Form 1099-DIV

Why do you need to file a 1099-DIV?

The 1099-DIV form is a type of information return used in the U.S. to report distributions, such as dividends, capital gain distributions, or non-taxable distributions, that were paid on stock and mutual fund accounts. The form is provided by the entity that paid the income to the recipient and a copy is also sent to the Internal Revenue Service (IRS). Here are the primary aspects of the form:

Tax Reporting Obligations for Issuers

• Transparency
  • Corporations, mutual funds, and other entities that distribute dividends or other distributions have a legal obligation to report these payments to the Internal Revenue Service (IRS).
• Tracking
  • The IRS uses 1099-DIV forms to match the amounts that entities claim they have paid out with the amounts that individuals report they have received.
• Avoiding Penalties
  • Issuers that fail to provide 1099-DIV forms when required or who submit inaccurate forms may face penalties.

Tax Reporting Obligations for Recipients

• Income Reporting
  • Individuals are required to report their dividend income and capital gains distributions on their tax returns. The 1099-DIV provides the necessary details to do this correctly.
• Tax Rate Determination
  • The form differentiates between ordinary dividends (Box 1a) and qualified dividends (Box 1b). Qualified dividends are taxed at the preferential capital gains tax rates, while ordinary dividends are taxed at ordinary income tax rates. This distinction affects the amount of tax an individual owes.
• Foreign Tax Credit
  • If foreign tax was withheld from dividends (Box 6), taxpayers might be eligible to claim a foreign tax credit or deduction on their U.S. tax return.
• Capital Gains Distributions
  • Reporting these distributions correctly can affect the amount of tax owed, especially if the taxpayer has capital losses that can offset these distributions.

Accuracy and Reconciliation

• The IRS receives a copy of every 1099-DIV issued. This allows the IRS to cross-reference and verify that individuals are accurately reporting their dividend and distribution income. Discrepancies can lead to the IRS making inquiries or audits.

Informative for Tax Planning

• For taxpayers, receiving the 1099-DIV can be informative for tax planning purposes. For instance, understanding the breakdown between qualified and non-qualified dividends can influence investment and tax strategies.

State Tax Reporting

• Depending on the state, dividend income might also be taxable at the state level. The 1099-DIV provides necessary information for state tax returns as well.

E-File Form 1099-DIV Today

Back to Top

Who needs to file a 1099-DIV?

The Form 1099-DIV is primarily used to report distributions, such as dividends that were paid on stock and mutual fund accounts. The responsibility to file a 1099-DIV typically lies with entities or individuals that pay interest. Here’s a breakdown of who typically needs to file a 1099-DIV:

Corporations

• If a corporation pays dividends to its shareholders, it generally must issue a 1099-DIV to any shareholder who received at least $10 in dividends during the tax year.

Banks and Financial Institutions

• If a person holds a stock or mutual fund in a brokerage account or with a bank that pays dividends, the bank or brokerage firm will typically issue a 1099-DIV for any dividends or distributions of $10 or more.

Mutual Funds and Regulated Investment Companies (RICs)

• These entities issue 1099-DIVs to shareholders who receive dividends, capital gains distributions, or other distributions.

Trusts and Estates

• If they distribute dividend income to beneficiaries, they might need to issue a 1099-DIV.

Real Estate Investment Trusts (REITs)

• REITs distribute most of their income to shareholders, and they issue 1099-DIVs to report these distributions.

Brokers

• If a broker manages dividend-paying stocks or funds on behalf of clients, the broker will generally issue the 1099-DIV.

Other Entities

• Any other entity that pays reportable dividends or distributions to others, meeting the threshold amounts.

E-File Form 1099-DIV Today

Back to Top

Are there any exemptions to filing a 1099-DIV?

Yes, there are several situations in which you don’t need to file a 1099-DIV, even if you’ve made payments during the course of your trade or business. Here are some of the exemptions:

Nominees

• If you’re a nominee who received dividends on behalf of someone else (e.g., you are holding a stock in your name but the benefits go to someone else), you may need to issue a 1099-DIV to the beneficial owner, but you can avoid filing one with the IRS if you transfer the reporting obligation to that beneficial owner.

Tax-Exempt Entities

• While they might need to issue 1099-DIVs for dividend income distributed, they don’t always have to file the form with the IRS. For example, retirement accounts like IRAs that might receive dividend income generally don’t require 1099-DIVs to be issued.

Certain Foreign Recipients

• Typically, payments to foreign recipients are reported on Form 1042-S, “Foreign Person’s U.S. Source Income Subject to Withholding,” instead of Form 1099-DIV.

Corporations

• Dividends paid to corporate shareholders are generally exempt from 1099-DIV reporting, with some exceptions, like when dividends are paid to tax-exempt organizations or when subject to backup withholding.

Payments Below Reporting Threshold

• Dividend payments of less than $10 are generally not required to be reported on a 1099-DIV. However, dividends subject to backup withholding need to be reported regardless of the amount.

Certain Other Payments

• For example, dividends paid on shares of a corporation registered under the Investment Company Act of 1940 that are redeemed within 6 months of their original issuance aren’t typically reported on Form 1099-DIV. There are other specific types of payments and situations with similar exceptions.

Dividends on Tax-Deferred Accounts

• Dividends earned in tax-deferred accounts, such as a 401(k) or traditional IRA, are typically not reported on a 1099-DIV.

Partnerships, S-Corporations, and LLCs

• These entities usually don’t issue 1099-DIV forms for distributions to their partners, members, or shareholders. Instead, dividend income and other financial activities are typically reported on Schedule K-1.

E-File Form 1099-DIV Today

Back to Top

What is the deadline for filing a 1099-DIV?

The deadline for filing a 1099-DIV can vary based on the several factors:

Sending to Recipients

• The 1099-DIV form should be furnished to the recipient by January 31 of the year following the payment year.

Filing with the IRS

• If you are filing on paper, the 1099-DIV forms should be submitted to the IRS by February 28 (or the last day of February) of the year following the payment year.

If you are filing electronically, the deadline extends to March 31 of the year following the payment year.

However, if any of these dates fall on a weekend or a holiday, the deadline may be extended to the next business day. Additionally, if you discover an error after the initial filing, there are separate deadlines for corrected 1099-DIV forms.

Remember, missing these deadlines can result in penalties, so it’s crucial to stay informed and act timely.

E-File Form 1099-DIV Today

Back to Top

What is required to file a 1099-DIV?

To file a Form 1099-DIV, you will need certain information about both the payer (the person or business making the payment) and the recipient (the person or business receiving the payment). Here’s what is required to file a 1099-DIV:

Information about the Payer

• Payer’s Name and Address
  • Provide your legal business name and mailing address.
• Payer’s Taxpayer Identification Number (TIN)
  • This could be your Employer Identification Number (EIN) or your Social Security Number (SSN), depending on your business structure. If you’re a sole proprietor, you might use your SSN; if you’re a business entity, you’d use your EIN.
• Payer’s Phone Number
  • Include a phone number where the payer can be reached.

Information about the Recipient

• Recipient’s Name and Address
  • Provide the legal name and mailing address of the individual or business receiving the payment.
• Recipient’s Taxpayer Identification Number (TIN)
  • This could be the recipient’s Social Security Number (SSN) if an individual or their Employer Identification Number (EIN) if a business entity.

Form specific information

• No form specific data is required, however some information should be added to justify the submission of the 1099-DIV form. The fields with amounts will vary based on the situation.

E-File Form 1099-DIV Today

Back to Top

What are the penalties for 1099-DIV?

Please see the penalties section for details.

E-File Form 1099-DIV Today

Back to Top

Do you need to e-file a 1099-DIV?

Please see the e-file section for details.

E-File Form 1099-DIV Today

Back to Top

Is state filing required for the 1099-DIV?

Please see the state filing section for details.

E-File Form 1099-DIV Today

Back to Top

What elements make up a 1099-DIV form?

The 1099-DIV contains several boxes, each designed to report specific types of income or information. Here is a breakdown of the boxes on the 1099-DIV:

Box 1a – Total Ordinary Dividends

This includes dividends subject to the ordinary income tax rate as well as short-term capital gain distributions.

Box 1b – Qualified Dividends

The portion of dividends that may be taxed at a lower rate.

Box 2a – Total Capital Gain Distributions

Refers to long-term capital gain distributions, primarily from mutual funds.

Box 2b – Unrecaptured Section 1250 Gain

Amount of section 1250 gain.

Box 2c – Section 1202 Gain

Exclusion amount for gain from certain small business stock.

Box 2d – Collectibles (28%) Gain

Gain subject to the 28% rate.

Box 2e – Section 897 ordinary dividends

This amount is included in Box 1a and is attributable to a Section 897 RIC or REIT owned by a non-US individual or foreign corporation.

Box 2f – Section 897 capital gain

This amount is included in Box 2a and is the capital gain attributable to a Section 897 RIC or REIT owned by a non-US individual or foreign corporation for which the disposition or partial disposition of a US real property interest (USRPI) is owned by a non-US individual or foreign corporation.

Box 3 – Non-dividend Distributions

Amounts that are a return of capital.

Box 4 – Federal Income Tax Withheld

Amounts withheld for federal income tax.

Box 5 – Section 199A dividends

This the portion of the amount in Box 1a that may be eligible for the 20% qualified business income deduction under section 199A.

Box 6 – Investment Expenses

Expenses related to royalty income.

Box 7 – Foreign Tax Paid

Amount of foreign taxes paid on dividends and distributions.

Box 8 – Foreign Country or U.S. Possession

Country or U.S. possession for which the foreign tax was paid.

Box 9 – Cash Liquidation Distributions

Amount received during a partial or complete liquidation of a corporation.

Box 9 – Noncash Liquidation Distributions

Fair market value of non-cash distributions.

Box 10 – Exempt-Interest Dividends

Amount from mutual funds that invest in tax-exempt federal bonds.

Box 11 FATCA filing requirement

If checked, the payer issued this 1099-DIV to satisfy its reporting requirement under IRC chapter 4.

Box 12 – Specified Private Activity Bond Interest Dividends

Taxable amount from certain private activity bonds.

Box 13 Specified private activity bond interest dividends

This is the portion of the Box 12 amount that is subject to the alternative minimum tax (AMT) reported on Form 6251.

Box 14-15 – State/Payer’s state no

This box indicates the state for which the income and tax details are being reported. It will also include the payer’s state identification number, which is an identifier assigned by the state’s revenue or taxation department.

Please see State Filing section for details.

Box 16 – State tax withheld

If the payer withheld any state income tax on behalf of the recipient, the amount is reported in this box.

Remember, not all boxes will be filled out on every 1099-DIV form. Only the relevant boxes for the specific payments made will have amounts or indicators.

E-File Form 1099-DIV Today

Back to Top

Can you correct a 1099-DIV?

Yes, you can correct a 1099-DIV. Please see the corrections and negations section for details.

E-File Form 1099-DIV Today

Back to Top