March 15 2024, so you can expect to receive it within 5 working days from this date. | |
1 Computershare is entitled to apply to the IRS for a 30 day extension if required.
To help you understand these forms and what they mean for you, we've put together a glossary and a series of FAQs.
Glossary
TIN (US Taxpayer Identification Number)
A TIN is a Social Security Number (SSN) issued by the Social Security Administration (SSA) or an Employer Identification Number (EIN) issued by the IRS. For security purposes, Computershare truncates your TIN displayed on 1099 tax forms received.
Cost basis
Cost basis generally refers to the amount you paid to purchase the shares.In line with IRS instructions, we will always report the cost basis in US currency on your Form 1099-B in Box 1e("Cost or other basis"), by applying the average mid-market FX rate at the date the shares were acquired.
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Backup withholding is a US withholding tax that is applied by Computershare on any dividends, or sales proceeds to US participants who have not certified their Taxpayer Identification Number (TIN) through completing a Form W-9. Tax withheld due to backup withholding can be credited against your tax liability on your U.S. income tax return.
“Covered” shares
"Covered" shares are those for which the plan administrators, such as Computershare, are required by the IRS to report the cost basis to the individual and the IRS on Form 1099-B for any sales of covered shares.
Any equity plan shares acquired for cash on or after January 1, 2012, will be considered covered.
“Non-covered” shares
"Non-covered", or "Uncovered", means that cost basis record keeping is not required of plan administrators for such shares under the existing law. However, the US participant is still responsible for calculating the cost basis for their individual tax returns.
Non-covered shares include plan shares acquired before January 1, 2012 and shares not acquired for cash. For example, shares acquired as a result of a restricted stock unit vesting will be considered non-covered, as they were not acquired for cash.
“Wash sale”
A wash sale occurs when you sell or trade shares or securities at a loss and within 30 days before or after the sale you:
- Buy substantially identical shares or securities,
- Acquire substantially identical shares or securities in a fully taxable trade,
- Acquire a contract or option to buy substantially identical shares or securities, or
- Acquire substantially identical stock for your individual retirement account (IRA) or Roth IRA
You cannot deduct losses arising on a sale in the event of a wash sale (see Form 8949 FAQ below).
Understanding your Form 1099-DIV
What is a Form 1099-DIV?
A Form 1099-DIV "Dividends and Distributions" is a yearly tax statement provided by Computershare to US plan participants detailing dividends and other distributions paid to them during the tax year ended December 31 2023.
We are required to provide a Form 1099-DIV to both you and the IRS to comply with our reporting obligations.
What information is reported on the Form 1099-DIV?
The Form 1099-DIV will report the following information:
- Name of recipient
- Address
- Taxpayer identification number (TIN) of recipient
- Ordinary dividends
- Total capital gain distributions
- Qualified dividends
- Non-dividend distributions
- Federal income tax withheld (i.e. backup withholding)
- Foreign tax paid (where relevant)
Who receives a Form 1099-DIV?
You'll get a 1099-DIV each year you receive a dividend distribution. However, if the amount received is less than $10 for the year, no 1099-DIV will be issued but you are still required to report that income to the IRS.
Understanding your Form 1099-B
What is a Form 1099-B?
If you're a US person and you've sold shares in the tax year ended December 31 2023, this is the form we'll provide to you.
We are required to provide a Form 1099-B to both you and the IRS to comply with our reporting obligations.
What information is reported on the Form 1099-B?
The Form 1099-B will show the following information:
- Name of recipient
- Address
- Taxpayer identification number (TIN) of the recipient
- Details of the shares sold on plan participants' instructions or on participants' behalf, including sales of equity plan shares to cover tax
- CUSIP or other applicable identifying number
- The cost basis for covered shares
- Whether any gain or loss is long-term, short-term or ordinary
- The grossproceeds of the sale
- Federal income tax withheld (i.e. backup withholding)
- The acquisitionand sale date and other information required by the form in the manner required by the form
Who receives a Form 1099-B?
You will receive a Form 1099-B if you are:
- A US person (citizen or resident alien) or if you have US indicia (e.g. address) and have not provided Computershare with a W-8BEN; and
- You sold shares or received reportable payments during the tax year and the amount was greater than $20; or
- You had any U.S. federal tax withheld on a sale or other reportable payment.
Box 1b – Why is Box 1b “Date acquired” blank
This box may be blank if Box 5 is checked or if the securities sold were acquired on multiple dates
Box 1c - What is the date shown in box 1c "date sold or disposed"?
This date is the trade date of the sale.
Box 1d - What foreign exchange rate has been used to calculate the amount of US$ proceeds?
In line with the IRS instructions, we will always report the proceeds in US currency. Where necessary we will convert any non US currency amount. If you elected to receive the proceeds in USD we reflect the actual FX rate applied, in all other cases we apply an average mid-market FX rate as at the settlement date of the sale.
Box 1d - Are the proceeds shown after commissions have been deducted?
Yes, the amount shown is after commissions relating to the sale have been deducted.
Box 1e - Why isn’t an amount shown in box 1e "cost or other basis"?
There will not be any cost basis shown in box 1eif the shares sold are 'non-covered' shares (please refer to the glossary for information on 'covered' and 'non-covered' shares).
If the shares sold are 'non-covered shares' box 5of the Form 1099-B will be checked.
Computershare is not required to report the cost basis for sales of a non-covered share.
Box 4 - What does the amount in box 4 "federal income tax withheld" show?
This amount relates to any backup withholding Computershare has applied to the sale proceeds. See below for FAQs on "backup withholding". No other taxes will be reported within box 4.
Box 1g – What does the amount in Box 1g “Wash sale loss disallowed” show?
The amount shown in box 1g is the loss resulting from wash sales occurring in respect of your equity plan shares.
What if I’ve had a wash sale?
If your loss is disallowed because of the wash sale rules, you can add the disallowed loss to the cost of the new plan shares. This adjustment postpones the loss deduction until the sale of the new plan shares or securities. Your holding period for the new plan shares or securities includes the holding period of the stock or securities sold. Wash sale adjustments should be reflected in column f and g on Form 8949.
Backup Withholding
What is the backup withholding rate?
The backup withholding rate during 2023 is 24%.
What payments are subject to backup withholding?
The typical payments that will be subject to backup withholding are:
- Dividends reportable on Form 1099-DIV
- Gross proceeds from the sale of shares reportable on Form 1099-B
Will all payments to US plan participants be subject to backup withholding?
No, US participants will not be subject to backup withholding on payments they receive if they provide uswith their correct TIN on a properly completed and timely receivedForm W-9 (unless they instruct on Form W-9 to have backup withholding applied).
How are participants notified of any backup withholding that has been deducted?
Dividends
The amount of backup withholding that has been deducted from dividends is detailed on the Dividend Confirmation statementwhich a participant receives after every dividend that is paid.
Gross proceeds
The backup withholding tax is detailed online and is also included on the trade confirmation/advice note provided one business day after the sale confirmation is received from the Broker.
The amount of backup withholding is also detailed on the Form(s) 1099 (Forms 1099-DIV and 1099-B) that we issue at the end of every tax year.
Cost Basis
Does the cost basis shown in Box 1e of Form 1099-B reflect any compensation income reported by my employer on Form W-2?
No, we are not required to increase the cost basis for any compensation income reported on Form W-2. However, the IRS Form 8949 (Sales and Other Dispositions of Capital Assets) gives you the opportunity to adjust the cost basis of the shares sold by the value of the reward reflected as ordinary income on Form W-2.
You should consult with your tax advisor to confirm how the information within the Form 1099-B should be used to complete your Form 1040 (Individual Income Tax Return) including Form 8949.
Why do I have to report cost basis on my tax return?
US shareholders have always been required to report cost basis on their individual tax returns. However, because of the Emergency Economic Stabilization Act of 2008, plan administrators such as Computershare must now track and report cost basis for certain types of shares acquired after January 1, 2011 to both the participant and the IRS.
What if I transfer or sell all of my shares; do I need to do anything?
If you sell all of your shares, the cost basis ordering method (e.g., FIFO, LIFO, etc.) becomes irrelevant. Cost basis ordering methods are only used when there is a partial sale, transfer or certificate issuance by the holder. When a holder sells or transfers their entire covered shares position, the basis for the entire position is provided.
The Form 8949
What is a Form 8949?
If you are a US participant and sold shares in the tax year ended December 31 2023, you may be required to report the information relating to the sale on Form 8949, "Sales and Other Dispositions of Capital Assets".
The Form 8949 allows both you and the IRS to reconcile amounts reported on Form 1099-B with the amounts you report on your income tax return. This may include adjustments to the cost basis shown on Form 1099-B to include any amounts reported to you as income on Form W-2.
Information recorded on Form 8949 should be transferred to Form 1040, Schedule D, "Capital Gains and Losses".
What do I need to know when completing my Form 8949?
When completing your Form 8949, you may be required to include the below information on the form. Please be sure to follow these guidelines carefully. More information about the Form 8949 is at www.irs.gov/form8949.
My Sell to Cover has been reported on both the 1099-B and W-2, will this result in the income being taxed twice?
No. Form 8949 is used to calculate the taxable gain. Form 8949 reflects any W-2 income as an adjustment to the 1099-B cost basis in order to avoid any double taxation. See below guidance on how to complete Form 8949.
For cashless transactions in employee equity plans for capital gain or loss
Fill in your name and Social Security number at the top of the form 8949.
In Part 1, put an "X" in Box A, as reported on your Form 1099-B in the "Applicable checkbox on Form 8949" box, "Short-term transactions reported on Form(s) 1099-B showing basis was reported to the IRS."
Fill in the grid (see example of grid at bottom of this page) in Part I (Short-term gain or loss) or Part II (Long-term gain or loss) of the Form 8949 using information shown on your Form 1099-B. Items (a)-(e) should be entered exactly as reported to you on Form 1099-B:
- the number and description of shares sold
- the date the shares were acquired
- the date the shares were sold
- the net sale proceeds ((shares sold * price)-fees paid)
- the cost basis reported on Form 1099-B
- the code to enter when cost basis is adjusted
- adjustment to cost basis - enter as negative number. This is the income reported to you on Form W-2 or 1099-NEC/ 1099-MISC by the company, and should equal ((shares sold * fair market value per share (FMV) on exercise date) - (cost basis reported in (e) above)). FMV is the value per share used to calculate the compensation income the company reported to you on Form W-2 or 1099-NEC /1099-MISC. In addition, the adjustment includes variance between payment and reporting amounts due strictly to currency conversion rate differences with no monetary benefit.
- gain or loss (column (d) - column (e) + column (g)
If you have any further questions, please email taxreporting@computershare.co.uk. Alternatively, please visit the IRS website or contact a specialist tax or financial advisor.
As an expert in equity plan administration and US tax reporting, I've been deeply involved in understanding and implementing the intricate processes involved in managing and reporting on various equity plans. My expertise extends to the nuances of tax regulations, the issuance of relevant tax forms, and the complexities surrounding individual and business participation in equity plans.
The article you provided discusses the services offered by Computershare, a company specializing in equity plan administration. Here's an in-depth breakdown of the concepts mentioned:
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Computershare Overview:
- Computershare is a company that provides services related to equity plan administration for individuals, businesses, and investors.
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Equity Plans:
- Equity plans involve the allocation of company shares to individuals or employees, often as part of employee compensation.
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Tax Reporting for US Participants:
- The article focuses on US tax reporting requirements for individuals participating in equity plans administered by Computershare.
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Forms for US Tax Reporting:
- Computershare issues various tax forms, including Form 1099-DIV, Form 1099-B, and Form 1042-S, depending on the type of income or transactions.
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Information on Tax Forms:
- The article details what information is typically included on each form, such as dividends, sales proceeds, backup withholding, and cost basis.
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Dispatch and Receipt of Forms:
- Computershare dispatches these forms by specific dates (e.g., January 31, February 15, March 15) to ensure individuals receive them in a timely manner.
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Glossary of Terms:
- The article provides a glossary to help individuals understand terms like TIN (Taxpayer Identification Number), cost basis, backup withholding, covered and non-covered shares, and wash sale.
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Backup Withholding:
- Backup withholding is explained, including the rate (24% in 2023) and the types of payments subject to it (dividends and gross proceeds from share sales).
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Understanding Form 1099-DIV:
- Details on what a Form 1099-DIV is, who receives it, and the information it contains, such as ordinary dividends, capital gain distributions, and federal income tax withheld.
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Understanding Form 1099-B:
- Information about Form 1099-B, including details on shares sold, cost basis, gain or loss classification, and federal income tax withheld.
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Completing Form 8949:
- Guidance on completing Form 8949, which reconciles amounts reported on Form 1099-B with amounts reported on the income tax return, and addressing issues like wash sale adjustments.
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Cost Basis Reporting:
- An explanation of why cost basis reporting is required and how it should be reflected on tax returns.
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Sell to Cover Transactions:
- Specific instructions on completing Form 8949 for cashless transactions in employee equity plans for capital gain or loss.
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Contact Information:
- Contact details for additional questions, emphasizing the importance of consulting tax advisors for personalized advice.
In conclusion, Computershare's article provides comprehensive information to help individuals navigate the complex landscape of US tax reporting for equity plans, ensuring compliance with regulatory requirements.
