Taxmap/pubs/p550-007.htm#TXMP04cf14e6
How To Report  
Dividend Income

1099 DIV   

See Form 1099-DIV for more information on how to report dividend income.

Taxmap/pubs/p550-007.htm#TXMP6e30a903 Form 1040A.

You must complete Schedule 1 (Form 1040A), Part II, and attach it to your Form 1040A, if:

1. Your ordinary dividends (Form 1099-DIV, box 1a) are more than $1,500, or
2. You received, as a nominee, dividends that actually belong to someone else.

List on line 5 each payer's name and the amount of ordinary dividends you received. If you received a Form 1099-DIV from a brokerage firm, list the brokerage firm as the payer.

Enter on line 6 the total of the amounts listed on line 5. (However, if you hold stock as a nominee, see Nominees, later.) Also enter this total on Form 1040A, line 9a.

Taxmap/pubs/p550-007.htm#TXMP1b9cefba Form 1040.

You must fill in Schedule B, Part II, and attach it to your Form 1040, if:

1. Your ordinary dividends (Form 1099-DIV, box 1a) are more than $1,500, or
2. You received, as a nominee, dividends that actually belong to someone else.

If your ordinary dividends are more than $1,500, you must also complete Schedule B, Part III.

List on Schedule B, Part II, line 5, each payer's name and the amount of ordinary dividends you received. If your securities are held by a brokerage firm (in "street name"), list the name of the brokerage firm that is shown on Form 1099-DIV as the payer. If your stock is held by a nominee who is the owner of record, and the nominee credited or paid you dividends on the stock, show the name of the nominee and the dividends you received or for which you were credited.

Enter on line 6 the total of the amounts listed on line 5. (However, if you hold stock as a nominee, see Nominees, later.) Also enter this total on Form 1040, line 9a.

Taxmap/pubs/p550-007.htm#TXMP03a786f1 Dividends received on restricted stock.

Restricted stock is stock that you get from your employer for services you perform and that is nontransferable and subject to a substantial risk of forfeiture. You do not have to include the value of the stock in your income when you receive it. However, if you get dividends on restricted stock, you must include them in your income as wages, not dividends. See Restricted Property in Publication 525 for information on restricted stock dividends.

Your employer should include these dividends in the wages shown on your Form W-2. If you also get a Form 1099-DIV for these dividends, list them on Schedule 1 (Form 1040A), line 5, or Schedule B (Form 1040), line 5, with the other dividends you received. Enter a subtotal of all your dividend income several lines above line 6. Below the subtotal, enter "Dividends on restricted stock reported as wages on Form 1040 (or Form 1040A), line 7," and enter the amount of the dividends included in your wages on line 7 of Form 1040 or Form 1040A. Subtract this amount from the subtotal and enter the result on line 6.

Taxmap/pubs/p550-007.htm#TXMP64102709 Election.

You can choose to include the value of restricted stock in gross income as pay for services. If you make this choice, report the dividends on the stock like any other dividends. List them on Part II, line 5, of Schedule 1 or Schedule B, along with your other dividends (if the amount of ordinary dividends received from all sources is more than $1,500). If you receive both a Form 1099-DIV and a Form W-2 showing these dividends, do not include the dividends in your wages reported on line 7 of Form 1040 or Form 1040A. Attach a statement to your Form 1040 or Form 1040A explaining why the amount shown on line 7 of your Form 1040 or Form 1040A is different from the amount shown on your Form W-2.

Taxmap/pubs/p550-007.htm#TXMP39e6898e Independent contractor.

If you received restricted stock for services as an independent contractor, the rules in the previous discussion apply. Generally, you must treat dividends you receive on the stock as income from self-employment.

Taxmap/pubs/p550-007.htm#TXMP32884b34 Qualified dividends.

Report qualified dividends (Form 1099-DIV, box 1b) on line 9b of Form 1040 or Form 1040A. Do not include any of the following on line 9b.

• Qualified dividends you received as a nominee. See Nominees later.
• Dividends on stock for which you did not meet the holding period. See Holding period, earlier under Qualified Dividends.
• Dividends on any share of stock to the extent that you are obligated (whether under a short sale or otherwise) to make related payments for positions in substantially similar or related property.
• Payments in lieu of dividends, but only if you know or have reason to know that the payments are not qualified dividends.
• Payments shown in Form 1099-DIV, box 1b, from a foreign corporation to the extent you know or have reason to know the payments are not qualified dividends.

If you have qualified dividends, you must figure your tax by completing the Qualified Dividends and Capital Gain Tax Worksheet in the Form 1040 or 1040A instructions or the Schedule D Tax Worksheet in the Schedule D instructions, whichever applies. Enter qualified dividends on line 2 of the worksheet.

Taxmap/pubs/p550-007.htm#TXMP6316f9ac Investment interest deducted.

If you claim a deduction for investment interest, you may have to reduce the amount of your qualified dividends that are eligible for the 5% or 15% tax rate. Reduce it by the amount of qualified dividends you choose to include in investment income when figuring the limit on your investment interest deduction. This is done on the Qualified Dividends and Capital Gain Tax Worksheet or the Schedule D Tax Worksheet. For more information about the limit on investment interest, see Interest Expenses in chapter 3.

Taxmap/pubs/p550-007.htm#TXMP3ab28184 Capital gain distributions.

How to report capital gain distributions depends on whether you have any other capital gains or losses. If you do, report total capital gain distributions (box 2a of Form 1099-DIV) on Schedule D (Form 1040), Part II, line 13. If you do not have any other capital gains or losses, you may be able to report your capital gain distributions directly on Form 1040, line 13, or Form 1040A, line 10. In either case, see Reporting Capital Gains and Losses in chapter 4 for more information.

The mutual fund or real estate investment trust (REIT) making the distribution should tell you how much of it is:

• Unrecaptured section 1250 gain (box 2b), or
• Section 1202 gain (box 2c).

For information about these terms, see Capital Gain Tax Rates in chapter 4.

Enter on line 11 of the Unrecaptured Section 1250 Gain Worksheet in the Schedule D instructions the part reported to you as unrecaptured section 1250 gain. If you have a gain on qualified small business stock (section 1202 gain), follow the reporting instructions under Section 1202 Exclusion in chapter 4.

Taxmap/pubs/p550-007.htm#TXMP2b54e05e Nondividend distributions.

Report nondividend distributions (box 3 of Form 1099-DIV) only after your basis in the stock has been reduced to zero. After the basis of your stock has been reduced to zero, you must show this amount on Schedule D, Part I, line 1, if you held the stock 1 year or less. Show it on Schedule D, Part II, line 8, if you held the stock for more than 1 year. Enter "Nondividend Distribution Exceeding Basis" in column (a) of Schedule D and the name of the company. Report your gain in column (f). Your gain is the amount of the distribution that is more than your basis in the stock.

Taxmap/pubs/p550-007.htm#TXMP55e88a5b Nominees.

If you received ordinary dividends as a nominee (that is, the dividends are in your name but actually belong to someone else), include them on line 5 of Schedule 1 (Form 1040A) or Schedule B (Form 1040). Several lines above line 6, put a subtotal of all dividend income listed on line 5. Below this subtotal, enter "Nominee Distribution" and show the amount received as a nominee. Subtract the total of your nominee distributions from the subtotal. Enter the result on line 6.

Taxmap/pubs/p550-007.htm#TXMP217a4c47 File Form 1099-DIV with the IRS.

If you received dividends as a nominee in 2004, you must file a Form 1099-DIV for those dividends with the IRS. Send the Form 1099-DIV with a Form 1096, Annual Summary and Transmittal of U.S. Information Returns, to your Internal Revenue Service Center by February 28, 2005. Give the actual owner of the dividends Copy B of the Form 1099-DIV by January 31, 2005. On Form 1099-DIV, you should be listed as the "Payer." The other owner should be listed as the "Recipient." You do not, however, have to file a Form 1099-DIV to show payments for your spouse. For more information about the reporting requirements and the penalties for failure to file (or furnish) certain information returns, see the General Instructions for Forms 1099, 1098, 5498, and W-2G.

Taxmap/pubs/p550-007.htm#TXMP4732ec2a Liquidating distributions.

If you receive a liquidating distribution on stock, the corporation will give you a Form 1099-DIV showing the amount of the liquidating distribution in boxes 8 and 9.

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