Dividends are distributions of money, stock, or other property a corporation pays to you because you own stock in that corporation. You also may receive dividends through a partnership, an estate, a trust, or an association that is taxed as a corporation. Most distributions are paid in cash. An individual may also receive distributions such as additional stock, stock rights, or other property or services.

You should receive a Form 1099-DIV, Dividends and Distributions, from each payer for distributions of $10.00 or more. However, you must report all taxable dividends even if you do not receive a statement.

The 1099 dividends statement shows your ordinary dividends nontaxable distributions, and capital gain distributions.

Ordinary dividends are the most common type of distribution from a corporation. They are paid out of the earnings and profits of the corporation. All ordinary dividends are fully taxable.

Nontaxable distributions can be made in the form of a return of capital or a tax-free distribution of additional shares of stock or stock rights. A return of capital is a return of some or all of your investment in the stock of the company. For information on Basis of Assets see Topic 703. A return of capital reduces the basis of your stock and is not taxed until your basis in the stock is fully recovered. Once the basis of your stock has been reduced to zero, any further return of capital is a capital gain.

Capital gain distributions are paid by mutual funds and certain investment companies. Capital gain distributions are always reported as long-term capital gains. You must also report any undistributed capital gain that an investment company or mutual fund credited to you that is reported on Form 2439.

If your ordinary dividends are $400.00 or less, report them directly on line 9 of Form 1040 or Form 1040A. If your ordinary dividends are over $400, report them on Schedule B of Form 1040 or Schedule 1 of Form 1040A. If you receive capital gain distributions, you may be able to report them directly on line 10 of Form 1040A or line 13 of Form 1040. You must use the 1040 form line 13. See the 1040 instructions for more information on how to report capital gain distributions.

The 1099-DIV statement should break down the distribution into the various categories. If it does not, you should contact the payer.

You must give your correct social security number to the payer of your dividend income. If you do not, you may be subject to a penalty and to back-up withholding. See Topic 307 for more information on back-up withholding.

When receiving dividends, you may have to pay estimated tax. See Topic 355 for information on estimated tax.

Additional information on dividend income can be found in Publication 550, Investment Income and Expenses, Publication 564, Mutual Fund Distributions, Publication 17, Your Federal Income Tax, and Frequently Asked Tax Questions, Types of Income. Publications and forms may be downloaded from this site or ordered by calling 1-800-829-3676.

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