Dividends are distributions of property by a corporation to a shareholder or owner of the corporation out of the earnings or profits of the corporation. Dividends are typically paid in the form of cash but may also be paid in other types of property. Form 1099-DIV is used to report dividends and certain other distributions to the shareholder.
Certain dividends are classified as qualified dividends and are taxed at lower capital gains tax rates. Otherwise, dividends that are not classified as qualified dividends are classified as ordinary dividends and are taxed as ordinary income.
Each box of the Form 1099-DIV contains information that the taxpayer may need to complete their tax return.
Box 1a Total ordinary dividends - This amount represents the total ordinary dividends that are taxable.
Box 1b Qualified dividends - This amount represents the portion of the amount in Box 1a that may be eligible for the reduced capital gains tax rates. Also reported in this box are dividends paid to a participant or beneficiary of an employee stock ownership plan (ESOP) which are reported as qualified dividends on Form 1040 but are not considered investment income for any other purposes.
Box 2a Total capital gain distributions - These are distributions from a regulated investment company (RIC) or a real estate investment trust (REIT). This amount is reported on Schedule D (Form 1040) and it includes the amounts that are also reported in Boxes 2b, 2c, and 2d.
Box 2b Unrecaptured Section 1250 gain - This amount is the portion of Box 2a that is a gain from certain depreciable real property. This is reported on the Unrecaptured Section 1250 Gain Worksheet.
Box 2c Section 1202 gain - This amount is the portion of Box 2a that is Section 1202 gain from certain small business stock. These amounts may be subject to an exclusion from total capital gain distributions from a RIC or REIT.
Box 2d Collectibles (28%) gain - This amount is the portion of Box 2a that is the 28% rate gain from sales or exchanges of collectibles. If required, it is reported on the 28% Rate Gain Worksheet.
Note: Both Box 2e and Box 2f were added to the form in 2021 and apply only to foreign persons or entities for which the character of the income does not change when passed through or distributed to its foreign owners or beneficiaries. Such income is generally treated as effectively connected income. These boxes should not be completed for a US citizen, but if they have been they can be ignored. A foreign person may have had taxes withheld on this income reported on Form 1042-S.
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 Nondividend distributions - This amount is a return of the cost or basis in the investment rather than a distribution made from the earnings of the investment. Generally such a return of the cost/basis of an investment is not taxable but reduces the basis in the investment. However, if the nondividend distribution exceeds the basis in the investment, the excess is treated as a capital gain transaction. See Publication 550 - Investment Income and Expenses for additional instructions.
Box 4 Federal income tax withheld - This is the tax withheld ("backup withholding") out of the interest paid on the investment. It is reported on Form 1040 as federal tax withheld.
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 - This is the portion of the amount in Box 1a that is the taxpayer's share of investment expenses. These expenses are generally related to a non-publicly offered mutual fund.
Box 7 Foreign Tax Paid - This amount was paid out of the dividends on the investment and can be used to claim either a foreign tax credit on Form 1116 or an itemized deduction on Schedule A (Form 1040).
Box 8 Foreign country or U.S. possession - The country or U.S. possession that the foreign tax reported in Box 7 was paid, but it will be blank for a RIC.
Box 9 Cash liquidation distributions - This amount is the cash the investor/taxpayer received upon liquidation of all or part of the underlying entity. Generally the cash distribution is considered a return of the cost or basis in the investment. If the total distributions exceeds the cost basis of the investment, the excess is treated as capital gain transaction. See Publication 550 - Investment Income and Expenses for additional reporting instructions.
Box 10 Noncash liquidation distributions - This amount is the assets other than cash that the investor/taxpayer received upon liquidation of all or part of the underlying entity. Generally the distribution of these assets to an investor is considered a return of the cost or basis in the investment. Such distributions will reduce the basis in the investment, and if the total distribution exceeds the cost basis in the investment, the excess is treated as capital gain transaction. See Publication 550 - Investment Income and Expenses for additional reporting instructions.
Box 11 FATCA filing requirement - If checked, the payer issued this 1099-DIV to satisfy its reporting requirement under IRC chapter 4. (You may wish to check to see if the taxpayer has a similar reporting requirement. See here for more information.)
Box 12 Exempt-interest dividends - This is the amount of exempt-interest dividends from a mutual fund or other RIC.
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. See the Form 6251 instructions here.
Box 14 - 16 contain information related to state tax withholding.
To enter Form 1099-DIV in TaxSlayer Pro, from the Main Menu of the tax return (Form 1040) select:
- Interest or Dividends (Sch B, 8815) - Select New, then Form 1099-DIV.
- Enter the Payer's Name and any amounts from Boxes 1a, 1b, 2a and 11, then select OK
- Enter all remaining items on the 1099-DIV for the corresponding Boxes
Note: This is a guide on entering Form 1099-DIV into the TaxSlayer Pro program. This is not intended as tax advice.