What Form 1099-DIV (2020) Is For
IRS Form 1099-DIV (2020) is used by financial institutions, mutual funds, credit unions, and regulated investment companies to report dividend income and other distributions paid during the 2020 tax year. It covers ordinary dividends, qualified dividends, capital gain distributions, foreign tax paid, and certain dividend payments tied to preferred stock or stock rights. The IRS receives the same information, which helps match dividends reported on your income tax return with amounts reported by the payer.
This form also tracks taxable dividend income, such as reinvested dividends, exempt interest dividends, undistributed capital gains, and other property distributions. Whether you receive dividends in cash or have them reinvested at fair market value, the amounts reported contribute to your taxable income. They may affect your federal income tax or available tax credits.
When You’d Use Form 1099-DIV
You use Form 1099-DIV when preparing your federal income tax return to report dividends paid to you, including total ordinary dividends, capital gains, and qualified dividend income. Taxpayers who receive dividends from mutual funds, S corporations, cooperative banks, or qualified foreign corporations must include these amounts even if their dividend payments were small. If your ordinary income from dividends exceeds $1,500, you are required to file Schedule B.
You also rely on the form if you receive a corrected copy, file late, or need to amend prior tax years. Situations involving foreign tax, taxable interest, interest dividends, or income from a foreign corporation or foreign trust may require additional forms. Using accurate amounts reported helps prevent future tax liability issues and ensures proper reporting of income.
Key Rules or Details for 2020
For the 2020 calendar year, financial institutions were required to issue IRS Form 1099-DIV by February 1, 2021, if the total of dividends and distributions exceeded $10. Even when no form was issued, taxpayers were still responsible for reporting all dividends received, including reinvested dividends, long-term capital gains, and capital gains distributions. Qualified dividends from qualified foreign corporations remained eligible for special tax treatment under the qualified dividend tax rate rules.
Box-level details were necessary for this tax year, including amounts reported for foreign tax, exempt interest dividends, the fair market value of property distributed, and special distributions to certain shareholders. Taxpayers using itemized deductions or claiming a foreign tax credit needed to review these entries closely. Proper reporting helps ensure accurate income tax calculations and prevents mismatches under the Internal Revenue Code.
For complete details on reporting, withholdings, and tax filings, see our guide for Information Returns & Reporting Forms.
Step-by-Step (High Level)
Step 1: Gather All Forms 1099-DIV
Wait until you receive all the expected forms. Most arrive in January, but some mutual funds and REITs issue them later in the year.
Step 2: Review for Accuracy
Check that your name, address, and Social Security Number are correct. Compare amounts to your brokerage statements to ensure accuracy.
Step 3: Add Your Ordinary and Qualified Dividends
Total Box 1a for ordinary dividends and Box 1b for qualified dividends. Report these amounts on Form 1040, Lines 3b and 3a.
Step 4: Report Capital Gain Distributions
If Box 2a shows capital gain distributions, report them on Schedule D or use the Schedule D Tax Worksheet.
Step 5: Determine Other Required Forms
Foreign tax, tax-exempt interest dividends, and state information may require additional forms such as Form 1116 or Schedule A.
Step 6: Keep the Forms for Your Records
Do not attach Form 1099-DIV to your return. Keep it with your tax documents for at least three years.
Common Mistakes and How to Avoid Them
- Not reporting dividends because no Form 1099-DIV was issued: Include dividend income under $10 by reviewing all brokerage statements and account summaries for complete reporting.
- Forgetting reinvested dividends: Report reinvested dividends as taxable income in the year earned and track them because they increase your cost basis.
- Reporting the same dividend income twice: Reconcile consolidated brokerage totals and remove duplicates when the same data appears in multiple summaries.
- Misclassifying ordinary and qualified dividends: Report Box 1a as total ordinary dividends and treat Box 1b as the qualified portion within Box 1a so the correct tax rates apply.
- Overlooking foreign tax paid in Box 7: Claim eligible foreign taxes as a credit or deduction to reduce your total federal income tax.
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 filing your tax return, the IRS compares dividends reported on your Form 1040 with amounts submitted by each financial institution. If dividends reported do not match total dividends from your 1099-DIV forms, you may receive a notice proposing changes to income, foreign tax credits, or capital gains. This matching process is standard because dividend payments are typically taxed at different rates depending on classification.
If you receive a corrected 1099-DIV after filing, you may need to amend your return depending on the size of the change and any impact on your tax liability. Changes related to ordinary dividend income, capital gain distributions, or qualified dividends can affect tax owed for the applicable tax year. Keeping copies of all forms, including your Social Security number details and record date statements, helps ensure accuracy for future tax years.
FAQs
What is IRS Form 1099-DIV (2020) used for?
IRS Form 1099-DIV (2020) reports dividend income, capital gain distributions, and other distributions paid by financial institutions, mutual funds, and regulated investment companies during the tax year. The amounts reported help determine taxable income and federal income tax owed on dividends received.
How are ordinary dividends and qualified dividends typically taxed?
Ordinary dividends are taxed as ordinary income, while qualified dividends may receive special tax treatment under the qualified dividend tax rate. Form 1099-DIV lists both amounts, enabling taxpayers to determine their tax liability based on the dividends reported and the fair market value of the distributed property.
When do capital gain distributions require filing additional forms?
Capital gain distributions, long-term capital gains, and undistributed capital gains may require filing Schedule D or Schedule B, depending on total dividends and interest income received. These entries on Form 1099-DIV help calculate taxable dividend income and ensure accurate reporting on an income tax return.
How does foreign tax reported on Form 1099-DIV affect a tax return?
Foreign tax paid to a foreign country and reported on Form 1099-DIV may qualify for a tax credit or itemized deductions. This applies when dividends paid by a foreign corporation or qualified foreign corporations are included in total dividends and may influence overall tax liability.
What should taxpayers check when reviewing dividends and distributions?
Taxpayers should review total ordinary dividends, capital gain distributions, exempt interest dividends, and certain dividend payments listed on Form 1099-DIV. Verifying the social security number, record date, and fair market value of other property distributed helps ensure accuracy when preparing an income tax return.
