The IRS has issued guidance on how taxpayers can begin reporting and paying stock buyback or stock repurchase excise taxes. Announcement 2023-18 states that taxpayers may wait until the IRS issues regulations relating to the stock repurchase excise tax until they have to report any excise tax on stock repurchases. This potentially pushes back the payment and return filing requirements until October 31, 2023, at the earliest.
Until this year (2023), taxpayers typically reported their stock sales as capital gains or perhaps dividends on their individual income tax returns. Congress recently imposed a 1% excise tax on the repurchase of corporate stock. This means Taxpayers will not only have to report stock buybacks or stock repurchases on their income tax returns and pay income tax on the stock buybacks, but Taxpayers may also have to file excise tax returns and pay the 1% excise tax as well. A repurchase of corporate stock is generally when a corporation purchases its shares from its shareholders. (Stock sales that do not involve a corporation buying back its own stock will not be subject to this excise tax.) The IRS is expected to issue regulations to provide further guidance on the types of transactions which will be subject to the excise tax.
The law went into effect this year (2023). According to the IRS’ recent announcement, taxpayers are expected to report the stock repurchase excise tax on a Form 720. Form 720 returns are due each quarter on April 30th, July 31st, October 31st, and January 31st. This means that taxpayers who received a stock repurchase in 2023 will have until October 31st, 2023, (at the earliest) to report the stock repurchase and pay any taxes due.
The Stock Repurchase Excise tax is a potential trap for the unwary. RJS LAW advises clients on the full spectrum of tax issues including the tax treatment of stock sales and purchases. Please contact RJS LAW at 619-595-1655 if you have any questions about the Stock Repurchase Excise tax or any other matter.
Written by Joseph Cole, Esq., LL.M.