Form 8937 Instructions: A Comprehensive Overview (Updated December 26, 2025)
Form 8937 details organizational actions impacting security basis, requiring issuers to report these events to the IRS, and adjustments are summarized separately on a worksheet.
What is Form 8937?
Form 8937, officially titled “Report of Organizational Actions Affecting Basis of Securities,” is a crucial tax form utilized by issuers of specified securities. This form is mandated by the Internal Revenue Service (IRS) to report organizational actions that have a direct impact on the tax basis of those securities held by investors.
Essentially, it’s a reporting mechanism designed to ensure accurate tax reporting when companies undergo significant changes, such as mergers, acquisitions, stock splits, or rights offerings. The IRS requires this information to help taxpayers correctly calculate their capital gains or losses when they eventually sell their securities. The form provides detailed information about the organizational action and how it affects the basis of the securities.
Issuers filing Form 8937 are responsible for providing this information to both the IRS and their shareholders, ensuring transparency and compliance with tax regulations. Official instructions for the form are readily available from the IRS and resources like Templateroller.
Purpose of Form 8937
The primary purpose of Form 8937 is to report organizational actions that necessitate adjustments to the tax basis of securities. These actions, like mergers and acquisitions, directly influence how much profit or loss a shareholder realizes upon selling their holdings. The IRS utilizes this information to ensure accurate tax reporting and prevent discrepancies in capital gains calculations.
By requiring issuers to report these changes, the IRS aims to maintain the integrity of the tax system and facilitate fair tax obligations for investors. Form 8937 ensures shareholders have the necessary data to correctly determine their cost basis, which is vital for calculating taxable gains or deductible losses.
Essentially, it’s a transparency tool, providing both the IRS and investors with a clear record of events impacting the value of securities for tax purposes, as highlighted by Dorsey & Whitney LLP.
Who Must File Form 8937?
Issuers of specified securities are primarily responsible for filing Form 8937. This includes corporations, partnerships, and other entities that undergo organizational actions affecting the basis of those securities. Specifically, if an issuer undertakes a merger, acquisition, stock split, rights offering, or similar event, they are obligated to report it to the IRS using this form.
The IRS clarifies that the filing requirement applies when an organizational action alters the tax basis of a security held by shareholders. Canadian companies engaging in such actions also fall under this requirement, as noted by Dorsey & Whitney LLP.
Essentially, any entity initiating a change that impacts a shareholder’s cost basis must file Form 8937 to ensure accurate tax reporting for all involved parties.
Issuers of Specified Securities
Issuers of specified securities encompass a broad range of entities, including corporations and partnerships, obligated to report organizational actions. These actions directly impact the tax basis of securities held by their shareholders. The IRS mandates that these issuers utilize Form 8937 to detail these changes accurately.
This responsibility extends beyond domestic entities; Canadian companies involved in organizational actions affecting tax basis are also required to file. The key trigger is any event altering a shareholder’s original investment cost.
Essentially, any organization distributing securities subject to basis adjustments falls under this filing requirement, ensuring transparency and correct tax calculations for investors.
Organizational Actions Affecting Basis
Organizational actions that necessitate filing Form 8937 are those fundamentally changing a shareholder’s investment basis in securities. These events require issuers to inform the IRS and shareholders of adjustments needed for accurate tax reporting. Common examples include mergers, acquisitions, stock splits, reverse stock splits, and rights offerings.
A merger, like the First Bancshares example from 2023, requires reporting for the tax year the action became effective. These actions aren’t limited to domestic transactions; international reorganizations also trigger filing obligations.
Understanding which actions necessitate reporting is crucial for compliance, ensuring shareholders correctly calculate capital gains or losses when selling their securities.
Types of Organizational Actions Reported
Form 8937 covers a spectrum of organizational actions impacting security basis. Mergers and acquisitions are frequently reported, particularly when one company absorbs another, altering shareholder stakes and basis calculations. Stock splits and reverse stock splits also require reporting, as they change the number of shares held and, consequently, the cost basis per share.
Rights offerings, granting existing shareholders the opportunity to purchase additional shares, necessitate basis adjustments. Canadian companies engaging in such actions, even across borders, must be aware of these U.S. tax reporting requirements.
These actions trigger the need to report adjustments to the IRS, ensuring accurate tax liability for shareholders.
Mergers and Acquisitions
Mergers and acquisitions (M&A) frequently necessitate filing Form 8937. When one company merges with or acquires another, the basis of securities held by shareholders of the acquired company often changes. This is because the shareholders may receive different consideration, such as cash, stock in the acquiring company, or a combination of both.
The reportable tax year is determined by the effective date of the merger; for example, a merger effective May 1, 2023, is reported in the 2023 tax year. Issuers must meticulously document these changes and report them to the IRS, providing shareholders with the information needed to accurately calculate their adjusted basis.
Stock Splits and Reverse Stock Splits
Stock splits and reverse stock splits are organizational actions that directly impact the basis of securities, triggering the need to file Form 8937. A stock split increases the number of shares outstanding while decreasing the price per share, maintaining the total value. Conversely, a reverse stock split reduces shares and increases the price.
These actions necessitate adjusting the cost basis per share for each shareholder. The issuer is responsible for reporting these adjustments to the IRS, ensuring accurate tax reporting. Detailed records of the split or reverse split ratio, along with the original cost basis, are crucial for completing the form correctly. Proper reporting avoids potential penalties and ensures compliance.
Rights Offerings
Rights offerings represent another organizational action demanding attention on Form 8937. These offerings grant existing shareholders the right, but not the obligation, to purchase additional shares, typically at a discounted price. This impacts the basis calculation for both shares acquired through the rights and those held previously.
Reporting a rights offering requires detailing the terms of the offering, including the rights ratio, subscription price, and any associated fees. Shareholders must adjust their cost basis to reflect the new shares purchased and the potential dilution of their existing holdings. Accurate reporting ensures correct capital gains or losses are calculated when these securities are eventually sold.
Understanding Specified Securities
Specified securities, as defined by the IRS for Form 8937 reporting, encompass a broad range of investment vehicles. These include stocks, bonds, warrants, and certain other financial instruments. However, not all securities qualify; generally, those traded on an established market are considered specified. Understanding this distinction is crucial for determining filing obligations.
Securities received through compensation, like stock options or employee stock purchase plans, also fall under this category. Canadian companies engaging in organizational actions affecting the tax basis of these securities must be particularly aware of U.S. reporting requirements. Proper identification of specified securities ensures accurate completion of Form 8937 and avoids potential penalties.
Reporting Requirements for Issuers
Issuers of specified securities triggering organizational actions with basis implications are legally obligated to file Form 8937 with the IRS. This requirement extends to entities undertaking mergers, acquisitions, stock splits, rights offerings, or similar events. The primary responsibility lies with the issuer to accurately report these actions and their impact on shareholder basis.
Failure to comply can result in significant penalties. Issuers must furnish statements to shareholders detailing the adjustments needed for their tax returns. The reportable tax year corresponds to the effective date of the organizational action, such as a merger finalized on May 1, 2023, being reported in the 2023 tax year.
Information Required on Form 8937
Form 8937 demands comprehensive details regarding organizational actions; Shareholder identification is crucial, necessitating accurate records for reporting basis adjustments. The form requires precise basis adjustment details, outlining how the action altered the cost basis of the security for each shareholder.
Furthermore, specifying the tax year of the organizational action is essential for correct tax reporting. Issuers must clearly indicate when the event occurred, as this dictates the year shareholders apply the adjustments. Detailed information about the type of action, the security affected, and the calculation of the basis change are all mandatory components of a complete and compliant filing.
Shareholder Identification
Accurate shareholder identification is paramount when completing Form 8937. Issuers must meticulously record details enabling clear association of basis adjustments with the correct security owners. This typically includes the shareholder’s name, address, and Taxpayer Identification Number (TIN), such as a Social Security Number or Employer Identification Number.
Proper identification ensures that each shareholder receives accurate information for their individual tax returns. The IRS requires this level of detail to track basis adjustments effectively and prevent discrepancies. Maintaining comprehensive and verifiable shareholder records is a critical component of compliant Form 8937 reporting, minimizing potential issues during tax audits.
Basis Adjustment Details
Precise basis adjustment details are central to Form 8937’s purpose. Issuers must clearly articulate the nature and amount of each adjustment resulting from the organizational action. This includes specifying whether the adjustment increases or decreases a shareholder’s basis in the security.
The form requires a detailed explanation of how the adjustment was calculated, referencing relevant provisions of the Internal Revenue Code. Accurate reporting necessitates a thorough understanding of the tax implications of the specific organizational action. Providing sufficient detail allows the IRS and shareholders to verify the correctness of the adjustments, ensuring tax compliance and avoiding potential penalties.
Tax Year of the Organizational Action
Determining the correct tax year for the organizational action is crucial for accurate Form 8937 reporting. Generally, the reportable year is the tax year in which the action becomes effective, not necessarily the year it was announced or approved. For example, a merger finalized on May 1, 2023, would be reported in the 2023 tax year, even if preliminary agreements were reached earlier.
This timing is vital because it dictates when shareholders must adjust their basis and report any gains or losses. Issuers must clearly indicate the relevant tax year on the form, ensuring consistency between their reporting and shareholder tax filings. Incorrectly identifying the tax year can lead to discrepancies and potential IRS scrutiny.
How to Obtain Form 8937 and Instructions
Obtaining Form 8937 and its accompanying instructions is straightforward. The Internal Revenue Service (IRS) provides downloadable PDF versions on its official website, www.irs.gov. Simply search for “Form 8937” to locate the current version and detailed instructions. Templateroller also offers downloadable instructions in PDF format, providing an alternative source.
Tax professionals and issuers can also order physical copies of the form and instructions from the IRS website or by calling the IRS Forms and Publications line. Ensure you are using the most up-to-date version, as forms are revised periodically to reflect changes in tax law. Utilizing the official IRS resources guarantees accuracy and compliance.
Where to File Form 8937
The filing address for Form 8937 depends on whether you are filing a paper return or submitting electronically. Generally, issuers of specified securities must file Form 8937 with the IRS center designated for their location. The IRS instructions provide a detailed list of addresses based on the issuer’s principal business address.
Electronic filing is encouraged and often required for certain entities. The IRS’s Filing Information Returns Electronically (FIRE) system is the primary method for electronic submission. Always consult the latest IRS instructions to confirm the correct filing location and method. Failure to file with the appropriate address may result in processing delays or penalties.
Filing Deadlines
The due date for Form 8937 generally coincides with the due date of the information return to which it relates, typically by February 28th for calendar-year issuers. However, this can be extended if the related information return is filed on an extended due date. It’s crucial to note that extensions for filing the information return do not automatically extend the due date for Form 8937; a separate extension request may be required in some cases.
Issuers should consult the official IRS instructions for specific deadline information, as it can vary based on the type of security and the organizational action taken. Timely filing is essential to avoid potential penalties and ensure compliance with IRS regulations.
Penalties for Failure to File
Failure to file Form 8937, or filing it with incorrect or incomplete information, can result in significant monetary penalties levied by the IRS. The penalty amount varies depending on the severity and duration of the non-compliance. Generally, a penalty may be assessed for each failure to furnish a correct return, with escalating amounts for continued disregard of filing requirements.
These penalties can be substantial, potentially reaching thousands of dollars. Intentional disregard of the filing obligations can lead to even harsher penalties. Issuers are strongly advised to adhere to all filing deadlines and ensure the accuracy of the information reported on Form 8937 to avoid these costly consequences.
Form 8937 and TurboTax
TurboTax facilitates the handling of Form 8937, though it requires a specific approach. Users encountering Form 8937 adjustments to the 1099-DIV should utilize a separate worksheet within TurboTax to summarize these adjustments, attaching it to the tax return for comprehensive reporting.
The necessary adjustments to dividend income (1099-DIVs) are entered on the “Form 1099-DIV Worksheet” within the software. Locate and check box (H) on this schedule to indicate the presence of these adjustments. While TurboTax guides the process, understanding the underlying organizational actions and basis adjustments remains crucial for accurate filing. Consult the official IRS instructions alongside TurboTax’s guidance.
Adjustments to 1099-DIV
Form 8937 often necessitates adjustments to information reported on Form 1099-DIV, particularly when organizational actions affect the tax basis of securities. These adjustments are crucial for accurately calculating taxable dividends and capital gains. Issuers must report these changes to shareholders and the IRS, ensuring consistency between the 1099-DIV and the Form 8937 filings.
The adjustments typically relate to stock splits, reverse stock splits, mergers, acquisitions, or rights offerings. These events can alter the cost basis of shares, impacting the amount of dividend income that is taxable. Accurate calculation and reporting of these adjustments are vital to avoid potential penalties and ensure compliance with tax regulations. Remember to utilize the dedicated worksheet within tax software for proper summarization.
Worksheet for 1099-DIV Adjustments
TurboTax and similar tax software provide a specific worksheet designed to calculate adjustments needed for Form 1099-DIV due to organizational actions reported on Form 8937. This worksheet is essential for accurately reflecting changes in dividend income resulting from events like stock splits or mergers. It allows taxpayers to systematically adjust the reported dividend amounts to align with their correct cost basis.
When completing this worksheet, carefully follow the instructions and input the relevant information from Form 8937. Typically, you’ll need to indicate the type of adjustment and the corresponding amount. Don’t forget to check the appropriate box (H) on the 1099-DIV worksheet to signify that adjustments are being made. This ensures the IRS receives a complete and accurate picture of your dividend income.
Paperwork Reduction Act Notice
The Internal Revenue Service (IRS), as per the Paperwork Reduction Act, strives to minimize the burden on taxpayers. This notice informs you about the estimated time required to complete Form 8937, Report of Organizational Actions Affecting Basis of Securities, and related instructions. The estimated average time is dependent on the complexity of the organizational action and the issuer’s record-keeping practices.
Comments regarding the accuracy of this time estimate, or suggestions for simplifying the form, are welcomed and should be submitted to the IRS. You can direct your feedback to the Department of the Treasury, IRS, and include the form number (8937) in your correspondence. Your input helps the IRS improve the efficiency and clarity of its tax forms and instructions, ultimately benefiting all taxpayers.
Resources and Further Information
For comprehensive guidance on Form 8937, taxpayers should consult the official instructions provided by the Internal Revenue Service (IRS). These instructions, available in PDF format from sources like Templateroller, detail specific reporting requirements and definitions. The IRS website (irs.gov) is a primary resource, offering access to the form itself, frequently asked questions, and related publications.
Tax professionals and legal firms, such as Dorsey & Whitney LLP, often publish insightful articles (JDSupra) addressing complex aspects of Form 8937, particularly for international transactions. TurboTax also provides support and worksheets to assist with adjustments to Form 1099-DIV. Remember to always refer to the latest official IRS guidance for accurate and up-to-date information.
