Form 1099-DIV: Dividends and Distributions (2013 Tax Year)

Understanding Form 1099-DIV doesn't have to be complicated. This guide breaks down everything you need to know about reporting dividend income for the 2013 tax year, using information directly from the IRS.

What Form 1099-DIV Is For

Form 1099-DIV is an official tax document that banks, brokerage firms, mutual funds, and other financial institutions use to report dividend income and certain distributions to both you and the Internal Revenue Service. Think of it as a receipt showing how much investment income you received during the 2013 calendar year.

You'll receive a Form 1099-DIV if you earned $10 or more in dividends, capital gain distributions, or tax-exempt interest dividends from stocks or mutual funds. If you received $600 or more as part of a corporate liquidation, you'll also get this form. The document reports several types of investment income including ordinary dividends (the regular payments companies make to shareholders), qualified dividends (which may qualify for lower tax rates), capital gain distributions from mutual funds or real estate investment trusts, and nondividend distributions (which represent a return of your original investment). IRS Form 1099-DIV 2013

The form doesn't apply to every situation. You won't receive a 1099-DIV for dividend-like payments from credit unions or savings banks—those are actually interest and get reported on Form 1099-INT instead. Life insurance dividend distributions and employee stock ownership plan distributions also use different forms.

When You’d Use Form 1099-DIV

Standard Filing Timeline

Financial institutions must mail your Form 1099-DIV by January 31, 2014 (for the 2013 tax year). You'll use the information on this form when preparing your 2013 federal income tax return, which is due April 15, 2014. You don't actually send the form to the IRS with your tax return—you keep it for your records—but you must report the amounts shown on it.

Late or Missing Forms

If you haven't received your 1099-DIV by mid-February, first contact the financial institution that paid you the dividends. They're required to provide it. If they can't help or won't respond, you should still report all dividend income you received, even without the form. You can call the IRS at 800-829-1040 for assistance if the issue isn't resolved by the end of February.

Corrected Forms

Sometimes financial institutions discover errors and send corrected versions marked "CORRECTED" at the top. When you receive a corrected 1099-DIV, use only the corrected version when filing your taxes. If you've already filed your return using incorrect information, you may need to file Form 1040X (Amended U.S. Individual Income Tax Return) to correct your tax return. IRS Instructions 2013

Special Dividend Timing Rule

There's an interesting quirk for mutual funds and real estate investment trusts. If they declare a dividend in October, November, or December 2013 but don't actually pay it until January 2014, it's still reported as 2013 income. This means your 2013 Form 1099-DIV might include dividends you won't actually receive until early 2014.

Key Rules or Details for 2013

The $10 Threshold

Financial institutions only had to issue a 1099-DIV if your total ordinary dividends, capital gain distributions, or exempt-interest dividends reached $10 or more. For liquidation distributions, the threshold was $600. Even if you don't receive a form because you fell below these amounts, you're still legally required to report all dividend income on your tax return.

Qualified Dividends Matter

The distinction between ordinary dividends and qualified dividends is crucial because qualified dividends enjoy lower tax rates. For 2013, qualified dividends from U.S. corporations and certain foreign corporations held for more than 60 days during a 121-day period around the dividend payment date qualified for capital gains tax rates rather than ordinary income rates. Your Form 1099-DIV shows qualified dividends separately in Box 1b.

Foreign Tax Complications

If you owned foreign stocks or international mutual funds, any foreign taxes withheld on your dividends appear in Box 6. You may be able to claim these as either a tax deduction or a tax credit on your U.S. return, potentially reducing your overall tax bill.

Backup Withholding

If you failed to provide your Social Security number or taxpayer identification number to the financial institution, or if the IRS notified them that you underreported interest or dividend income, they may have withheld 28% of your dividends for backup withholding. This amount shows in Box 4 and counts as tax you've already paid.

Nominee Situations

If dividends were paid to your account but actually belong to someone else (for example, if you held stock in a custodial account for your child), you become a "nominee." In this case, you must file a Form 1099-DIV to report the other person's share of the income, along with Form 1096 as a transmittal.

Step-by-Step (High Level)

Step 1: Receive and Review

Wait for all your Forms 1099-DIV to arrive by early February. Check each form carefully for accuracy—verify your Social Security number, name spelling, and that the amounts seem reasonable based on your investment activity.

Step 2: Organize Your Forms

Keep all your 1099-DIV forms together. If you have multiple investment accounts, you may receive several forms from different institutions. Create a simple list or spreadsheet totaling the amounts from each box across all forms.

Step 3: Report on Your Tax Return

When preparing your Form 1040 or 1040A, report total ordinary dividends from Box 1a on line 9a. Report qualified dividends from Box 1b on line 9b. If you received capital gain distributions (Box 2a), report these on Schedule D or directly on Form 1040 line 13 if you meet certain conditions. Exempt-interest dividends from Box 10 go on line 8b as tax-exempt interest.

Step 4: Claim Foreign Tax Credits if Applicable

If Box 6 shows foreign tax paid, you can either claim it as a deduction (easier) or as a credit (potentially more beneficial). For amounts under $300 ($600 if married filing jointly), you can claim the credit directly on Form 1040 without filing Form 1116.

Step 5: Attach Required Schedules

If your dividends exceed $1,500 or you have specific types of distributions, you'll need to complete Schedule B (Interest and Ordinary Dividends). Capital gain distributions may require Schedule D.

Step 6: Keep Documentation

Store your 1099-DIV forms with your tax return records for at least three years. The IRS recommends keeping them longer if they show reinvested dividends that affect your cost basis for future sales.

Common Mistakes and How to Avoid Them

Mistake #1: Not Reporting Small Amounts

Many taxpayers wrongly assume that if they didn't receive a 1099-DIV, they don't need to report the income. The law requires you to report all dividend income regardless of the amount. Even $5 in dividends must be reported.

How to Avoid It: Review all your investment account statements for the year. Many institutions include dividend summaries in year-end statements even if the amounts didn't trigger a 1099-DIV.

Mistake #2: Confusing Total and Qualified Dividends

Box 1a shows total ordinary dividends, while Box 1b shows the subset that qualifies for lower rates. Some taxpayers mistakenly add these together, effectively counting qualified dividends twice.

How to Avoid It: Remember that Box 1b is already included in Box 1a. Report Box 1a on line 9a and Box 1b on line 9b—don't add them together. Your taxable income only includes the Box 1a amount once.

Mistake #3: Overlooking Nondividend Distributions

Box 3 shows nondividend distributions, which represent a return of your original investment. These aren't immediately taxable, but they reduce your cost basis in the stock. Many taxpayers ignore this box entirely.

How to Avoid It: Track nondividend distributions carefully. Reduce your stock's cost basis by the amount shown in Box 3. This will matter when you eventually sell the stock and calculate your capital gain or loss.

Mistake #4: Forgetting About Reinvested Dividends

If you automatically reinvest dividends to buy more shares, you might think you don't have to report them since you didn't receive cash. Wrong—reinvested dividends are fully taxable in the year paid.

How to Avoid It: All reinvested dividends appear on your 1099-DIV just like cash dividends. Report them the same way. The positive side: reinvested dividends increase your cost basis in the stock, reducing your eventual capital gain when you sell.

Mistake #5: Mishandling Corrected Forms

When financial institutions send corrected 1099-DIVs, some taxpayers file using the original form, while others try to report both versions, creating double-counting.

How to Avoid It: If you receive a corrected form before filing your return, use only the corrected version and discard the original. If you've already filed, determine whether the correction changes your tax liability significantly enough to warrant filing an amended return.

Mistake #6: Incorrect Social Security Numbers

Transposed digits in your SSN can cause the IRS computers to flag your return for backup withholding or delay your refund.

How to Avoid It: Always verify that the SSN on every 1099-DIV matches your Social Security card exactly. If you find an error, contact the issuer immediately to get a corrected form.

What Happens After You File

Once you've filed your tax return including your Form 1099-DIV information, several things occur behind the scenes:

IRS Matching Process

The IRS receives copies of every Form 1099-DIV issued by financial institutions. Their computers match these against the amounts you reported on your tax return. This matching typically happens many months after you file—sometimes up to a year or more later.

If the IRS finds a discrepancy—you reported less than what appears on the 1099-DIVs they received—you'll get a notice (typically CP2000) proposing additional tax, interest, and possibly penalties. You'll have an opportunity to respond, either agreeing to the change or explaining why your return was correct (for example, if you had a legitimate basis adjustment).

Refund or Payment Processing

If your return shows a refund, including proper reporting of 1099-DIV income helps ensure smooth processing. Returns with missing or incorrect investment income are more likely to face delayed refunds due to additional review.

State Tax Implications

Most states with income taxes also receive copies of your federal 1099-DIV information or require you to report it separately. Your state return will typically mirror your federal reporting of dividend income, though some states offer special treatment for certain dividends.

Future Recordkeeping

The dividend information on your 2013 Form 1099-DIV may affect your taxes for years to come. If you reinvested dividends, track this information carefully—it increases your cost basis and reduces your taxable gain when you eventually sell. If you received nondividend distributions, you've reduced your basis and need to remember this for future sales.

Audit Considerations

While including Form 1099-DIV income on your return doesn't increase audit risk, failing to report it significantly increases your audit chances. The IRS computer systems are very effective at catching unreported 1099 income.

FAQs

Q1: I received my 1099-DIV in late January, but it shows dividends "paid" in January 2014. Should I report this on my 2013 or 2014 tax return?

If the form is labeled "2013," report it on your 2013 return regardless of when you actually received the money. Mutual funds and REITs sometimes declare dividends in late 2013 but don't pay them until January 2014. Tax law treats these as 2013 income if declared in October, November, or December of 2013, even though you didn't receive the cash until 2014.

Q2: My brokerage account shows more dividend income than what appears on my 1099-DIV. What should I report?

Always report what's on the official 1099-DIV form(s) you receive. If you believe there's an error, contact your broker immediately to request a corrected form. Your account statements may include preliminary or estimated amounts, but only the official 1099-DIV counts for tax reporting. The financial institution sends the IRS a copy of the same form they send you, so discrepancies will trigger IRS notices.

Q3: Can I deduct investment-related expenses against my dividend income?

For 2013, investment expenses like advisory fees, safe deposit box fees, and investment publication subscriptions were deductible as miscellaneous itemized deductions on Schedule A, subject to a 2% of adjusted gross income floor. However, you cannot directly offset them against dividend income—they're claimed separately. Box 5 on Form 1099-DIV shows your share of expenses from certain non-publicly traded mutual funds, which you can deduct this way.

Q4: I sold some stock during 2013. Does the Form 1099-DIV include information about that sale?

No. Form 1099-DIV only reports dividends and distributions received while you owned the investment. Stock sales are reported on Form 1099-B (Proceeds from Broker and Barter Exchange Transactions), which is a completely different form. You'll report 1099-DIV information in the income section of your return and 1099-B information on Schedule D for capital gains and losses.

Q5: What if I never received a Form 1099-DIV but I know I earned dividends in 2013?

You must still report all dividend income even without a 1099-DIV. Contact the financial institution first to request the form. If they can't provide it, use your account statements or year-end summaries to determine the correct amount and report it on your return. The IRS may not have received a copy either if the payer failed to file, so keep excellent documentation of your income source in case of future questions.

Q6: My Form 1099-DIV shows backup withholding in Box 4. Why did this happen and what do I do?

Backup withholding at 28% occurs when you didn't provide your Social Security number to the payer, the IRS notified them that your SSN was incorrect, or the IRS told them you underreported interest or dividend income previously. The withheld amount is treated as federal income tax you've already paid. Report it on line 62 of Form 1040 (or the equivalent line on Form 1040A) along with any other withholding from W-2s. To stop future backup withholding, verify your SSN is correct with all financial institutions and resolve any IRS notices about underreported income.

Q7: Are the dividends from my money market fund reported on Form 1099-DIV or 1099-INT?

It depends on the type of money market fund. Money market mutual funds report dividends on Form 1099-DIV (Box 1a). Money market deposit accounts at banks report interest on Form 1099-INT. Check which form you received—the issuer determines the proper classification based on how the account is legally structured.

Sources

2013 Form 1099-DIV
2013 Instructions for Form 1099-DIV
2013 General Instructions for Certain Information Returns

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