Form 1099-DIV

Form 1099-DIV is a form sent to investors who have received distributions from any type of investment during a calendar year. Investors can receive multiple 1099-DIVs. Each Form 1099-DIV should be reported on an investor’s tax filing. The Form 1099-DIV is one of many 1099 forms an individual may accumulate for a given tax year. Investors may receive numerous 1099-DIV forms since they are provided by each platform where an investor has their investment holdings.

Investment platforms are required to provide a 1099-DIV by January 31. Companies provide a copy of the Form 1099-DIV to the investor and the IRS. Certain types of investment accounts are exempt from issuing a Form 1099-DIV. Exempt accounts include individual retirement accounts, money purchase pension plans, profit-sharing plans and various other retirement accounts. Investors will typically not receive a 1099-DIV if cumulative dividends are not greater than $10.

1099-DIV Categories
Most investors receiving a Form 1099-DIV will have ordinary dividends, qualified dividends or total capital gains. Other categories for investors include: unrecap. sec. 1250 gain, section 1202 gain, collectibles gain, nondividend distributions, federal income tax withheld, investment expenses, foreign tax paid, foreign country or U.S. possession, cash liquidation distributions, noncash liquidation distributions, exempt-interest dividends, specified private activity bond interest dividends and state tax withheld. Investors may also be subject to FATCA filing requirements for foreign accounts. A copy of Form 1099-DIV for 2018 can be found here.

Tax Filing
Investors will need to file each 1099-DIV they receive on their annual tax form. This can be done on a Schedule B or directly on the Form 1040. Dividends are taxed at an investor’s income tax rate with a few exceptions. Qualified dividends are the primary exception. Qualified dividends have met certain criteria that allow them to be taxed at a lower tax rate.

The tax rate on capital gains may also vary from the ordinary income tax rate. Short-term capital gains are taxed at the ordinary income tax rate but long-term capital gains will pay lower taxes. (See also: Comparing Long-Term vs. Short-Term Capital Gain Tax Rates.) Charles Schwab provides a breakdown of the 2017 tax rates for distributions here.

1099-DIV reporting boxes
Box 1a of your 1099-DIV will report the total amount of ordinary dividends you receive, while box 1b reports the portion of box 1a that is considered to be qualified dividends.

If your mutual fund investment makes a capital gain distribution to you, it will be reported in box 2a.

If any state and federal taxes were withheld from your distributions, those amounts will be reported in boxes 4 for federal withholding and 14 for state withholding.

Ordinary and qualified dividends
For ordinary dividends that aren’t qualified, which is equal to box 1a minus 1b, you’ll pay tax at ordinary rates.

As of this writing, qualified dividends are taxed as long-term capital gains. This means that if your highest income tax bracket is 15 percent or less, you receive these dividends tax-free. If your marginal rate of tax is higher than 15 percent, your qualified dividends are taxed at 15 or 20 percent depending on your income.

To be qualified, your dividends must be paid by a U.S. corporation or, if a foreign corporation, a tax treaty must exist between the U.S. and the country of incorporation, or the shares must trade on a U.S. stock exchange. Moreover, at a minimum, you must own the stock for more than 60 days during the 121-day period that begins 60 days before the ex-dividend date.

Mutual fund distributions
When your mutual fund makes a distribution of its investment earnings to you and reports it in box 2a of Form 1099-DIV, the IRS generally allows you to treat the distribution like a long-term capital gain. This is beneficial since the same tax rules that apply to your qualified dividends also apply to mutual fund capital gain distributions, regardless of whether you hold the investment for 10 days or 10 years.

Schedule B implications
Your receipt of dividends this year may also require you to prepare a Schedule B attachment to your tax return. Even if you don’t received a Form 1099-DIV, you are required to still report all of your taxable dividend income. Schedule B is necessary when the total amount dividends or interest you receive exceeds $1,500. However, Schedule B doesn’t change the amount of tax you’ll pay; it just requires you to report information about the dividend and interest income you receive from each source. When you use TurboTax to prepare your tax return, we’ll ask you simple questions and fill in all the right forms for you.

Form 1099-DIV
Instructions for Form 1099-DIV