What Is 1099-DIV Box 2f and How Should You Report It?

Tax forms can be confusing, especially when they contain unfamiliar terms. Box 2f on Form 1099-DIV is one such category that, while not widely discussed, plays a role in tax reporting for certain investors.

Understanding what this box represents and how to report it correctly is essential to avoid errors on your tax return.

Purpose of Box 2f

Box 2f on Form 1099-DIV reports Section 897 ordinary dividends, which apply to foreign investors holding shares in U.S. real estate investment trusts (REITs) or other entities subject to the Foreign Investment in Real Property Tax Act (FIRPTA). Under U.S. tax law, certain real estate-related income earned by non-U.S. persons is treated as effectively connected with a U.S. trade or business and taxed accordingly.

This income is separated from other dividend distributions due to its tax implications for foreign investors. FIRPTA requires that gains from selling U.S. real property interests (USRPI) be taxed as if the seller were engaged in a U.S. trade or business. When a REIT distributes income from such gains, a portion of those dividends may be classified as Section 897 ordinary dividends. These distributions are subject to a 21% withholding rate, aligning with the corporate tax rate rather than the standard 30% withholding applied to most U.S.-sourced dividends received by foreign investors.

Typical Income Listed Under Box 2f

The income reported in Box 2f comes from distributions made by REITs and regulated investment companies (RICs) that earn revenue from U.S. real property interests. These distributions are categorized separately because they originate from real estate transactions rather than traditional investment income.

For example, if a REIT sells an office building at a profit and distributes part of those proceeds to shareholders, the portion allocated to foreign investors may be classified under Box 2f. This ensures that foreign investors are taxed similarly to direct real estate owners rather than benefiting from lower dividend tax rates.

Certain mutual funds that invest heavily in U.S. real estate assets may also distribute income that falls into this category. If a fund realizes capital gains from selling real estate holdings, a portion of those gains may be passed through to investors as Section 897 ordinary dividends. This prevents foreign investors from avoiding real estate-related taxes by investing through pooled structures instead of directly owning property.

Where to Report the Amount

Amounts listed in Box 2f must be reported correctly to comply with IRS regulations. Nonresident aliens filing Form 1040-NR typically include these amounts on Schedule NEC (Tax on Income Not Effectively Connected With a U.S. Trade or Business). Since these distributions are U.S.-sourced income subject to specific withholding rules, they must be reported separately from other investment income. The applicable tax rate depends on whether a tax treaty between the investor’s home country and the U.S. provides a reduced rate or exemption.

For U.S. citizens and resident aliens, reporting requirements differ. If a taxpayer receives a Form 1099-DIV with an entry in Box 2f but is not a foreign investor, the amount may still need to be considered when calculating total taxable dividends. While these distributions primarily affect nonresident investors, domestic taxpayers holding interests in REITs or mutual funds with foreign shareholders should review their tax situation to ensure proper classification.

Checking for Accuracy With Supporting Documents

To verify the accuracy of Box 2f amounts, investors should compare their Form 1099-DIV with year-end account statements from brokers or fund administrators. These statements typically provide a breakdown of dividend distributions, capital gains, and any adjustments made throughout the year. If discrepancies arise, investors should request a detailed income reclassification report from the issuing institution, as REITs and mutual funds frequently adjust dividend characterizations after the initial reporting period.

Foreign investors should also check whether withholding tax was applied correctly. Section 897 ordinary dividends are subject to a 21% withholding rate, but if an investor qualifies for a lower rate under a tax treaty, they may be eligible for a refund. Reviewing IRS Form 1042-S (Foreign Person’s U.S. Source Income Subject to Withholding) can help confirm whether the correct amount was withheld. If too much tax was withheld, a refund can be claimed by filing Form 1040-NR along with Form 8233 (Exemption From Withholding).

Handling Adjusted Figures

Taxpayers may receive a corrected Form 1099-DIV if a REIT or mutual fund reclassifies distributions after the initial reporting period. These adjustments can affect both the total taxable amount and the withholding applied, making it important to review any changes carefully.

If a corrected form is issued, it replaces the original and must be used when filing. Taxpayers who have already submitted their return before receiving an adjustment may need to file an amended return using Form 1040-X (Amended U.S. Individual Income Tax Return) or Form 1040-NR-X for nonresident filers. Ignoring adjustments could result in underreporting income or overpaying taxes. If withholding was miscalculated, taxpayers may need to request a refund or make an additional payment.

Retaining Records for Future Reference

Keeping accurate records is essential for tax compliance, especially when dealing with income classifications that may be subject to IRS scrutiny. Box 2f amounts should be documented alongside brokerage statements, REIT distribution notices, and any corrected tax forms received throughout the year. These records serve as evidence in case of an audit or if discrepancies arise in future tax filings.

Foreign investors should also retain copies of Form 1042-S and any related withholding certificates, such as Form W-8BEN (Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding and Reporting). These documents help substantiate claims for treaty benefits or refunds of excess withholding. Since tax authorities may request documentation years after a return is filed, maintaining organized records for at least three to six years is advisable.