What is Form 1099-DIV?
Form 1099-DIV, Dividends and Distributions, is an IRS form sent by banks and other financial institutions to report their dividends and other distributions to investors, taxpayers, and the IRS.
Taxpayers are required to file information from each Form 1099-DIV they receive on their annual tax form. Dividends are taxed at the same rate as an investor’s income tax rate, with certain exceptions. Qualified dividends are the most common exception, as they have met certain criteria that allow them to be taxed at a lower capital gains 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 taxes on long-term capital gains are lower.
Additional instructions on how to fill out the various fields in Form 1099-DIV can be found on the IRS website.
Who needs to use Form 1099-DIV?
Banks, investment companies, and other financial institutions are required to provide taxpayers with a 1099-DIV by Jan. 31 each year, so that taxpayers can include the information from Form 1099-DIV in their annual tax returns. Companies provide a copy of Form 1099-DIV to the investors and to the IRS as well.
How to fill out Form 1099-DIV?
The IRS 1099 DIV Form is a very simple, if long, form to fill out. It will be helpful to have documents containing the relevant information with you as you fill the form out in order to ensure that you are entering the correct information.
There are three copies of this form. The instructions given here will apply to all copies, but it may be important to keep their differences in mind:
- Copy A is for the use of the IRS and is to be filed with your Form 1096, Annual Summary and Transmittal of US Information Returns.
- Copy 1 is for the use of the State Tax Department and must be sent to them attached to your tax return.
- Copy B is for the Recipient (the receiver of the Payer’s dividend payments).
Make sure to remember which forms should be submitted where or kept by you, in order to avoid any issues with the IRS not recognizing a form as having been properly submitted.
Payer’s Name and Address
Enter the name of the Payer (the company or other entity that is paying in dividends) and the following information of the Payer:
- Street Address
- City or Town
- State or Province
- ZIP Code or Foreign Postal Code
- Telephone number
Enter the Payer’s TIN.
Enter Recipient’s (the receiver of the Payer’s dividend payments) TIN.
Enter the name of the person or company receiving the dividends
Enter the Recipient’s primary street address here, including their apartment number if applicable.
City or Town, State or Province, ZIP or Foreign Postal Code
Enter the Recipient’s city or town, state or province, and zip or foreign postal code.
Foreign Account Tax Compliance Act (FATCA) Filing Requirement
Mark the box provided if you are filling out this form as part of your requirements per the FATCA.
If you have multiple accounts for a Recipient, and thus are filing more than one copy of Form 1099-DIV, enter one of the account numbers here, and remember to file another Form 1099-DIV for each other account number.
You will also have to enter an account number here if you checked the FATCA Filing Requirement box.
2nd TIN Notice
If you were given a notice by the IRS twice within the past three calendar years (but not within the same year or concerning information returns that were filed in the same year) that the Recipient provided an incorrect TIN, mark the box provided.
Line 1a - Total Ordinary Dividends
Enter the total of the ordinary dividends paid.
Line 1b - Qualified Dividends
Enter the total of qualified dividends.
Line 2a - Total Capital Gain Distribution
Enter the total of capital gain distributed.
Line 2b - Unrecaptured Section 1250 Gain
Enter the total of the unrecaptured gain as defined in Section 1250 of the United States Internal Revenue Code (IRC).
Line 2c - Section 1202 Gain
Enter how much gain is being declared as part of Section 1202 of the IRC.
Line 2d - Collectibles (28%) gain
Enter how much gain in collectibles is subject to the 28% tax rate.
Line 2e - Section 897 Ordinary Dividends
Enter the total of Ordinary Dividends as outlined in Section 897 of the IRC.
Line 2f - Section 897 Capital Gain
Enter the total amount of capital gains as outlined in Section 897 of the IRC.
Line 3 - Nondividend distributions
Enter the total amount of distributions that are not dividends.
Line 4 - Federal Income Tax Withheld
Enter the amount of federal income tax withheld from the account.
Line 5 - Section 199A Dividends
Enter the amount of dividends applicable for Section 199A of the IRC.
Line 6 - Investment Expenses
Enter the total investment expenses here.
Line 7 - Foreign Tax Paid
Enter the amount of foreign tax paid, if any.
Line 8 - Foreign Country or US Possession
Enter the name of the foreign country or US possession that the foreign tax in Line 7 was paid to, if any.
Line 9 - Cash Liquidation Distributions
Enter the amount of cash distributed as part of liquidation.
Line 10 - Noncash Liquidation Distributions
Enter cash distributed as part of a liquidation.
Line 11 - Exempt-interest dividends
Enter exempt-interest dividends from a mutual fund or other Regulated Investment Company (RIC).
Line 12 - Specified Private Activity Bond Interest Dividends
Enter exempt-interest dividends paid by a RIC on specified private activity bonds to the extent that the dividends are attributable to interest on the bonds received by the (RIC) minus an allocable share of the expenses.
Line 13 - State
Enter the State(s) that the Payer and Recipient are in.
Line 14 - State Identification Number
Enter the State Identification number of the Payer and Recipient.
Line 15 - State Tax Withheld
Enter the amount of tax withheld by the state for the Payer and the Recipient individually.
Tips when filling out Form 1099-DIV
Form 1099 DIV contains sensitive information regarding the address and TIN of both the Payer and Recipient, as well as information on their assets and taxes. It is important to keep your copy of this form in a safe and secure area so as to avoid any issues regarding identity theft and other legal concerns.
Make sure all information entered is correct, and that the form is submitted to the appropriate place on time. This will help avoid any consequences for giving the IRS the wrong information and ensure that your tax returns will be processed properly.
Practice good contract management. Make sure to keep your copy of the form in a safe and organized area, or even copy it again in order to be doubly sure that you have a backup in case the original is damaged in some way. This will be useful for possible legal purposes in the future, or even simply as a record.