The 1099 DIV: an essential tax form for investors

You will need to refer to the 1099 DIV forms to report your dividend income. Photo: StockMonkeys.com.

If any of your investments pay you dividends, you’ll likely receive at least one Form 1099 DIV in the mail at tax time. Form 1099 DIV is sent to you and the IRS by financial institutions such as brokerage houses and banks, and it reports dividends and distributions paid to you, even if they have been reinvested and not considered. like cash. Mutual fund capital gains distributions are also reported via 1099 DIV forms.

Let’s go over the basics of Form 1099 DIV for those who might have to report these payments on their tax return.

Nuts and bolts – and boxes
One key thing to note about the 1099 DIV Form is that you and the IRS receive it. So if you were just hoping not to report dividend income to Uncle Sam, I’m sorry to say the IRS is aware of that income and will reconcile the reports it receives with the tax return you file. . It also means that you don’t need to complete the form with your tax return because the IRS will already have the information it needs. That said, you will likely need to refer to the 1099 DIV form when preparing your return, as it contains important information.

The form looks pretty straightforward for a tax form, with a bunch of boxes to fill out. Box 1a will total the ordinary dividends you received of the institution that sent the form. (Keep in mind that you can have more than one of these forms and you may need to total some numbers.) Box 1b indicates how much of your total ordinary dividends are considered “qualified”.

Qualified dividends are taxed at the same rate as long-term capital gains, which is 15% for most of us, 0% for those in the 15% tax bracket, or less, and 20% or 23.8% for high incomes. Ordinary non-qualifying dividends – you can calculate them by subtracting the sum in box 1b from the sum in box 1a – are taxed at your regular tax rate, which is 25% for many of us and can approach 40% for high incomes.

What makes a dividend eligible? Well, it will have been paid to you by an American corporation or a corporation based in a country that has a tax treaty with the United States or whose shares are traded on a U.S. stock exchange. There are also a few other requirements, namely that you must have owned the stock for more than 60 days.

In box 2a, you will see any capital gains distribution you received, usually from a mutual fund. This is treated as a long term capital gain, and it is taxed accordingly. This is beneficial because short-term capital gains are taxed at your regular tax rate. Other boxes detail any federal income taxes withheld, foreign taxes paid, and / or foreign source income.

Note that you will not get 1099 DIV forms for your tax-advantaged retirement accounts such as IRAs, as these accounts do not generate a tax return. You are not taxed on the dividends and capital gains you receive each year on holdings in these accounts.

Annex B
Although you don’t have to file the 1099 DIV form with the IRS, the 1099 DIV form (s) you receive may require you to prepare and file a Schedule B with your return. This is the case if all of your ordinary dividends listed in all box 1a of your 1099 DIV Form (s) total more than $ 1,500 – or if you have more than $ 1,500 in interest income. This shouldn’t be a big deal, however, as Schedule B primarily wants you to list ordinary dividends and / or interest you’ve received from various payers.

The 1099 DIV form is one of the simpler tax forms that taxpayers face, but nonetheless you should have a solid understanding of its role in your finances.


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