What Is Form 1099-DIV for Dividends and Distributions?

Form 1099-DIV, Dividends and Distributions, is an information return used to report investment income to taxpayers and the Internal Revenue Service (IRS). The form provides a summary of dividends and capital gain distributions you received throughout the tax year.

Who Issues and Receives a Form 1099-DIV

Financial institutions such as banks, brokerage firms, and mutual fund companies are required to issue Form 1099-DIV. They send the form to any individual or entity that has received at least $10 in dividends or other distributions during the calendar year. The form is not just for cash payments; it also reports dividends that are automatically reinvested back into the security.

Payers must send copies of the 1099-DIV to the recipient and the IRS. The deadline for sending the recipient’s copy is January 31 of the year following the tax year in which the income was paid. Failure to report the income shown on a 1099-DIV can result in the IRS issuing a notice, such as a CP2000, for underreported income.

Understanding the Boxes on Form 1099-DIV

Box 1a shows your total ordinary dividends, which may also include certain short-term capital gains from mutual funds and your share of investment expenses. This amount represents the total dividends you received, which are generally taxed at your regular income tax rate. Within this total is a subset of dividends that may be eligible for a lower tax rate. These are called qualified dividends and are reported in Box 1b. For a dividend to be qualified, it must meet certain requirements, such as being paid by a U.S. corporation or a qualifying foreign corporation and you must have held the stock for a specific period of time.

Box 2a reports total capital gain distributions. These are payments from mutual funds or real estate investment trusts (REITs) that have sold securities at a profit. These gains are passed on to you as an investor and are typically taxed at long-term capital gains rates, which are generally lower than ordinary income rates. Other boxes, such as 2b, 2c, and 2d, provide a further breakdown of the capital gains, showing the portion attributable to unrecaptured Section 1250 gains, Section 1202 gains, and collectibles gains, each with its own specific tax implications.

Box 3, Nondividend Distributions, shows any payments that are considered a return of your original investment, also known as a return of capital. This amount is generally not taxable but reduces your cost basis in the investment. Once your basis is reduced to zero, any further distributions are treated as a capital gain.

Box 7 shows any foreign tax you paid on dividends from international stocks or funds. You may be able to claim a foreign tax credit or an itemized deduction for these taxes paid, which can reduce your U.S. tax liability. Other notable boxes include Box 5 for Section 199A dividends, which may qualify for a deduction, and Box 12 for exempt-interest dividends, which are typically not subject to federal income tax.

Reporting 1099-DIV Information on Your Tax Return

You must transfer the information on your Form 1099-DIV to your U.S. Individual Income Tax Return, Form 1040. The figures from the various boxes on the 1099-DIV correspond to specific lines on the tax return.

The total ordinary dividends from Box 1a are reported on line 3b of Form 1040. The qualified dividends from Box 1b, which are a portion of the ordinary dividends, are reported on line 3a of Form 1040. If your total dividend income exceeds $1,500, you are also required to complete and attach Schedule B, Interest and Ordinary Dividends, to your tax return.

Capital gain distributions, found in Box 2a of the 1099-DIV, are generally reported on Schedule D, Capital Gains and Losses. The total from Box 2a is transferred to line 13 of Schedule D. If you are not required to file Schedule D for any other reason, you may be able to report the capital gain distribution directly on Form 1040.

The foreign tax paid, shown in Box 7, can be claimed as a credit or a deduction. To claim the credit, you will likely need to file Form 1116, Foreign Tax Credit. Taking the credit is often more beneficial than taking a deduction, but the calculation can be more complex. The deduction would be reported on Schedule A, Itemized Deductions.