Need help with Taxes concerning Employee Purchase Plan.?

Question

I want do my own taxes but I have a problem, I don't know what to do with my Employee Purchase Plan stock. From 2000 - 2003 I purchased stock after taxes through my work. They would contribute 10% at each purchase. They also would give me dividends on the stock which was set up to purchase more stock. In 2005 I quit my job and left my stock with that company. Last year since I was not working there anymore they charged me $30 for the account. They sent me Form 1099-B. They also sent me Form 1099-DIV for my dividends.

What do I need to do about the $30? Do I need setup a spreadsheet and calculate the averages purchase price for my holdings? If yes, will the average purchase price be calculated with both the company's contribution plus the dividends as well as what was being deducted from paycheck?

Answer 1

First, the 10% employer contribution should have been included in your W-2 and you have already been taxed for it. Second, you should have been declaring the dividends as income each year on your tax return. The $30 account maintenance fee should be treated the same as fees charged by a broker for maintaining an account. As I understand it, you would claim it on line 22 of Schedule A if you itemize. I may be wrong about how it is claimed, but I'm sure it can be claimed.

Answer 2

Did they "contribute 10%", or did you but stock at 90% of some set price? Usually employee plans are set up to buy stock 10% or 15% below some market price. If the sale price is greater than that market price, your cost basis is the market price to calculate gains, and the 10% discount is ordinary income. Yes, you need to calculate an average price, since you also bought some stock with reinvested dividends. You should have information from the company that outlines the tax consequences. I had such a booklet for each of the companies I worked for over the years that had stock plans.

Answer 3

As with any stock, your basis is what you paid for it, including the $30. I would either take the stock away from them or sell it, if that's reasonable. The dividends should have already been taxed; if that's the case, you should include those divdends in your basis.