Form 1099-DIV: Reporting Dividends and Distributions

Form 1099-DIV is an Internal Revenue Service (IRS) form sent by financial institutions to investors and the IRS. It reports dividend payments and other distributions made to an investor during a calendar year. Any investor who receives more than $10 in dividends or distributions will receive this form. Financial institutions are required to send these forms to recipients by January 31 each year.

Understanding the Information on Form 1099-DIV

Form 1099-DIV is separated into boxes that report specific types of income. Box 1a shows the total ordinary dividends received, which are distributions of a company’s earnings. These are the most common type of distribution and are taxed at your regular income tax rate.

Box 1b contains the portion of Box 1a’s amount that is considered qualified dividends. For a dividend to be “qualified,” it must be paid by a U.S. or qualifying foreign corporation, and you must have held the stock for a specific period. These dividends are taxed at lower long-term capital gains rates.

Box 2a reports total capital gain distributions, which are paid by mutual funds or real estate investment trusts (REITs). These distributions represent the net long-term capital gains realized by the fund from selling assets. Like qualified dividends, these gains are taxed at favorable long-term capital gains rates, regardless of how long you have owned the fund shares.

Box 3 reports nondividend distributions, which are a return of your original investment, not a dividend. This amount is not taxed as income but reduces the cost basis of your stock. This adjustment increases the capital gain or reduces the capital loss you will report when you sell the investment.

Other boxes provide information for your tax return. Box 4 shows any federal income tax withheld, which can occur if you did not provide a correct taxpayer identification number. Box 7 details foreign tax paid, which may allow you to claim a foreign tax credit or an itemized deduction. Box 12 reports exempt-interest dividends from municipal bond funds, which are not subject to federal income tax.

Reporting Dividend Income on Your Tax Return

If your total ordinary dividends in Box 1a exceed $1,500, you are required to file Schedule B (Form 1040), Interest and Ordinary Dividends. On this schedule, you must list each payer of dividend income. The total from Box 1a is then carried over to the ordinary dividends line on your Form 1040.

The amount of qualified dividends from Box 1b is reported on the designated line of Form 1040. This ensures the income is taxed at the lower long-term capital gains rates. It is important to enter this number correctly to receive the preferential tax treatment, though tax software often handles this automatically.

Capital gain distributions from Box 2a are transferred to Schedule D (Form 1040), Capital Gains and Losses. If you have no other capital transactions, Form 1040 instructions may allow you to report this amount directly on the main form without filing Schedule D.

Federal income tax withheld, shown in Box 4, is added to other withholdings on Form 1040, reducing your tax liability or increasing your refund. The foreign tax paid from Box 7 can be claimed as a deduction on Schedule A (Form 1040) or as a credit using Form 1116; the credit provides a greater tax benefit for most taxpayers. Tax-exempt dividends from Box 12 are reported on Form 1040 for informational purposes.

Common Issues and Corrections

If you find an error on your Form 1099-DIV, contact the payer who issued it. The payer is responsible for issuing a corrected form, which will be marked with a “CORRECTED” checkbox. You should wait to file your tax return until you receive the corrected form, but you are still responsible for reporting the correct income figures even if one is not provided.

You must report all dividend income, even if you do not receive a Form 1099-DIV. If you believe you should have received a form but did not, contact the payer to request it. If you cannot obtain the form, use your own records, such as brokerage statements, to determine the correct amounts to report.

If you receive a Form 1099-DIV with income belonging to someone else, such as a family member, you are a “nominee.” You must file a separate Form 1099-DIV for the actual owner, listing yourself as the payer. This nominee form is filed with Form 1096 with the IRS, and a copy is sent to the actual owner. On your Schedule B, report the full amount from the original form and then subtract the amount attributable to the nominee.