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Firstgov gov 8. Firstgov gov   Dividends and Other Distributions Table of Contents Reminder Introduction Useful Items - You may want to see: General InformationDividends not reported on Form 1099-DIV. Firstgov gov Reporting tax withheld. Firstgov gov Nominees. Firstgov gov Ordinary DividendsQualified Dividends Dividends Used to Buy More Stock Money Market Funds Capital Gain DistributionsBasis adjustment. Firstgov gov Nondividend DistributionsLiquidating Distributions Distributions of Stock and Stock Rights Other DistributionsInformation reporting requirement. Firstgov gov Alternative minimum tax treatment. Firstgov gov How To Report Dividend IncomeInvestment interest deducted. Firstgov gov Reminder Foreign-source income. Firstgov gov  If you are a U. Firstgov gov S. Firstgov gov citizen with dividend income from sources outside the United States (foreign-source income), you must report that income on your tax return unless it is exempt by U. Firstgov gov S. Firstgov gov law. Firstgov gov This is true whether you reside inside or outside the United States and whether or not you receive a Form 1099 from the foreign payer. Firstgov gov Introduction This chapter discusses the tax treatment of: Ordinary dividends, Capital gain distributions, Nondividend distributions, and Other distributions you may receive from a corporation or a mutual fund. Firstgov gov This chapter also explains how to report dividend income on your tax return. Firstgov gov Dividends are distributions of money, stock, or other property paid to you by a corporation or by a mutual fund. Firstgov gov You also may receive dividends through a partnership, an estate, a trust, or an association that is taxed as a corporation. Firstgov gov However, some amounts you receive that are called dividends are actually interest income. Firstgov gov (See Dividends that are actually interest under Taxable Interest in chapter 7. Firstgov gov ) Most distributions are paid in cash (or check). Firstgov gov However, distributions can consist of more stock, stock rights, other property, or services. Firstgov gov Useful Items - You may want to see: Publication 514 Foreign Tax Credit for Individuals 550 Investment Income and Expenses Form (and Instructions) Schedule B (Form 1040A or 1040) Interest and Ordinary Dividends General Information This section discusses general rules for dividend income. Firstgov gov Tax on unearned income of certain children. Firstgov gov   Part of a child's 2013 unearned income may be taxed at the parent's tax rate. Firstgov gov If it is, Form 8615, Tax for Certain Children Who Have Unearned Income, must be completed and attached to the child's tax return. Firstgov gov If not, Form 8615 is not required and the child's income is taxed at his or her own tax rate. Firstgov gov    Some parents can choose to include the child's interest and dividends on the parent's return if certain requirements are met. Firstgov gov Use Form 8814, Parents' Election To Report Child's Interest and Dividends, for this purpose. Firstgov gov   For more information about the tax on unearned income of children and the parents' election, see chapter 31. Firstgov gov Beneficiary of an estate or trust. Firstgov gov    Dividends and other distributions you receive as a beneficiary of an estate or trust are generally taxable income. Firstgov gov You should receive a Schedule K-1 (Form 1041), Beneficiary's Share of Income, Deductions, Credits, etc. Firstgov gov , from the fiduciary. Firstgov gov Your copy of Schedule K-1 (Form 1041) and its instructions will tell you where to report the income on your Form 1040. Firstgov gov Social security number (SSN) or individual taxpayer identification number (ITIN). Firstgov gov    You must give your SSN or ITIN to any person required by federal tax law to make a return, statement, or other document that relates to you. Firstgov gov This includes payers of dividends. Firstgov gov If you do not give your SSN or ITIN to the payer of dividends, you may have to pay a penalty. Firstgov gov For more information on SSNs and ITINs, see Social Security Number (SSN) in chapter 1. Firstgov gov Backup withholding. Firstgov gov   Your dividend income is generally not subject to regular withholding. Firstgov gov However, it may be subject to backup withholding to ensure that income tax is collected on the income. Firstgov gov Under backup withholding, the payer of dividends must withhold, as income tax, on the amount you are paid, applying the appropriate withholding rate. Firstgov gov   Backup withholding may also be required if the IRS has determined that you underreported your interest or dividend income. Firstgov gov For more information, see Backup Withholding in chapter 4. Firstgov gov Stock certificate in two or more names. Firstgov gov   If two or more persons hold stock as joint tenants, tenants by the entirety, or tenants in common, each person's share of any dividends from the stock is determined by local law. Firstgov gov Form 1099-DIV. Firstgov gov   Most corporations and mutual funds use Form 1099-DIV, Dividends and Distributions, to show you the distributions you received from them during the year. Firstgov gov Keep this form with your records. Firstgov gov You do not have to attach it to your tax return. Firstgov gov Dividends not reported on Form 1099-DIV. Firstgov gov   Even if you do not receive Form 1099-DIV, you must still report all your taxable dividend income. Firstgov gov For example, you may receive distributive shares of dividends from partnerships or S corporations. Firstgov gov These dividends are reported to you on Schedule K-1 (Form 1065), Partner's Share of Income, Deductions, Credits, etc. Firstgov gov , and Schedule K-1 (Form 1120S), Shareholder's Share of Income, Deductions, Credits, etc. Firstgov gov Reporting tax withheld. Firstgov gov   If tax is withheld from your dividend income, the payer must give you a Form 1099-DIV that indicates the amount withheld. Firstgov gov Nominees. Firstgov gov   If someone receives distributions as a nominee for you, that person should give you a Form 1099-DIV, which will show distributions received on your behalf. Firstgov gov Form 1099-MISC. Firstgov gov   Certain substitute payments in lieu of dividends or tax-exempt interest received by a broker on your behalf must be reported to you on Form 1099-MISC, Miscellaneous Income, or a similar statement. Firstgov gov See Reporting Substitute Payments under Short Sales in chapter 4 of Publication 550 for more information about reporting these payments. Firstgov gov Incorrect amount shown on a Form 1099. Firstgov gov   If you receive a Form 1099 that shows an incorrect amount (or other incorrect information), you should ask the issuer for a corrected form. Firstgov gov The new Form 1099 you receive will be marked “Corrected. Firstgov gov ” Dividends on stock sold. Firstgov gov   If stock is sold, exchanged, or otherwise disposed of after a dividend is declared but before it is paid, the owner of record (usually the payee shown on the dividend check) must include the dividend in income. Firstgov gov Dividends received in January. Firstgov gov   If a mutual fund (or other regulated investment company) or real estate investment trust (REIT) declares a dividend (including any exempt-interest dividend or capital gain distribution) in October, November, or December, payable to shareholders of record on a date in one of those months but actually pays the dividend during January of the next calendar year, you are considered to have received the dividend on December 31. Firstgov gov You report the dividend in the year it was declared. Firstgov gov Ordinary Dividends Ordinary (taxable) dividends are the most common type of distribution from a corporation or a mutual fund. Firstgov gov They are paid out of earnings and profits and are ordinary income to you. Firstgov gov This means they are not capital gains. Firstgov gov You can assume that any dividend you receive on common or preferred stock is an ordinary dividend unless the paying corporation or mutual fund tells you otherwise. Firstgov gov Ordinary dividends will be shown in box 1a of the Form 1099-DIV you receive. Firstgov gov Qualified Dividends Qualified dividends are the ordinary dividends subject to the same 0%, 15%, or 20% maximum tax rate that applies to net capital gain. Firstgov gov They should be shown in box 1b of the Form 1099-DIV you receive. Firstgov gov The maximum rate of tax on qualified dividends is: 0% on any amount that otherwise would be taxed at a 10% or 15% rate. Firstgov gov 15% on any amount that otherwise would be taxed at rates greater than 15% but less than 39. Firstgov gov 6%. Firstgov gov 20% on any amount that otherwise would be taxed at a 39. Firstgov gov 6% rate. Firstgov gov To qualify for the maximum rate, all of the following requirements must be met. Firstgov gov The dividends must have been paid by a U. Firstgov gov S. Firstgov gov corporation or a qualified foreign corporation. Firstgov gov (See Qualified foreign corporation , later. Firstgov gov ) The dividends are not of the type listed later under Dividends that are not qualified dividends . Firstgov gov You meet the holding period (discussed next). Firstgov gov Holding period. Firstgov gov   You must have held the stock for more than 60 days during the 121-day period that begins 60 days before the ex-dividend date. Firstgov gov The ex-dividend date is the first date following the declaration of a dividend on which the buyer of a stock is not entitled to receive the next dividend payment. Firstgov gov Instead, the seller will get the dividend. Firstgov gov   When counting the number of days you held the stock, include the day you disposed of the stock, but not the day you acquired it. Firstgov gov See the examples later. Firstgov gov Exception for preferred stock. Firstgov gov   In the case of preferred stock, you must have held the stock more than 90 days during the 181-day period that begins 90 days before the ex-dividend date if the dividends are due to periods totaling more than 366 days. Firstgov gov If the preferred dividends are due to periods totaling less than 367 days, the holding period in the previous paragraph applies. Firstgov gov Example 1. Firstgov gov You bought 5,000 shares of XYZ Corp. Firstgov gov common stock on July 9, 2013. Firstgov gov XYZ Corp. Firstgov gov paid a cash dividend of 10 cents per share. Firstgov gov The ex-dividend date was July 16, 2013. Firstgov gov Your Form 1099-DIV from XYZ Corp. Firstgov gov shows $500 in box 1a (ordinary dividends) and in box 1b (qualified dividends). Firstgov gov However, you sold the 5,000 shares on August 12, 2013. Firstgov gov You held your shares of XYZ Corp. Firstgov gov for only 34 days of the 121-day period (from July 10, 2013, through August 12, 2013). Firstgov gov The 121-day period began on May 17, 2013 (60 days before the ex-dividend date), and ended on September 14, 2013. Firstgov gov You have no qualified dividends from XYZ Corp. Firstgov gov because you held the XYZ stock for less than 61 days. Firstgov gov Example 2. Firstgov gov Assume the same facts as in Example 1 except that you bought the stock on July 15, 2013 (the day before the ex-dividend date), and you sold the stock on September 16, 2013. Firstgov gov You held the stock for 63 days (from July 16, 2013, through September 16, 2013). Firstgov gov The $500 of qualified dividends shown in box 1b of your Form 1099-DIV are all qualified dividends because you held the stock for 61 days of the 121-day period (from July 16, 2013, through September 14, 2013). Firstgov gov Example 3. Firstgov gov You bought 10,000 shares of ABC Mutual Fund common stock on July 9, 2013. Firstgov gov ABC Mutual Fund paid a cash dividend of 10 cents a share. Firstgov gov The ex-dividend date was July 16, 2013. Firstgov gov The ABC Mutual Fund advises you that the portion of the dividend eligible to be treated as qualified dividends equals 2 cents per share. Firstgov gov Your Form 1099-DIV from ABC Mutual Fund shows total ordinary dividends of $1,000 and qualified dividends of $200. Firstgov gov However, you sold the 10,000 shares on August 12, 2013. Firstgov gov You have no qualified dividends from ABC Mutual Fund because you held the ABC Mutual Fund stock for less than 61 days. Firstgov gov Holding period reduced where risk of loss is diminished. Firstgov gov   When determining whether you met the minimum holding period discussed earlier, you cannot count any day during which you meet any of the following conditions. Firstgov gov You had an option to sell, were under a contractual obligation to sell, or had made (and not closed) a short sale of substantially identical stock or securities. Firstgov gov You were grantor (writer) of an option to buy substantially identical stock or securities. Firstgov gov Your risk of loss is diminished by holding one or more other positions in substantially similar or related property. Firstgov gov   For information about how to apply condition (3), see Regulations section 1. Firstgov gov 246-5. Firstgov gov Qualified foreign corporation. Firstgov gov   A foreign corporation is a qualified foreign corporation if it meets any of the following conditions. Firstgov gov The corporation is incorporated in a U. Firstgov gov S. Firstgov gov possession. Firstgov gov The corporation is eligible for the benefits of a comprehensive income tax treaty with the United States that the Treasury Department determines is satisfactory for this purpose and that includes an exchange of information program. Firstgov gov For a list of those treaties, see Table 8-1. Firstgov gov The corporation does not meet (1) or (2) above, but the stock for which the dividend is paid is readily tradable on an established securities market in the United States. Firstgov gov See Readily tradable stock , later. Firstgov gov Exception. Firstgov gov   A corporation is not a qualified foreign corporation if it is a passive foreign investment company during its tax year in which the dividends are paid or during its previous tax year. Firstgov gov Readily tradable stock. Firstgov gov   Any stock (such as common, ordinary, or preferred) or an American depositary receipt in respect of that stock is considered to satisfy requirement (3) under Qualified foreign corporation , if it is listed on a national securities exchange that is registered under section 6 of the Securities Exchange Act of 1934 or on the Nasdaq Stock Market. Firstgov gov For a list of the exchanges that meet these requirements, see www. Firstgov gov sec. Firstgov gov gov/divisions/marketreg/mrexchanges. Firstgov gov shtml. Firstgov gov Dividends that are not qualified dividends. Firstgov gov   The following dividends are not qualified dividends. Firstgov gov They are not qualified dividends even if they are shown in box 1b of Form 1099-DIV. Firstgov gov Capital gain distributions. Firstgov gov Dividends paid on deposits with mutual savings banks, cooperative banks, credit unions, U. Firstgov gov S. Firstgov gov building and loan associations, U. Firstgov gov S. Firstgov gov savings and loan associations, federal savings and loan associations, and similar financial institutions. Firstgov gov (Report these amounts as interest income. Firstgov gov ) Dividends from a corporation that is a tax-exempt organization or farmer's cooperative during the corporation's tax year in which the dividends were paid or during the corporation's previous tax year. Firstgov gov Dividends paid by a corporation on employer securities held on the date of record by an employee stock ownership plan (ESOP) maintained by that corporation. Firstgov gov Dividends on any share of stock to the extent you are obligated (whether under a short sale or otherwise) to make related payments for positions in substantially similar or related property. Firstgov gov Payments in lieu of dividends, but only if you know or have reason to know the payments are not qualified dividends. Firstgov gov 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. Firstgov gov Table 8-1. Firstgov gov Income Tax Treaties Income tax treaties the United States has with the following countries satisfy requirement (2) under Qualified foreign corporation. Firstgov gov Australia Indonesia Romania Austria Ireland Russian Bangladesh Israel Federation Barbados Italy Slovak Belgium Jamaica Republic Bulgaria Japan Slovenia Canada Kazakhstan South Africa China Korea Spain Cyprus Latvia Sri Lanka Czech Lithuania Sweden Republic Luxembourg Switzerland Denmark Malta Thailand Egypt Mexico Trinidad and Estonia Morocco Tobago Finland Netherlands Tunisia France New Zealand Turkey Germany Norway Ukraine Greece Pakistan United Hungary Philippines Kingdom Iceland Poland Venezuela India Portugal     Dividends Used to Buy More Stock The corporation in which you own stock may have a dividend reinvestment plan. Firstgov gov This plan lets you choose to use your dividends to buy (through an agent) more shares of stock in the corporation instead of receiving the dividends in cash. Firstgov gov Most mutual funds also permit shareholders to automatically reinvest distributions in more shares in the fund, instead of receiving cash. Firstgov gov If you use your dividends to buy more stock at a price equal to its fair market value, you still must report the dividends as income. Firstgov gov If you are a member of a dividend reinvestment plan that lets you buy more stock at a price less than its fair market value, you must report as dividend income the fair market value of the additional stock on the dividend payment date. Firstgov gov You also must report as dividend income any service charge subtracted from your cash dividends before the dividends are used to buy the additional stock. Firstgov gov But you may be able to deduct the service charge. Firstgov gov See chapter 28 for more information about deducting expenses of producing income. Firstgov gov In some dividend reinvestment plans, you can invest more cash to buy shares of stock at a price less than fair market value. Firstgov gov If you choose to do this, you must report as dividend income the difference between the cash you invest and the fair market value of the stock you buy. Firstgov gov When figuring this amount, use the fair market value of the stock on the dividend payment date. Firstgov gov Money Market Funds Report amounts you receive from money market funds as dividend income. Firstgov gov Money market funds are a type of mutual fund and should not be confused with bank money market accounts that pay interest. Firstgov gov Capital Gain Distributions Capital gain distributions (also called capital gain dividends) are paid to you or credited to your account by mutual funds (or other regulated investment companies) and real estate investment trusts (REITs). Firstgov gov They will be shown in box 2a of the Form 1099-DIV you receive from the mutual fund or REIT. Firstgov gov Report capital gain distributions as long-term capital gains, regardless of how long you owned your shares in the mutual fund or REIT. Firstgov gov Undistributed capital gains of mutual funds and REITs. Firstgov gov    Some mutual funds and REITs keep their long-term capital gains and pay tax on them. Firstgov gov You must treat your share of these gains as distributions, even though you did not actually receive them. Firstgov gov However, they are not included on Form 1099-DIV. Firstgov gov Instead, they are reported to you in box 1a of Form 2439. Firstgov gov   Report undistributed capital gains (box 1a of Form 2439) as long-term capital gains on Schedule D (Form 1040), column (h), line 11. Firstgov gov   The tax paid on these gains by the mutual fund or REIT is shown in box 2 of Form 2439. Firstgov gov You take credit for this tax by including it on Form 1040, line 71, and checking box a on that line. Firstgov gov Attach Copy B of Form 2439 to your return, and keep Copy C for your records. Firstgov gov Basis adjustment. Firstgov gov   Increase your basis in your mutual fund, or your interest in a REIT, by the difference between the gain you report and the credit you claim for the tax paid. Firstgov gov Additional information. Firstgov gov   For more information on the treatment of distributions from mutual funds, see Publication 550. Firstgov gov Nondividend Distributions A nondividend distribution is a distribution that is not paid out of the earnings and profits of a corporation or a mutual fund. Firstgov gov You should receive a Form 1099-DIV or other statement showing the nondividend distribution. Firstgov gov On Form 1099-DIV, a nondividend distribution will be shown in box 3. Firstgov gov If you do not receive such a statement, you report the distribution as an ordinary dividend. Firstgov gov Basis adjustment. Firstgov gov   A nondividend distribution reduces the basis of your stock. Firstgov gov It is not taxed until your basis in the stock is fully recovered. Firstgov gov This nontaxable portion is also called a return of capital; it is a return of your investment in the stock of the company. Firstgov gov If you buy stock in a corporation in different lots at different times, and you cannot definitely identify the shares subject to the nondividend distribution, reduce the basis of your earliest purchases first. Firstgov gov   When the basis of your stock has been reduced to zero, report any additional nondividend distribution you receive as a capital gain. Firstgov gov Whether you report it as a long-term or short-term capital gain depends on how long you have held the stock. Firstgov gov See Holding Period in chapter 14. Firstgov gov Example. Firstgov gov You bought stock in 2000 for $100. Firstgov gov In 2003, you received a nondividend distribution of $80. Firstgov gov You did not include this amount in your income, but you reduced the basis of your stock to $20. Firstgov gov You received a nondividend distribution of $30 in 2013. Firstgov gov The first $20 of this amount reduced your basis to zero. Firstgov gov You report the other $10 as a long-term capital gain for 2013. Firstgov gov You must report as a long-term capital gain any nondividend distribution you receive on this stock in later years. Firstgov gov Liquidating Distributions Liquidating distributions, sometimes called liquidating dividends, are distributions you receive during a partial or complete liquidation of a corporation. Firstgov gov These distributions are, at least in part, one form of a return of capital. Firstgov gov They may be paid in one or more installments. Firstgov gov You will receive Form 1099-DIV from the corporation showing you the amount of the liquidating distribution in box 8 or 9. Firstgov gov For more information on liquidating distributions, see chapter 1 of Publication 550. Firstgov gov Distributions of Stock and Stock Rights Distributions by a corporation of its own stock are commonly known as stock dividends. Firstgov gov Stock rights (also known as “stock options”) are distributions by a corporation of rights to acquire the corporation's stock. Firstgov gov Generally, stock dividends and stock rights are not taxable to you, and you do not report them on your return. Firstgov gov Taxable stock dividends and stock rights. Firstgov gov   Distributions of stock dividends and stock rights are taxable to you if any of the following apply. Firstgov gov You or any other shareholder have the choice to receive cash or other property instead of stock or stock rights. Firstgov gov The distribution gives cash or other property to some shareholders and an increase in the percentage interest in the corporation's assets or earnings and profits to other shareholders. Firstgov gov The distribution is in convertible preferred stock and has the same result as in (2). Firstgov gov The distribution gives preferred stock to some common stock shareholders and common stock to other common stock shareholders. Firstgov gov The distribution is on preferred stock. Firstgov gov (The distribution, however, is not taxable if it is an increase in the conversion ratio of convertible preferred stock made solely to take into account a stock dividend, stock split, or similar event that would otherwise result in reducing the conversion right. Firstgov gov )   The term “stock” includes rights to acquire stock, and the term “shareholder” includes a holder of rights or of convertible securities. Firstgov gov If you receive taxable stock dividends or stock rights, include their fair market value at the time of distribution in your income. Firstgov gov Preferred stock redeemable at a premium. Firstgov gov   If you hold preferred stock having a redemption price higher than its issue price, the difference (the redemption premium) generally is taxable as a constructive distribution of additional stock on the preferred stock. Firstgov gov For more information, see chapter 1 of Publication 550. Firstgov gov Basis. Firstgov gov   Your basis in stock or stock rights received in a taxable distribution is their fair market value when distributed. Firstgov gov If you receive stock or stock rights that are not taxable to you, see Stocks and Bonds under Basis of Investment Property in chapter 4 of Publication 550 for information on how to figure their basis. Firstgov gov Fractional shares. Firstgov gov    You may not own enough stock in a corporation to receive a full share of stock if the corporation declares a stock dividend. Firstgov gov However, with the approval of the shareholders, the corporation may set up a plan in which fractional shares are not issued but instead are sold, and the cash proceeds are given to the shareholders. Firstgov gov Any cash you receive for fractional shares under such a plan is treated as an amount realized on the sale of the fractional shares. Firstgov gov Report this transaction on Form 8949, Sales and Other Dispositions of Capital Assets. Firstgov gov Enter your gain or loss, the difference between the cash you receive and the basis of the fractional shares sold, in column (h) of Schedule D (Form 1040) in Part I or Part II, whichever is appropriate. Firstgov gov    Report these transactions on Form 8949 with the correct box checked. Firstgov gov   For more information on Form 8949 and Schedule D (Form 1040), see chapter 4 of Publication 550. Firstgov gov Also see the Instructions for Form 8949 and the Instructions for Schedule D (Form 1040). Firstgov gov Example. Firstgov gov You own one share of common stock that you bought on January 3, 2004, for $100. Firstgov gov The corporation declared a common stock dividend of 5% on June 29, 2013. Firstgov gov The fair market value of the stock at the time the stock dividend was declared was $200. Firstgov gov You were paid $10 for the fractional-share stock dividend under a plan described in the discussion above. Firstgov gov You figure your gain or loss as follows: Fair market value of old stock $200. Firstgov gov 00 Fair market value of stock dividend (cash received) +10. Firstgov gov 00 Fair market value of old stock and stock dividend $210. Firstgov gov 00 Basis (cost) of old stock after the stock dividend (($200 ÷ $210) × $100) $95. Firstgov gov 24 Basis (cost) of stock dividend (($10 ÷ $210) × $100) + 4. Firstgov gov 76 Total $100. Firstgov gov 00 Cash received $10. Firstgov gov 00 Basis (cost) of stock dividend − 4. Firstgov gov 76 Gain $5. Firstgov gov 24 Because you had held the share of stock for more than 1 year at the time the stock dividend was declared, your gain on the stock dividend is a long-term capital gain. Firstgov gov Scrip dividends. Firstgov gov   A corporation that declares a stock dividend may issue you a scrip certificate that entitles you to a fractional share. Firstgov gov The certificate is generally nontaxable when you receive it. Firstgov gov If you choose to have the corporation sell the certificate for you and give you the proceeds, your gain or loss is the difference between the proceeds and the portion of your basis in the corporation's stock allocated to the certificate. Firstgov gov   However, if you receive a scrip certificate that you can choose to redeem for cash instead of stock, the certificate is taxable when you receive it. Firstgov gov You must include its fair market value in income on the date you receive it. Firstgov gov Other Distributions You may receive any of the following distributions during the year. Firstgov gov Exempt-interest dividends. Firstgov gov   Exempt-interest dividends you receive from a mutual fund or other regulated investment company, including those received from a qualified fund of funds in any tax year beginning after December 22, 2010, are not included in your taxable income. Firstgov gov Exempt-interest dividends should be shown in box 10 of Form 1099-DIV. Firstgov gov Information reporting requirement. Firstgov gov   Although exempt-interest dividends are not taxable, you must show them on your tax return if you have to file a return. Firstgov gov This is an information reporting requirement and does not change the exempt-interest dividends to taxable income. Firstgov gov Alternative minimum tax treatment. Firstgov gov   Exempt-interest dividends paid from specified private activity bonds may be subject to the alternative minimum tax. Firstgov gov See Alternative Minimum Tax (AMT) in chapter 30 for more information. Firstgov gov Dividends on insurance policies. Firstgov gov    Insurance policy dividends the insurer keeps and uses to pay your premiums are not taxable. Firstgov gov However, you must report as taxable interest income the interest that is paid or credited on dividends left with the insurance company. Firstgov gov    If dividends on an insurance contract (other than a modified endowment contract) are distributed to you, they are a partial return of the premiums you paid. Firstgov gov Do not include them in your gross income until they are more than the total of all net premiums you paid for the contract. Firstgov gov Report any taxable distributions on insurance policies on Form 1040, line 21. Firstgov gov Dividends on veterans' insurance. Firstgov gov   Dividends you receive on veterans' insurance policies are not taxable. Firstgov gov In addition, interest on dividends left with the Department of Veterans Affairs is not taxable. Firstgov gov Patronage dividends. Firstgov gov   Generally, patronage dividends you receive in money from a cooperative organization are included in your income. Firstgov gov   Do not include in your income patronage dividends you receive on: Property bought for your personal use, or Capital assets or depreciable property bought for use in your business. Firstgov gov But you must reduce the basis (cost) of the items bought. Firstgov gov If the dividend is more than the adjusted basis of the assets, you must report the excess as income. Firstgov gov   These rules are the same whether the cooperative paying the dividend is a taxable or tax-exempt cooperative. Firstgov gov Alaska Permanent Fund dividends. Firstgov gov    Do not report these amounts as dividends. Firstgov gov Instead, report these amounts on Form 1040, line 21; Form 1040A, line 13; or Form 1040EZ, line 3. Firstgov gov How To Report Dividend Income Generally, you can use either Form 1040 or Form 1040A to report your dividend income. Firstgov gov Report the total of your ordinary dividends on line 9a of Form 1040 or Form 1040A. Firstgov gov Report qualified dividends on line 9b of Form 1040 or Form 1040A. Firstgov gov If you receive capital gain distributions, you may be able to use Form 1040A or you may have to use Form 1040. Firstgov gov See Exceptions to filing Form 8949 and Schedule D (Form 1040) in chapter 16. Firstgov gov If you receive nondividend distributions required to be reported as capital gains, you must use Form 1040. Firstgov gov You cannot use Form 1040EZ if you receive any dividend income. Firstgov gov Form 1099-DIV. Firstgov gov   If you owned stock on which you received $10 or more in dividends and other distributions, you should receive a Form 1099-DIV. Firstgov gov Even if you do not receive Form 1099-DIV, you must report all your dividend income. Firstgov gov   See Form 1099-DIV for more information on how to report dividend income. Firstgov gov Form 1040A or 1040. Firstgov gov    You must complete Schedule B (Form 1040A or 1040), Part II, and attach it to your Form 1040A or 1040, if: Your ordinary dividends (Form 1099-DIV, box 1a) are more than $1,500, or You received, as a nominee, dividends that actually belong to someone else. Firstgov gov If your ordinary dividends are more than $1,500, you must also complete Schedule B (Form 1040A or 1040), Part III. Firstgov gov   List on Schedule B (Form 1040A or 1040), Part II, line 5, each payer's name and the ordinary dividends you received. Firstgov gov If your securities are held by a brokerage firm (in “street name”), list the name of the brokerage firm shown on Form 1099-DIV as the payer. Firstgov gov 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. Firstgov gov   Enter on line 6 the total of the amounts listed on line 5. Firstgov gov Also enter this total on line 9a of Form 1040A or 1040. Firstgov gov Qualified dividends. Firstgov gov   Report qualified dividends (Form 1099-DIV, box 1b) on line 9b of Form 1040 or Form 1040A. Firstgov gov The amount in box 1b is already included in box 1a. Firstgov gov Do not add the amount in box 1b to, or substract it from, the amount in box 1a. Firstgov gov   Do not include any of the following on line 9b. Firstgov gov Qualified dividends you received as a nominee. Firstgov gov See Nominees under How to Report Dividend Income in chapter 1 of Publication 550. Firstgov gov Dividends on stock for which you did not meet the holding period. Firstgov gov See Holding period , earlier under Qualified Dividends. Firstgov gov Dividends on any share of stock to the extent you are obligated (whether under a short sale or otherwise) to make related payments for positions in substantially similar or related property. Firstgov gov Payments in lieu of dividends, but only if you know or have reason to know the payments are not qualified dividends. Firstgov gov 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. Firstgov gov   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 (Form 1040) instructions, whichever applies. Firstgov gov Enter qualified dividends on line 2 of the worksheet. Firstgov gov Investment interest deducted. Firstgov gov   If you claim a deduction for investment interest, you may have to reduce the amount of your qualified dividends that are eligible for the 0%, 15%, or 20% tax rate. Firstgov gov Reduce it by the qualified dividends you choose to include in investment income when figuring the limit on your investment interest deduction. Firstgov gov This is done on the Qualified Dividends and Capital Gain Tax Worksheet or the Schedule D Tax Worksheet. Firstgov gov For more information about the limit on investment interest, see Investment expenses in chapter 23. Firstgov gov Expenses related to dividend income. Firstgov gov   You may be able to deduct expenses related to dividend income if you itemize your deductions on Schedule A (Form 1040). Firstgov gov See chapter 28 for general information about deducting expenses of producing income. Firstgov gov More information. Firstgov gov    For more information about how to report dividend income, see chapter 1 of Publication 550 or the instructions for the form you must file. Firstgov gov Prev  Up  Next   Home   More Online Publications
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Return Transcript

Tax Return Transcripts show most line items from your tax return (Form 1040, 1040A or 1040EZ) as it was originally filed, including any accompanying forms and schedules. This transcript does not reflect any changes you, your representative or the IRS made after you filed your return. In many cases, a Return Transcript will meet the requirements of lending institutions offering mortgages and student loans.

Page Last Reviewed or Updated: 10-Jan-2014

The Firstgov Gov

Firstgov gov Part Six -   Figuring Your Taxes and Credits The eight chapters in this part explain how to figure your tax and how to figure the tax of certain children who have more than $2,000 of unearned income. Firstgov gov They also discuss tax credits that, unlike deductions, are subtracted directly from your tax and reduce your tax dollar for dollar. Firstgov gov Chapter 36 discusses the earned income credit. Firstgov gov Chapter 37 discusses a wide variety of other credits, such as the adoption credit. Firstgov gov Table of Contents 30. Firstgov gov   How To Figure Your TaxIntroduction Figuring Your Tax Alternative Minimum Tax (AMT) Tax Figured by IRSFiling the Return 31. Firstgov gov   Tax on Unearned Income of Certain ChildrenWhat's New Introduction Useful Items - You may want to see: Which Parent's Return To UseParents Who Do Not File a Joint Return Parent's Election To Report Child's Interest and DividendsEffect of Making the Election Figuring Child's Income Figuring Additional Tax Tax for Certain Children Who Have Unearned IncomeProviding Parental Information (Form 8615, lines A–C) Step 1. Firstgov gov Figuring the Child's Net Unearned Income (Form 8615, Part I) Step 2. Firstgov gov Figuring Tentative Tax at the Parent's Tax Rate (Form 8615, Part II) Step 3. Firstgov gov Figuring the Child's Tax (Form 8615, Part III) 32. Firstgov gov   Child and Dependent Care CreditReminders Introduction Useful Items - You may want to see: Tests To Claim the CreditQualifying Person Test Earned Income Test Work-Related Expense Test Joint Return Test Provider Identification Test How To Figure the CreditFiguring Total Work-Related Expenses Earned Income Limit Dollar Limit Amount of Credit How To Claim the CreditTax credit not refundable. Firstgov gov Employment Taxes for Household Employers 33. Firstgov gov   Credit for the Elderly or the DisabledIntroduction Useful Items - You may want to see: Are You Eligible for the Credit?Qualified Individual Income Limits How to Claim the CreditCredit Figured for You Credit Figured by You 34. Firstgov gov   Child Tax CreditIntroduction Useful Items - You may want to see: Qualifying Child Amount of CreditLimits on the Credit Claiming the Credit Additional Child Tax Credit Completing Schedule 8812 (Form 1040A or 1040)Part I Parts II–IV 35. Firstgov gov   Education CreditsIntroduction Useful Items - You may want to see: Who Can Claim an Education Credit Qualified Education ExpensesNo Double Benefit Allowed Adjustments to Qualified Education Expenses 36. Firstgov gov   Earned Income Credit (EIC)What's New Reminders Introduction Useful Items - You may want to see: Do You Qualify for the Credit?If Improper Claim Made in Prior Year Part A. Firstgov gov Rules for EveryoneRule 1. Firstgov gov Your AGI Must Be Less Than: Rule 2. Firstgov gov You Must Have a Valid Social Security Number (SSN) Rule 3. Firstgov gov Your Filing Status Cannot Be Married Filing Separately Rule 4. Firstgov gov You Must Be a U. Firstgov gov S. Firstgov gov Citizen or Resident Alien All Year Rule 5. Firstgov gov You Cannot File Form 2555 or Form 2555-EZ Rule 6. Firstgov gov Your Investment Income Must Be $3,300 or Less Rule 7. Firstgov gov You Must Have Earned Income Part B. Firstgov gov Rules If You Have a Qualifying ChildRule 8. Firstgov gov Your Child Must Meet the Relationship, Age, Residency, and Joint Return Tests Rule 9. Firstgov gov Your Qualifying Child Cannot Be Used By More Than One Person To Claim the EIC Rule 10. Firstgov gov You Cannot Be a Qualifying Child of Another Taxpayer Part C. Firstgov gov Rules If You Do Not Have a Qualifying ChildRule 11. Firstgov gov You Must Be at Least Age 25 but Under Age 65 Rule 12. Firstgov gov You Cannot Be the Dependent of Another Person Rule 13. Firstgov gov You Cannot Be a Qualifying Child of Another Taxpayer Rule 14. Firstgov gov You Must Have Lived in the United States More Than Half of the Year Part D. Firstgov gov Figuring and Claiming the EICRule 15. Firstgov gov Your Earned Income Must Be Less Than: IRS Will Figure the EIC for You How To Figure the EIC Yourself ExamplesExample 1. Firstgov gov John and Janet Smith (Form 1040A) Example 2. Firstgov gov Kelly Green (Form 1040EZ) 37. Firstgov gov   Other CreditsWhat's New Introduction Useful Items - You may want to see: Nonrefundable CreditsAdoption Credit Alternative Motor Vehicle Credit Alternative Fuel Vehicle Refueling Property Credit Credit to Holders of Tax Credit Bonds Foreign Tax Credit Mortgage Interest Credit Nonrefundable Credit for Prior Year Minimum Tax Plug-in Electric Drive Motor Vehicle Credit Residential Energy Credits Retirement Savings Contributions Credit (Saver's Credit) Refundable CreditsCredit for Tax on Undistributed Capital Gain Health Coverage Tax Credit Credit for Excess Social Security Tax or Railroad Retirement Tax Withheld Prev  Up  Next   Home   More Online Publications