Too much capital gains tax was withheld from me -- how to get it back?
August 31, 2020 12:59 PM Subscribe
A while back I owned some stock in a former employer's company, which I held onto for over a year. Then that company got acquired, and most of that stock was liquidated as part of the terms of the acquisition. I believe that the transfer agency withheld more money for taxes than they should have -- details inside.
So, in the liquidation, the transfer agency treated the proceeds as short-term capital gains, even though I had owned the stock for more than a year. Am I right in thinking that it should have been treated as long-term capital gains, and I should get a large chunk of that withholding back? And if so, then how do I go about doing this?
Additional complications: this happened a couple of years ago, so I assume I'd need to file an amendment to my tax return for that year. Also, I originally got the stock by purchasing ISOs when I worked at that company (after which they went public, then got acquired).
So, in the liquidation, the transfer agency treated the proceeds as short-term capital gains, even though I had owned the stock for more than a year. Am I right in thinking that it should have been treated as long-term capital gains, and I should get a large chunk of that withholding back? And if so, then how do I go about doing this?
Additional complications: this happened a couple of years ago, so I assume I'd need to file an amendment to my tax return for that year. Also, I originally got the stock by purchasing ISOs when I worked at that company (after which they went public, then got acquired).
First, you have three years from the date you filed your original return so if this was something that happened in 2016 (returned filed April 17, three years expired April 2020) then it is too late and it doesn't matter.
Second, as ashy_sock said, look at your return. If it was filed correctly on the return then any extra withholding just got credited against any other taxes also due that year.
Third, you already know this but I found it confusing - double check that make sure you can't confusing the date of the option vs the date the options was exercised and the shares actually acquired. Also, when options are exercised, the difference between the market price and exercise price can be taxed as current income (haven't checked the details recently but another reason why the withholding might have been higher.
The the way, the one time I had to amend a return, it was much easier than I thought. You can find IRS regs on the link above.
posted by metahawk at 2:00 PM on August 31, 2020 [2 favorites]
Second, as ashy_sock said, look at your return. If it was filed correctly on the return then any extra withholding just got credited against any other taxes also due that year.
Third, you already know this but I found it confusing - double check that make sure you can't confusing the date of the option vs the date the options was exercised and the shares actually acquired. Also, when options are exercised, the difference between the market price and exercise price can be taxed as current income (haven't checked the details recently but another reason why the withholding might have been higher.
The the way, the one time I had to amend a return, it was much easier than I thought. You can find IRS regs on the link above.
posted by metahawk at 2:00 PM on August 31, 2020 [2 favorites]
Capital gains and Qualified Dividends are taxed at separate rates and if you have QD income to report that would be your own assets you personally owned and sold for profit. The capital gains property belong to another company that you invest in and they pay you your share of their profits. You will need to contact the IRS website for information on which schedule you need for amendments and what the rules are.
posted by The_imp_inimpossible at 11:23 PM on September 2, 2020
posted by The_imp_inimpossible at 11:23 PM on September 2, 2020
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If you just went with the coding on the 1099b that the company provided to you and the IRS, it may well have been processed as short term gains. It does sound from what you said that these should be long-term gains.
You'll need to go look at your tax records to see what you actually reported, though. It could have been that the company over-withheld, but the difference was absorbed in other taxes due within your return, for instance. Turbo Tax might have relied on an imported (incorrect?) 1099b, but in manual mode it's pretty good about asking you when you acquired the shares. Only your records can tell you what happened.
If it was truly misreported, you'll need to file an amended return.
posted by ashy_sock at 1:22 PM on August 31, 2020 [2 favorites]