Form 1099-DIV: Dividends and Distributions (2023)
If you own stocks, mutual funds, or other investments that pay dividends, you'll likely receive Form 1099-DIV each tax season. This form reports the dividend income you earned during the year, and understanding it is crucial for accurately filing your tax return. This guide breaks down everything you need to know about Form 1099-DIV for tax year 2023 in plain language.
What Form 1099-DIV Is For
Form 1099-DIV is an information return that banks, brokerage firms, mutual fund companies, and other financial institutions use to report dividends and distributions paid to investors. Think of it as a receipt showing how much dividend income you received during the calendar year.
Financial institutions must issue you a Form 1099-DIV if you received at least $10 in dividends, capital gain distributions, or other distributions from your investments. They also use this form if they withheld any federal income tax under backup withholding rules or if you received $600 or more as part of a corporate liquidation.
You'll receive this form for various types of payments, including ordinary dividends from stocks, qualified dividends (which receive special tax treatment), capital gain distributions from mutual funds or real estate investment trusts (REITs), tax-exempt interest dividends from municipal bond funds, and nondividend distributions (which represent a return of your investment rather than earnings). The form also reports any foreign taxes paid on your behalf and certain specialized distributions like Section 199A dividends that may qualify for a special deduction.
It's important to understand that you don't file Form 1099-DIV directly with the IRS. Instead, your financial institution sends copies to both you and the IRS. You use the information from the form to complete your personal income tax return (Form 1040 or 1040-SR). The IRS matches the information you report against what financial institutions submitted, so accuracy is essential. IRS.gov
When You’d Use Form 1099-DIV
Normal Timeline
Financial institutions must send Form 1099-DIV to recipients by January 31, 2024 for the 2023 tax year. However, there's an important exception: if a mutual fund or REIT declared a dividend in October, November, or December 2023 but actually paid it in January 2024, it's still reported on your 2023 Form 1099-DIV even though you received the money in 2024.
Corrected Forms
Sometimes you'll receive a corrected Form 1099-DIV marked "CORRECTED" at the top. This happens when the original form contained errors—perhaps the dividend amount was wrong, qualified dividends were miscalculated, or your personal information was incorrect. If you receive a corrected form after you've already filed your tax return, you'll need to determine if the changes affect your tax liability. If they do, you should file an amended return using Form 1040-X.
What to Do If Your Form Is Wrong
If you believe your Form 1099-DIV contains errors, first contact the financial institution that issued it and request a correction. They should issue a corrected form to you and the IRS. If the issuer refuses to correct an error you're certain about, you should still file your tax return with the correct information and attach a statement explaining the discrepancy. Keep documentation supporting your position in case the IRS questions the difference. IRS.gov
Missing Forms
If you haven't received a Form 1099-DIV by mid-February and you know you earned dividend income, contact your financial institution first. If you still can't obtain it, contact the IRS for help. Regardless, you're legally required to report all dividend income on your tax return, even if you never receive the form.
Key Rules or Details for 2023
The $10 Reporting Threshold
Financial institutions must issue Form 1099-DIV if they paid you at least $10 in dividends or distributions during the year. However, even if you receive less than $10, you're still required to report that income on your tax return—you just won't receive a form.
The $1,500 Schedule B Requirement
This is a critical threshold. If your total taxable interest and ordinary dividends exceed $1,500 for the year, you must file Schedule B (Interest and Ordinary Dividends) along with your Form 1040. Schedule B provides detailed information about all sources of interest and dividend income. If your combined interest and dividends total $1,500 or less, you can report them directly on Form 1040 without filing Schedule B. IRS.gov
Qualified vs. Ordinary Dividends
One of the most important distinctions on Form 1099-DIV is between ordinary dividends (Box 1a) and qualified dividends (Box 1b). All dividends start as ordinary dividends, but some qualify for special tax treatment. Qualified dividends are taxed at the lower long-term capital gains rates (0%, 15%, or 20% depending on your income), while ordinary dividends that aren't qualified are taxed at your regular income tax rates (which can be as high as 37%).
For a dividend to be qualified, you must meet a holding period requirement: 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 ex-dividend date is the first date when a stock trades without the right to receive the declared dividend. The good news is that your financial institution calculates this for you and reports the qualified portion in Box 1b.
Electronic Filing Requirements
For those who must file Form 1099-DIV with the IRS (financial institutions, not individual taxpayers), the rules changed for 2023. The e-filing threshold dropped from 250 returns to just 10 returns. This means if an institution files 10 or more information returns of any type, they must file electronically.
Foreign Account Reporting
If you had dividend income from foreign investments or if your total foreign financial assets exceed certain thresholds, you may have additional reporting requirements beyond Form 1099-DIV, including reporting foreign accounts on Schedule B Part III or filing FinCEN Form 114 (FBAR). IRS.gov
Step-by-Step (High Level)
Step 1: Gather All Your Forms
Collect every Form 1099-DIV you receive from all financial institutions. If you have multiple investment accounts, you'll likely receive multiple forms. Don't start your tax return until you've received all expected forms, typically by early February.
Step 2: Understand the Key Boxes
Focus on these important boxes: Box 1a (Total Ordinary Dividends) shows all taxable dividend income; Box 1b (Qualified Dividends) shows the portion eligible for lower tax rates; Box 2a (Total Capital Gain Distributions) reports long-term capital gains from mutual funds; Box 3 (Nondividend Distributions) shows returns of capital that reduce your investment's cost basis; Box 4 (Federal Income Tax Withheld) shows any backup withholding; Box 5 (Section 199A Dividends) may qualify for a special 20% deduction; Box 12 (Exempt-Interest Dividends) reports tax-free municipal bond interest.
Step 3: Determine If You Need Schedule B
Add up all ordinary dividends from all Forms 1099-DIV (Box 1a amounts) and all taxable interest from Forms 1099-INT. If the total exceeds $1,500, you must complete Schedule B. You'll also need Schedule B if you had foreign accounts, even if your income is below $1,500.
Step 4: Report on Your Tax Return
On Form 1040 or 1040-SR, report the total ordinary dividends on Line 3b and the total qualified dividends on Line 3a. If you need Schedule B, attach it to your return showing the detailed breakdown of all dividend sources. Capital gain distributions from Box 2a are typically reported on Schedule D or directly on Form 1040 depending on your situation.
Step 5: Handle Special Situations
If Box 4 shows federal tax withheld, include this with your other tax payments on Form 1040. This reduces your tax due or increases your refund. If you have exempt-interest dividends (Box 12), report these on Line 2a of Form 1040—they're not taxable but must be disclosed. Section 199A dividends may qualify for a special deduction calculated using additional forms. IRS.gov
Step 6: Keep Your Forms
Retain all Forms 1099-DIV with your tax records for at least three years from the filing date. The IRS may request them if they have questions about your return.
Common Mistakes and How to Avoid Them
Mistake 1: Not Reporting All Dividend Income
Some taxpayers mistakenly believe they don't need to report dividend income if it's below the $10 threshold or if they didn't receive a form. This is wrong. All dividend income is taxable and must be reported, regardless of the amount or whether you received a form. Keep your own records of all dividend payments throughout the year.
Mistake 2: Confusing Box 1a and Box 1b
A frequent error is reporting only Box 1b (qualified dividends) on your tax return, ignoring Box 1a (total ordinary dividends). Remember: Box 1a includes Box 1b. You must report both amounts in their designated places on Form 1040—Box 1a on Line 3b and Box 1b on Line 3a. The qualified dividends receive preferential tax treatment, but all ordinary dividends must be reported.
Mistake 3: Missing the Schedule B Requirement
If your interest and dividends total more than $1,500, failing to file Schedule B can trigger IRS notices. Tax software usually catches this, but if you're filing paper returns, calculate your total carefully. Schedule B is also required if you had interest from seller-financed mortgages or foreign financial accounts, regardless of the dollar amount.
Mistake 4: Forgetting About Late-Arriving Forms
Some taxpayers file their returns in January or early February, then receive a corrected or late Form 1099-DIV afterward. To avoid this, wait until at least mid-February before filing, and check with all your financial institutions to confirm they've sent everything. If you do file early and receive a form later, you'll need to file an amended return.
Mistake 5: Incorrectly Handling Nondividend Distributions
Box 3 (Nondividend Distributions) isn't immediately taxable income—instead, it reduces your cost basis in the investment. Many taxpayers incorrectly add this to their income. These distributions only become taxable when your cost basis reaches zero or when you sell the investment. Track these amounts carefully for future tax years.
Mistake 6: Ignoring Backup Withholding
If Box 4 shows federal income tax withheld (backup withholding), you must claim this credit on your tax return or you'll overpay your taxes. This withholding typically occurs if you failed to provide a correct taxpayer identification number to the financial institution.
Mistake 7: Double-Counting Reinvested Dividends
If you automatically reinvest dividends to purchase more shares, these dividends are still taxable in the year paid and should appear on your Form 1099-DIV. Don't ignore them because you didn't receive cash. Also, increase your cost basis by the reinvested amount to avoid double taxation when you eventually sell the shares.
What Happens After You File
IRS Matching Process
The IRS uses an automated system to match the income you report against the Forms 1099-DIV that financial institutions filed. This matching usually occurs several months after the filing deadline. If the IRS finds a discrepancy—for example, you reported $2,000 in dividends but received Forms 1099-DIV totaling $2,500—you'll receive a notice, typically a CP2000 (Proposed Changes to Your Tax Return).
If You Receive an IRS Notice
Don't panic if you receive a CP2000 or similar notice. Review it carefully to understand what the IRS believes is missing or incorrect. Sometimes the IRS is right—you may have overlooked a form. Other times, you may have reported the income differently than expected, or the IRS made an error. You have the right to respond, usually within 30 days, providing documentation or explanation. If you agree with the IRS adjustment, follow the payment instructions. If you disagree, respond in writing with supporting documentation.
Amended Returns
If you discover after filing that you made an error with your dividend income, you should file Form 1040-X (Amended U.S. Individual Income Tax Return) to correct it. You generally have three years from the original filing deadline to file an amended return and claim a refund. When you receive a corrected Form 1099-DIV that changes your tax liability, filing an amended return protects you from penalties and interest.
State Tax Implications
Remember that Form 1099-DIV affects both your federal and state tax returns. Most states tax dividend income, though a few do not. Some states have different rules for qualified dividends or municipal bond interest. Check your state's requirements separately.
Future Record Keeping
Keep all Forms 1099-DIV along with your tax return records. These forms become especially important when you sell investments, as they help establish your cost basis and holding periods. If you received nondividend distributions (Box 3), tracking these over multiple years is essential for calculating your adjusted cost basis when you sell. IRS.gov
FAQs
1. Do I need to file a tax return if my only income is $150 in dividends?
It depends on your overall filing requirement. If your total income (including the $150 in dividends) exceeds the standard deduction for your filing status, you must file. For 2023, the standard deduction is $13,850 for single filers and $27,700 for married filing jointly. Even if you're not required to file, you should file if you had any federal income tax withheld (Box 4) to claim a refund.
2. What's the difference between qualified and ordinary dividends, and why does it matter?
All dividends reported in Box 1a are ordinary dividends. Qualified dividends (Box 1b) are a subset that meet specific requirements, primarily that you held the stock for more than 60 days around the dividend date. Qualified dividends are taxed at preferential capital gains rates (0%, 15%, or 20%), while non-qualified ordinary dividends are taxed at your regular income tax rate (up to 37%). This can result in significant tax savings for investors in higher tax brackets.
3. I received my Form 1099-DIV but the amounts seem wrong. What should I do?
Contact the issuing financial institution immediately and request a corrected form. Keep records of all dividend statements you received throughout the year to support your position. If they agree there's an error, they'll issue a corrected Form 1099-DIV marked "CORRECTED" to both you and the IRS. If you've already filed your return, you may need to file an amended return once you receive the corrected form.
4. Can I deduct investment expenses shown on Form 1099-DIV?
Starting with the 2018 tax year, miscellaneous itemized deductions subject to the 2% floor (including most investment expenses) are no longer deductible for individual taxpayers. However, the amount in Box 6 is already included in your ordinary dividend income in Box 1a, so it does increase your taxable income. This primarily affects investors in non-publicly offered mutual funds.
5. What are Section 199A dividends, and how do they affect my taxes?
Section 199A dividends (Box 5) are qualified REIT dividends and certain RIC dividends that may qualify for a special 20% deduction under the Tax Cuts and Jobs Act. If you have these dividends, you may be able to deduct up to 20% of them from your taxable income, subject to certain limitations based on your total income and filing status. This is calculated using Form 8995 or Form 8995-A.
6. Do I have to pay taxes on dividends that I automatically reinvest?
Yes. Dividends are taxable in the year they're paid, regardless of whether you receive them in cash or reinvest them to purchase additional shares. However, reinvested dividends increase your cost basis in the investment, which reduces your capital gain (or increases your capital loss) when you eventually sell the shares. Make sure to track reinvested dividends to avoid paying tax twice on the same income.
7. I received a corrected Form 1099-DIV after I already filed my tax return. What do I do?
Compare the corrected form to the original. If the changes affect your tax liability, you should file an amended return using Form 1040-X. If the changes are minor and don't affect your tax owed or refund (perhaps just a change in how dividends were categorized but the total remains the same), you may not need to amend. When in doubt, consult a tax professional. Remember, you have three years from the original filing deadline to file an amended return.
Additional Resources
For more detailed information, visit the official IRS resources:
- Instructions for Form 1099-DIV
- About Form 1099-DIV
- Topic No. 404, Dividends
- Schedule B Instructions
This guide provides general information about Form 1099-DIV for tax year 2023 based on IRS guidance. Tax situations vary, and this should not be considered tax advice. For specific questions about your situation, consult a qualified tax professional or contact the IRS directly.
