Form 1099-DIV: Dividends and Distributions (2014) — Your Complete Guide to Understanding Dividend Income Reporting

What Form 1099-DIV Is For

Form 1099-DIV is the tax document that reports dividend payments and certain distributions you received during the year from stocks, mutual funds, and other investments. Think of it as a receipt from banks, brokers, and investment companies showing how much investment income you earned.

When you own stock in a company or shares in a mutual fund, you may receive dividend payments—essentially your share of the company's profits. The organization paying these dividends (the "payer") must tell both you and the IRS about these payments using Form 1099-DIV if you received $10 or more in dividends during the year.

The form reports several types of investment income: ordinary dividends (the most common type), qualified dividends (which may get favorable tax rates), capital gain distributions from mutual funds, and nondividend distributions (which represent a return of your original investment). It may also show foreign taxes paid on your behalf and any federal tax withheld from your payments.

You'll use the information on Form 1099-DIV to complete your personal tax return—specifically, you'll report these amounts on Form 1040 or 1040A, and on Schedule B if your dividends exceed certain thresholds.

When You’d Use Form 1099-DIV

Filing Late or Amended Returns

Standard Timeline: For 2014 dividends, you should have received your Form 1099-DIV by February 2, 2015. You then use it to file your 2014 tax return, which was due April 15, 2015.

If You're Filing Late: If you missed the original deadline and haven't filed your 2014 return yet, you still need to report all dividend income shown on your 1099-DIV forms. File your return as soon as possible to minimize penalties and interest. The IRS already has a copy of your 1099-DIV, so omitting this income will trigger notices and potential audits.

Amended Returns: You would file an amended return using Form 1040X if you discover errors after filing your original 2014 return. Common scenarios include:

Receiving a corrected 1099-DIV showing different amounts than originally reported
Discovering you forgot to include a 1099-DIV from an account you overlooked
Realizing you reported dividends incorrectly (such as treating qualified dividends as ordinary income)
Finding that you claimed foreign tax credits improperly

Generally, you have three years from the original filing deadline to file an amended return and claim a refund, though special circumstances can extend this timeframe.

Corrected Forms: If you receive a "CORRECTED" 1099-DIV after filing your return, carefully compare it to the original. If the changes affect your tax liability, file Form 1040X to amend your return. Even small changes in qualified dividend amounts can impact your tax bill due to different tax rates.

Key Rules or Details for 2014

Reporting Thresholds

Payers must issue Form 1099-DIV if they paid you $10 or more in dividends or other distributions, $600 or more as part of a liquidation, or if they withheld any federal income tax under backup withholding rules—even if your dividends were less than $10.

Qualified vs. Ordinary Dividends

This distinction matters significantly for your tax bill. Ordinary dividends are taxed at your regular income tax rate (up to 39.6% in 2014), while qualified dividends receive preferential rates—0%, 15%, or 20% depending on your income level. For dividends to be "qualified," you must have held the stock for more than 60 days during the 121-day period beginning 60 days before the ex-dividend date. The good news: the payer determines this for you and reports it in Box 1b.

Special 2014 Qualified Small Business Stock Rules

For qualified small business stock acquired between September 27, 2010, and December 31, 2013, a 100% exclusion may apply to capital gains. This is an exceptionally generous provision, but strict requirements apply regarding holding periods and the nature of the business. If you have section 1202 gain, it appears in Box 2c.

Nondividend Distributions

Amounts in Box 3 are not taxable immediately—they represent a return of your original investment. However, you must reduce your "cost basis" (what you paid for the stock) by this amount. When you eventually sell the stock, you'll calculate your gain or loss using this reduced basis, potentially increasing your taxable gain.

Foreign Tax Considerations

If your dividends came from foreign investments and foreign taxes were withheld (shown in Box 6), you can either claim these as a tax credit or deduct them as an itemized deduction. The credit usually provides greater tax savings, but requires filing Form 1116 if the foreign taxes exceed certain limits.

December-Declared, January-Paid Dividends

A special rule applies to mutual funds (RICs) and real estate investment trusts (REITs). If they declare a dividend in October, November, or December, but pay it in January, it's treated as if received and paid on December 31 of the prior year. This means a dividend received in January 2015 might be reportable on your 2014 return if it was declared in late 2014.

Step-by-Step (High Level)

Step 1: Gather All Your 1099-DIV Forms

Wait until mid-February to ensure you've received all forms. Check every brokerage account, bank account, and investment you held during 2014. Don't forget small accounts—even $10 in dividends triggers a 1099-DIV.

Step 2: Verify the Information

Check that your name, Social Security number, and account numbers are correct. Ensure the amounts look reasonable compared to what you expected. If something seems wrong, contact the payer immediately.

Step 3: Organize the Information

Create a simple list or spreadsheet with columns for each payer and the key boxes: Box 1a (total ordinary dividends), Box 1b (qualified dividends), Box 2a (capital gain distributions), and Box 4 (federal tax withheld). This organization prevents errors when transferring information to your tax return.

Step 4: Report on Your Tax Return

Transfer Box 1a amounts to line 9a of Form 1040 (or Form 1040A). Transfer Box 1b amounts to line 9b. If your total ordinary dividends exceed $1,500, you must also complete Schedule B. Capital gain distributions from Box 2a generally go on Schedule D, line 13, though simple situations may allow direct entry on Form 1040, line 13.

Step 5: Handle Special Situations

If Box 4 shows federal income tax withheld, include this on your return's withholding line—it's money the IRS already collected from you. If Box 6 shows foreign taxes paid, decide whether to take the credit (typically on Form 1116) or deduct them on Schedule A. If Box 3 shows nondividend distributions, adjust your investment records to reduce your cost basis.

Step 6: Keep Records

Retain all 1099-DIV forms for at least three years after filing. If you receive nondividend distributions, keep those forms until you sell the investment, plus three more years, since they affect your cost basis calculation.

Common Mistakes and How to Avoid Them

Mistake #1: Overlooking Small Accounts

Many taxpayers forget about old brokerage accounts or small dividend-paying accounts. The IRS receives copies of all 1099-DIV forms and will notice missing income. Solution: Review last year's return to identify all potential sources, and check old statements or contact prior financial institutions.

Mistake #2: Confusing Box 1a and Box 1b

Box 1a shows your total ordinary dividends, while Box 1b shows the portion eligible for lower tax rates. Some taxpayers mistakenly add both amounts together, doubling their dividend income. Solution: Box 1b is already included in Box 1a—it's a subset, not an additional amount. Report Box 1a on line 9a and Box 1b on line 9b; don't add them together.

Mistake #3: Ignoring Nondividend Distributions

The amount in Box 3 isn't immediately taxable, so people assume they can ignore it. But failing to reduce your cost basis means you'll overpay taxes when you sell the investment. Solution: Maintain a "cost basis worksheet" for each investment showing your original cost minus any nondividend distributions. Your 2014 1099-DIV instructions show this reduces what you paid for the stock.

Mistake #4: Mishandling Corrected Forms

You file your return in March using the original 1099-DIV, then receive a corrected version in May showing different amounts. Some taxpayers file a second return rather than an amended return. Solution: Use Form 1040X (Amended U.S. Individual Income Tax Return) to correct errors. Don't file a second Form 1040, as this confuses IRS processing.

Mistake #5: Not Reporting Foreign Taxes Properly

Box 6 shows foreign taxes paid, but many taxpayers either ignore this or incorrectly claim the credit. Solution: Understand you have two options—take it as an itemized deduction (Schedule A) or as a tax credit (Form 1116 if over the threshold). The credit usually saves more, but requires additional calculations. IRS Publication 514 provides detailed guidance.

Mistake #6: Forgetting About Reinvested Dividends

Just because you automatically reinvest dividends to buy more shares doesn't mean they're not taxable. The IRS treats reinvested dividends the same as cash dividends. Solution: Report all dividends shown in Box 1a, whether you received cash or reinvested them. Also remember: reinvested dividends increase your cost basis in the investment.

Mistake #7: Missing the Schedule B Requirement

If your total interest and ordinary dividends exceed $1,500, you must file Schedule B listing each payer. Many taxpayers skip this, creating processing delays. Solution: When your Box 1a amounts total over $1,500, complete Schedule B showing each payer's name and amount, even though it seems redundant.

What Happens After You File

Immediate Processing

Once you file your 2014 return including your 1099-DIV information, the IRS processes it through their system. They compare the amounts you reported against the 1099-DIV forms they received from your payers. This matching process is largely automated.

If Everything Matches

Your return processes normally. You'll receive your refund if one is due (typically within 21 days for e-filed returns), or your payment will be applied to your tax liability. No further action is needed regarding your dividends.

If There's a Discrepancy

The IRS may send you a CP2000 notice—"Proposed Changes to Your Tax Return." This isn't technically an audit, but rather a notice that their records don't match yours. You'll have an opportunity to respond, either agreeing with their changes or explaining why your return was correct. Common triggers include:

You forgot to include a 1099-DIV entirely
You transposed numbers when entering amounts
You received a corrected 1099-DIV after filing but didn't file an amended return
The payer sent a form to the IRS but you never received it

Investment Tracking

Your reported dividends become part of your permanent tax record. This matters especially for nondividend distributions, which affect your cost basis. When you eventually sell investments, the IRS will verify your gain/loss calculations against historical records.

State Tax Returns

Most states with income tax also require reporting of dividend income. Your 1099-DIV includes state reporting boxes (12-14) if state income tax was withheld. You'll need to report your dividends on your state return as well, following your state's specific rules about which dividends are taxable.

Future Year Planning

Your 2014 dividend history helps plan for future years. If you received substantial qualified dividends, you might adjust your withholding or estimated tax payments for 2015. If you had significant capital gain distributions, you might discuss tax-loss harvesting strategies with your advisor.

Audit Possibilities

While dividend income alone rarely triggers an audit, significant changes from prior years or large amounts relative to your income might warrant IRS review. Having your 1099-DIV forms and related documentation ready is crucial if selected for examination.

FAQs

Q1: I received my 1099-DIV but the amounts seem wrong. What should I do?

Contact the payer (broker, bank, or investment company) immediately using the phone number shown on the form. They can explain how they calculated the amounts and issue a corrected form if there was an error. Don't file your tax return until you resolve the discrepancy, as using incorrect information leads to IRS notices and potential penalties. Keep records of your communications with the payer.

Q2: I didn't receive a 1099-DIV for an account I know paid dividends. Am I still required to report it?

Yes, absolutely. You must report all dividend income whether or not you received a 1099-DIV. Check your investment statements for December 2014 to confirm dividend amounts. Contact the payer to request a duplicate form. If you can't obtain one before the filing deadline, use your own records to report the income. The IRS expects you to report all income regardless of whether you received the proper forms.

Q3: What's the difference between qualified and ordinary dividends, and why does it matter?

All dividends start as ordinary dividends (Box 1a). Qualified dividends (Box 1b) are a subset that meet specific requirements—primarily coming from U.S. corporations or qualified foreign corporations, and meeting holding period requirements. The distinction is crucial because qualified dividends are taxed at capital gains rates (0%, 15%, or 20% depending on your income), while non-qualified ordinary dividends are taxed at your regular income tax rate (up to 39.6% in 2014). This can save thousands in taxes for investors in higher tax brackets.

Q4: I sold all my shares in February 2014 but received a 1099-DIV in January 2015. Do I still need to report it?

Yes. The 1099-DIV reports dividends paid during the calendar year 2014, regardless of when you sold the stock. Even if you only owned the shares for part of 2014, any dividends paid while you held them are reportable on your 2014 return. The sale of the shares is a separate transaction reported on Form 1099-B and Schedule D.

Q5: My 1099-DIV shows foreign tax paid in Box 6. How do I handle this?

You have two options: take a tax credit or an itemized deduction. The foreign tax credit (typically more beneficial) directly reduces your U.S. tax liability dollar-for-dollar. For foreign taxes under $300 ($600 for married filing jointly) from qualified sources, you can claim it directly on Form 1040 without filing Form 1116. For amounts exceeding these thresholds, you'll need to complete Form 1116, which is more complex. Alternatively, you can claim foreign taxes as an itemized deduction on Schedule A, though this usually provides less benefit. IRS Publication 514 provides comprehensive guidance.

Q6: What does "nondividend distribution" in Box 3 mean, and what do I do with it?

Nondividend distributions represent a return of your original investment capital—essentially getting back money you already paid taxes on when you earned it. This amount is not immediately taxable. However, you must reduce your "cost basis" (what you paid for the investment) by this amount. Keep detailed records because when you sell the investment, your capital gain will be larger (or loss smaller) due to this reduced basis. For example, if you paid $1,000 for stock and received $100 in nondividend distributions, your basis is now $900. When you sell, your gain is calculated from this $900 figure.

Q7: I received multiple 1099-DIV forms from the same broker. How do I report them?

This commonly happens when you have multiple types of accounts at one firm (individual account, IRA, joint account) or invested in multiple funds. Each form represents dividends from a specific account or investment. Report each 1099-DIV separately—don't combine them unless they're truly duplicate copies of the same information. If your total ordinary dividends exceed $1,500, you'll list each payer separately on Schedule B. Some tax software allows you to enter them individually and will total them appropriately. Keep all forms with your tax records as each represents distinct income sources.

Sources

2014 Instructions for Form 1099-DIV - IRS.gov
Form 1099-DIV 2014 - IRS.gov
2014 General Instructions for Certain Information Returns - IRS.gov

This guide provides general information based on 2014 tax rules. Tax laws change frequently, and individual circumstances vary. Consult a qualified tax professional for advice specific to your situation.

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