Form 1099-DIV is used to report dividends and certain other distributions to investors/taxpayers. Dividends are distributions of property by a corporation to the shareholder or owner of the corporation out of the earnings or profits of the corporation. Dividends are typically paid in the form of cash but may be paid in other types of property. Certain dividends (that were paid out of the earnings or profits of the corporation and were subject to taxation by the corporation) can be classified as Qualified Dividends and taxed at lower capital gains tax rates. Dividends that are not classified as Ordinary Dividends are classified as Ordinary Dividends and are taxed as ordinary income and are subject to regular tax rates.
Each box of the Form 1099-DIV contains information that the taxpayer may need to complete their tax return.
Box 1a contains the Ordinary Dividends.Ordinary Dividends are reported on Form 1040, Line 3b. The portion of Ordinary Dividends that are considered to be Qualified Dividends are taxed at the lower capital gain rates. Any Ordinary Dividends that are not considered to be Qualified Dividends are taxed as ordinary income.
Box 1b contains the portion of Box 1a that are Qualified Dividends. Qualified Dividends are reported on Form 1040, Line 3a. Also reported in this box are dividends paid to a participant or beneficiary of an employee stock ownership plan (ESOP) which are reported as Qualified Dividends on Form 1040, but are not considered investment income for any other purposes.
Box 2a contains the Total Capital Gain Distributions from a regulated investment company (such as a publicly traded company) or a real estate investment trust (REIT). This amount is reported on Schedule D, Form 1040, if required (See the instructions for Form 1040, Schedule 1, Line 13 to determine when Schedule D is required: Instructions for Form 1040). Otherwise, the amount is reported directly on Schedule 1, Line 13. It may also include amounts that are also reported in Boxes 2b, 2c and 2d.
Box 2b contains the portion of box 2a that is the Unrecaptured Section 1250 Gain from certain depreciable real property. This is reported on the Unrecaptured Section 1250 Gain Worksheet.
Box 2c contains the portion of box 2a that is Section 1202 gain from certain small business stock. These amounts may be subject to an exclusion from income Total Capital Gain Distributions from a regulated investment (such as a publicly traded company) or a real estate investment trust (REIT).
Box 2d contains the 28% rate gain from sales or exchanges of collectibles.
Box 3 contains the Non-Dividend Distributions which represents any distribution to the investor/taxpayer from the underlying entity that is not made from the earnings of the entity but is a return of the cost or basis in the investment. Generally such a return of the cost/basis of an investment is not taxable and will reduce the basis in the investment. However, if the non-dividend distribution exceeds the cost basis of the investment, the excess would be treated as capital gain transaction. See Publication 550 – Investment Income and Expenses for additional instructions.
Box 4 contains the Federal Tax Withholdings including any backup withholdings that were withheld out of the interest paid on the investment.
Box 5 Shows dividends that are eligible for the 20% qualified business income deduction under section 199A (Tax Cuts and Jobs Act). See: Instructions for Form 1040
Box 6 contains information on the taxpayer’s share of any Investment Expenses. These expenses are generally from a non-publicly offered mutual fund. This amount is included in Box 1a.
Box 7 contains the Foreign Tax Paid out of the dividends on the investment. This amount may be used to determine if the taxpayer can claim either a foreign tax credit on Form 1116 or an itemized deduction on Schedule A (Form 1040).
Box 8 contains the country or U.S. possession that the foreign tax reported in Box 7 was paid.
Box 9 contains the Cash Liquidation Distributions which represents the cash the investor/taxpayer received upon liquidation of all or part of the underlying entity. Generally the cash distribution is considered a return of the cost or basis in the investment. If the total distributions exceeds the cost basis of the investment, the excess would be treated as capital gain transaction. See Publication 550 – Investment Income and Expensesfor additional reporting instructions.
Box 10 contains the Non-Cash Liquidation Distributions which represents the assets other than cash that the investor/taxpayer received upon liquidation of all or part of the underlying entity. Generally the distribution of these assets to an investor is considered a return of the cost or basis in the investment. Such distributions will reduce the basis in the investment, and if the total distribution exceeds the cost basis in the investment, the excess would be treated as capital gain transaction. See Publication 550 – Investment Income and Expenses for additional reporting instructions.
Box 11 contains the tax-exempt dividends paid. This amount is entered on Line 2a, Form 1040.
Box 12 contains the Specified Private Activity Bond Dividends. This amount is included in the Box 11 amount but will be subject to the Alternative Minimum Tax and be entered on Form 6251. See: Instructions for Form 6251.
Box 13 – 15 contains the State Withholding Information related to the bond or other debt investment.
To input the Form 1099-DIV, Box 1a through Box 15 amounts in Keystone Tax Solutions Pro, from the Main Menu of the Tax Return (Form 1040) select:
- Income Menu
- Select New
- Select 1099-DIV (Dividend and Distribution)
- Enter the Payer’s Name and any amounts from Boxes 1a, 1b, 2a and 11 and select ‘OK’
- Enter all remaining items on the 1099-DIV for the corresponding Boxes
NOTE: This is a guide on entering Form 1099-DIV into the Keystone Tax Solutions Pro program. This is not intended as tax advice. For additional information refer to the Additional Resources below.