I’m a T-Mobile subscriber, and I see that the company is going to give stock to its customers. What do I need to do at tax time? Will I owe taxes on the stock?
All current and new customers will receive at least one share of T-Mobile stock, and customers who refer new members can receive up to 100 extra shares per year. T-Mobile (symbol TMUS) is currently selling at about $42 per share—up 8.6% over the past year and 24% over the past three years—but the gift could make tax filing more difficult. “It can complicate your tax situation if you have an otherwise simple tax return,” says Laurie Ziegler, an enrolled agent and managing member of Sass Accounting LLC, in Saukville, Wis.
According to T-Mobile’s prospectus, the company expects the IRS to treat the single share of stock given to all its customers as a discount off the cost of service rather than as taxable income. But any additional shares you earn by referring new customers will be considered taxable income, and T-Mobile will report that income to the IRS on Form 1099-MISC. (Only income above $600 must be reported to the IRS, but Ziegler thinks the company is likely to report smaller amounts.)
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You’ll get a 1099-MISC by January 31, 2017, for the income earned in 2016. When you file your 2016 taxes, report the amount on the 1099-MISC as “other income” on line 21 of your Form 1040. You won’t be able to use Form 1040-EZ, says Mark Luscombe, federal tax analyst for Wolters Kluwer Tax & Accounting, a tax publishing company.
When you sell the shares, any profit will be subject to capital-gains taxes. The amount you reported to the IRS as income—plus any dividends you reinvested and paid taxes on—will be your tax basis; your gain or loss will be calculated using that number.
As with other investments, stock held for a year or less is considered to be a short-term capital gain (and taxable at your ordinary income-tax rate), and stock held for longer than a year is a long-term capital gain and taxed at the lower capital-gains rate (15% for most people). File Form 8949 to report the sale, and file Schedule D to calculate the capital gain or loss.
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