Do I Have to Report Dividends Less Than $10?

Dividends represent distributions of a company’s earnings to its shareholders. Understanding the tax implications of receiving these payments is an important aspect of managing personal finances.

Understanding Dividend Income

Dividends are a portion of a company’s profits or accumulated earnings distributed to its shareholders. These distributions are typically paid out on a regular basis, such as quarterly or annually, and can be received from investments like stocks, mutual funds, or exchange-traded funds (ETFs).

There are two main types of dividends: ordinary and qualified. Ordinary dividends are taxed at the taxpayer’s regular income tax rate. Qualified dividends, however, can receive more favorable tax treatment, being taxed at lower capital gains rates. To be classified as qualified, a dividend must meet specific Internal Revenue Service (IRS) criteria, including being paid by a U.S. company or a qualifying foreign company, and the stock must have been held for a specified period, typically more than 60 days within a 121-day window around the ex-dividend date.

Reporting Requirements for Dividends

All income received, including dividend income, is generally considered taxable unless explicitly exempted by law. Taxpayers are required to report all income on their annual tax returns, regardless of the amount or whether they receive a specific tax form from the payer.

Financial institutions and other payers typically issue Form 1099-DIV, Dividends and Distributions, to both the recipient and the IRS. This form reports the total amount and type of dividends paid during the year. While receiving a Form 1099-DIV simplifies the reporting process for the recipient, its absence does not remove the taxpayer’s obligation to report the income.

Specifics for Small Dividend Amounts

Companies and financial institutions are generally required to issue Form 1099-DIV to taxpayers if the total dividends paid to them amount to $10 or more in a tax year. However, if the total dividend amount is less than $10, the payer is not obligated to send out a Form 1099-DIV.

Despite the absence of a Form 1099-DIV for small amounts, taxpayers are still required to report all dividend income received, even if it is less than $10. The IRS mandates the reporting of all income, and this includes even a few cents of dividend earnings. For tax purposes, these small amounts are considered taxable income that must be included on the taxpayer’s income tax return.

Taxpayers typically report dividend income on Form 1040. If the total taxable ordinary dividends received exceed $1,500, or if certain other conditions are met, taxpayers must also file Schedule B (Form 1040), Interest and Ordinary Dividends. On Schedule B, taxpayers list the name of each payer and the amount of dividends received from each. Even without a Form 1099-DIV, taxpayers can manually enter the payer’s name and the total dividend amount when preparing their tax return, ensuring all income is accurately reported.