When Are 1099-DIV Required to Be Sent Out?
Understand your obligations for reporting dividend payments. This guide details the complete process for issuing Form 1099-DIV to ensure compliance.
Form 1099-DIV, Dividends and Distributions, is an information return used by businesses and financial institutions to report dividend payments and certain other distributions to investors and the Internal Revenue Service (IRS). This form details the different types of distributions made throughout the year, which is necessary for the recipient to accurately prepare their income tax return. The information helps taxpayers report their investment income correctly.
Who Is Required to Send Form 1099-DIV
The obligation to issue a Form 1099-DIV falls on the entity that pays the dividends. This includes corporations paying dividends on their stock, as well as banks, mutual fund companies, and brokerage firms that handle investments on behalf of their clients.
An entity must send a Form 1099-DIV if it makes payments of at least $10 in dividends or other distributions treated as dividends. A form is also required if any foreign tax was withheld and paid on dividends, regardless of the dividend amount. Similarly, if any federal income tax was withheld under the backup withholding rules, a Form 1099-DIV must be issued. A separate threshold exists for payments of $600 or more made to an individual as part of a corporate liquidation.
Not all distributions from an investment will result in a 1099-DIV. For instance, if total dividends for the year are less than $10, a form is not required, though the recipient is still obligated to report the income. Distributions from tax-deferred retirement accounts like IRAs do not generate a 1099-DIV, as the tax reporting for those accounts follows different rules.
Key Deadlines for Form 1099-DIV
Payers must send Copy B of the form to the person who received the dividend payments by January 31 of the year following the payment year. This ensures that investors have the necessary information in hand to prepare and file their personal income tax returns on time.
The deadlines for filing the form with the IRS depend on the submission method. For entities that choose to file paper copies of Form 1099-DIV, the deadline is February 28. When filing by paper, the payer must also submit a summary document, Form 1096, Transmittal of U.S. Information Returns, which totals the information from all the 1099-DIV forms being sent.
For those who file electronically, the IRS provides an extended deadline. Electronic filers have until March 31 to submit their Form 1099-DIV data to the IRS. Businesses that file 10 or more information returns in aggregate are required to file them electronically.
Penalties for Non-Compliance
Failing to meet the established deadlines for furnishing or filing Form 1099-DIV can lead to financial penalties from the IRS. These penalties apply for failures such as not filing on time, not providing a copy to the recipient, or reporting incorrect information. The penalty amounts are structured on a tiered system, increasing based on the length of the delay.
If a correct form is filed within 30 days of the due date, the penalty is $60 per form. If the form is filed more than 30 days late but before August 1, the penalty increases to $130 per form. For forms filed after August 1, or not filed at all, the penalty rises to $330 per form.
In cases where the IRS determines that a business intentionally disregarded its filing obligations, the penalties are substantially higher. The penalty for intentional disregard is $660 per form, with no maximum penalty amount.