What Form 1099-DIV (2010) Is For
IRS Form 1099-DIV (2010) reports dividend income, capital gain distributions, and other investment income received from financial institutions, mutual funds, and regulated investment companies. The form helps taxpayers and the Internal Revenue Service track ordinary dividends, qualified dividends, and capital gain dividends that contribute to taxable income. Each financial institution must issue this form to individuals who received dividends paid or had federal income tax withheld during the tax year.
The form also reports foreign taxes paid, exempt interest and dividend distributions, and non-dividend distributions from investments such as money market funds and mutual funds. All amounts reported on Form 1099-DIV must be included on the taxpayer’s federal tax return as part of their recipient’s gross income.
When You’d Use Form 1099-DIV
Form 1099-DIV is used by investors who received dividends paid directly from corporations, mutual funds, or other financial institutions during the 2010 tax year. Recipients should file Form 1099-DIV information with their annual tax return to ensure that all ordinary income and capital gains are accurately reported. If multiple accounts exist, more than one form may be issued to report total ordinary dividends and total capital gain distributions.
Payers must send Form 1099-DIV to recipients by January 31, 2011, and file Form 1099-DIV with the IRS by February 28, 2011, for paper filing or March 31, 2011, for electronic filing. If errors occur, corrected forms must be issued. If backup withholding rules apply, the payer must report the withheld federal income tax on the same form as the one used for the original return.
Key Rules or Details for 2010
The 2010 tax year introduced several provisions under the Internal Revenue Code that affected how taxpayers reported dividends and distributions. Qualified dividends from domestic corporations or qualified foreign corporations were taxed at reduced capital gains rates of up to 15 percent for most taxpayers. Regulated investment companies and mutual funds reporting qualified REIT dividends paid were required to follow specific holding period rules around the ex-dividend date to determine eligibility for preferential rates.
Backup withholding rules required financial institutions to withhold 28 percent of dividend payments when the taxpayer identification number or Social Security number was missing or incorrect. The qualified small business stock exclusion was increased to 75 percent for eligible sales during this tax year. Additional reporting applied to noncash liquidation distributions, private activity bonds, and specific depreciable real property. These details ensured compliance with Internal Revenue Service filing requirements and accurate reporting of investment income.
For complete details on reporting, withholdings, and tax filings, see our guide for Information Returns & Reporting Forms.
Step-by-Step (High Level)
For Recipients
Taxpayers receiving Form 1099-DIV should take the following steps to ensure accurate filing:
- Review all personal details on the form, including the name, address, and Social Security number.
- Confirm the accuracy of the total ordinary dividends and qualified dividends listed in Boxes 1a and 1b.
- Report the amounts on the tax return:
- Total ordinary dividends on Form 1040, Line 9a
- Qualified dividends on Line 9b
- Capital gain distributions on Schedule D or directly on Form 1040, Line 13
- Total ordinary dividends on Form 1040, Line 9a
- Report foreign tax in Box 6 as a deduction or a credit.
- If state income tax withheld is shown, include the amount on the state tax return.
- Attach Schedule B if total dividends exceed $1,500.
For Payers
Financial institutions and other payers must:
- Prepare a Form 1099-DIV for each person who received $10 or more in dividends or had any amount of federal income tax withheld.
- Verify the recipient’s name and taxpayer identification number.
- Complete Form 1096 when filing paper returns and submit it by the deadline.
- Issue copies to recipients by January 31, 2011, and to the IRS by the appropriate deadline.
- File electronically if submitting 250 or more forms.
- Retain records for at least three years in case of further notices or corrections.
Common Mistakes and How to Avoid Them
- Reporting all dividends as ordinary income: Always separate qualified dividends, which are taxed at lower rates, from ordinary dividends. Review holding period and eligibility rules before filing.
- Ignoring corrected forms: If a corrected Form 1099-DIV is received after filing, amend the return to ensure consistency with IRS records and avoid notices.
- Reporting dividends from credit unions or savings accounts: These should be reported on Form 1099-INT, not Form 1099-DIV. Confirm the correct form before entering amounts.
- Using incorrect taxpayer identification numbers: Verify SSNs or TINs with the IRS TIN Matching Program to prevent mismatches and backup withholding.
- Forgetting nondividend distributions: Track nondividend distributions carefully—they reduce the cost basis of your investment and affect capital gains reporting later.
- Misclassifying dividends from foreign or domestic corporations: Only qualified foreign corporations and domestic corporations are eligible for reduced tax rates. Review the issuer’s status before reporting.
By separating dividend types, verifying all details, and promptly updating corrected forms, taxpayers can ensure accurate reporting and avoid costly errors.
Learn more about how to avoid business tax problems in our guide on How to File and Avoid Penalties.
What Happens After You File
After a taxpayer includes all amounts reported on Form 1099-DIV in their tax return, the Internal Revenue Service verifies that the reported information matches what financial institutions and other payers submitted. If total ordinary dividends, capital gain distributions, or foreign tax amounts differ, the IRS may issue further notices or adjustments to correct discrepancies.
Recipients should retain copies of all tax returns, 1099-DIV forms, and related documents for a minimum of three years. Payers must maintain filing records for the same period. Any federal or state income tax withheld must be appropriately documented. For detailed instructions, taxpayers can refer to the official IRS website and review the Instructions for Form 1099-DIV (2010) for guidance on filing corrections and understanding FATCA filing.
FAQs
What is IRS Form 1099-DIV (2010) used for?
IRS Form 1099-DIV (2010) is issued by financial institutions, mutual funds, and other financial entities to report dividend income, capital gains distributions, and other investment income that contribute to taxable income and must be reported on a federal tax return.
Do I need to report small amounts of dividend income?
Yes, all dividends paid, including ordinary dividends, qualified dividends, and nondividend distributions, must be reported on the tax return even if the amount is small. The Internal Revenue Service requires reporting to ensure all taxable income is recorded.
How are qualified dividends and capital gain distributions taxed?
Qualified dividends and capital gain distributions are taxed at reduced capital gains rates, rather than ordinary income rates. To qualify, the stock or mutual fund must meet the required holding period, as specified under Internal Revenue Code rules, based on the ex-dividend date.
What should I do if federal income tax or state income tax was withheld?
If federal income tax withheld or state income tax withheld appears on Form 1099-DIV, include those amounts when filing your tax return. These withholdings reduce your total tax owed and must match what the Internal Revenue Service records show.
How do I report foreign tax or exempt interest dividends?
Foreign tax and exempt interest dividends reported on Form 1099-DIV can be claimed as a deduction or credit on your tax return. Taxpayers should use Schedule B to report dividends paid directly by foreign corporations or other financial institutions accurately.
