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Us irs e file free 3. Us irs e file free   Adjustments to Income Table of Contents Individual Retirement Arrangement (IRA) Contributions and DeductionsContributions to Kay Bailey Hutchison Spousal IRAs. Us irs e file free Deductible contribution. Us irs e file free Nondeductible contribution. Us irs e file free You may be able to subtract amounts from your total income (Form 1040, line 22 or Form 1040A, line 15) or total effectively connected income (Form 1040NR, line 23) to get your adjusted gross income (Form 1040, line 37; Form 1040A, line 21; or Form 1040NR, line 36). Us irs e file free Some adjustments to income follow. Us irs e file free Contributions to your individual retirement arrangement (IRA) (Form 1040, line 32; Form 1040A, line 17; or Form 1040NR, line 32), explained later in this publication. Us irs e file free Certain moving expenses (Form 1040, line 26; or Form 1040NR, line 26) if you changed job locations or started a new job in 2013. Us irs e file free See Publication 521, Moving Expenses, or see Form 3903, Moving Expenses, and its instructions. Us irs e file free Some health insurance costs (Form 1040, line 29 or Form 1040NR, line 29) if you were self-employed and had a net profit for the year, or if you received wages in 2013 from an S corporation in which you were a more-than-2% shareholder. Us irs e file free For more details, see Publication 535, Business Expenses. Us irs e file free Payments to your self-employed SEP, SIMPLE, or qualified plan (Form 1040, line 28 or Form 1040NR, line 28). Us irs e file free For more information, including limits on how much you can deduct, see Publication 560, Retirement Plans for Small Business. Us irs e file free Penalties paid on early withdrawal of savings (Form 1040, line 30 or Form 1040NR, line 30). Us irs e file free Form 1099-INT, Interest Income, or Form 1099-OID, Original Issue Discount, will show the amount of any penalty you were charged. Us irs e file free Alimony payments (Form 1040, line 31a). Us irs e file free For more information, see Publication 504, Divorced or Separated Individuals. Us irs e file free There are other items you can claim as adjustments to income. Us irs e file free These adjustments are discussed in your tax return instructions. Us irs e file free Individual Retirement Arrangement (IRA) Contributions and Deductions This section explains the tax treatment of amounts you pay into traditional IRAs. Us irs e file free A traditional IRA is any IRA that is not a Roth or SIMPLE IRA. Us irs e file free Roth and SIMPLE IRAs are defined earlier in the IRA discussion under Retirement Plan Distributions . Us irs e file free For more detailed information, see Publication 590. Us irs e file free Contributions. Us irs e file free   An IRA is a personal savings plan that offers you tax advantages to set aside money for your retirement. Us irs e file free Two advantages of a traditional IRA are: You may be able to deduct some or all of your contributions to it, depending on your circumstances, and Generally, amounts in your IRA, including earnings and gains, are not taxed until distributed. Us irs e file free    Although interest earned from your traditional IRA generally is not taxed in the year earned, it is not tax-exempt interest. Us irs e file free Do not report this interest on your tax return as tax-exempt interest. Us irs e file free General limit. Us irs e file free   The most that can be contributed for 2013 to your traditional IRA is the smaller of the following amounts. Us irs e file free Your taxable compensation for the year, or $5,500 ($6,500 if you were age 50 or older by the end of 2013). Us irs e file free Contributions to Kay Bailey Hutchison Spousal IRAs. Us irs e file free   In the case of a married couple filing a joint return for 2013, up to $5,500 ($6,500 for each spouse age 50 or older by the end of 2013) can be contributed to IRAs on behalf of each spouse, even if one spouse has little or no compensation. Us irs e file free For more information on the general limit and the Kay Bailey Hutchison Spousal IRA limit, see How Much Can Be Contributed? in Publication 590. Us irs e file free Deductible contribution. Us irs e file free   Generally, you can deduct the lesser of the contributions to your traditional IRA for the year or the general limit (or Kay Bailey Hutchison Spousal IRA limit, if applicable) just explained. Us irs e file free However, if you or your spouse was covered by an employer retirement plan at any time during the year for which contributions were made, you may not be able to deduct all of the contributions. Us irs e file free Your deduction may be reduced or eliminated, depending on your filing status and the amount of your income. Us irs e file free For more information, see Limit if Covered by Employer Plan in Publication 590. Us irs e file free Nondeductible contribution. Us irs e file free   The difference between your total permitted contributions and your IRA deduction, if any, is your nondeductible contribution. Us irs e file free You must file Form 8606, Nondeductible IRAs, to report nondeductible contributions even if you do not have to file a tax return for the year. Us irs e file free    For 2014, the most that can be contributed to your traditional IRA is $5,500 ($6,500 if you are age 50 or older at the end of 2014). Us irs e file free Prev  Up  Next   Home   More Online Publications
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Us irs e file free 8. Us irs e file free   Dividends and Other Distributions Table of Contents Reminder Introduction Useful Items - You may want to see: General InformationDividends not reported on Form 1099-DIV. Us irs e file free Reporting tax withheld. Us irs e file free Nominees. Us irs e file free Ordinary DividendsQualified Dividends Dividends Used to Buy More Stock Money Market Funds Capital Gain DistributionsBasis adjustment. Us irs e file free Nondividend DistributionsLiquidating Distributions Distributions of Stock and Stock Rights Other DistributionsInformation reporting requirement. Us irs e file free Alternative minimum tax treatment. Us irs e file free How To Report Dividend IncomeInvestment interest deducted. Us irs e file free Reminder Foreign-source income. Us irs e file free  If you are a U. Us irs e file free S. Us irs e file free 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. Us irs e file free S. Us irs e file free law. Us irs e file free 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. Us irs e file free 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. Us irs e file free This chapter also explains how to report dividend income on your tax return. Us irs e file free Dividends are distributions of money, stock, or other property paid to you by a corporation or by a mutual fund. Us irs e file free You also may receive dividends through a partnership, an estate, a trust, or an association that is taxed as a corporation. Us irs e file free However, some amounts you receive that are called dividends are actually interest income. Us irs e file free (See Dividends that are actually interest under Taxable Interest in chapter 7. Us irs e file free ) Most distributions are paid in cash (or check). Us irs e file free However, distributions can consist of more stock, stock rights, other property, or services. Us irs e file free 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. Us irs e file free Tax on unearned income of certain children. Us irs e file free   Part of a child's 2013 unearned income may be taxed at the parent's tax rate. Us irs e file free If it is, Form 8615, Tax for Certain Children Who Have Unearned Income, must be completed and attached to the child's tax return. Us irs e file free If not, Form 8615 is not required and the child's income is taxed at his or her own tax rate. Us irs e file free    Some parents can choose to include the child's interest and dividends on the parent's return if certain requirements are met. Us irs e file free Use Form 8814, Parents' Election To Report Child's Interest and Dividends, for this purpose. Us irs e file free   For more information about the tax on unearned income of children and the parents' election, see chapter 31. Us irs e file free Beneficiary of an estate or trust. Us irs e file free    Dividends and other distributions you receive as a beneficiary of an estate or trust are generally taxable income. Us irs e file free You should receive a Schedule K-1 (Form 1041), Beneficiary's Share of Income, Deductions, Credits, etc. Us irs e file free , from the fiduciary. Us irs e file free Your copy of Schedule K-1 (Form 1041) and its instructions will tell you where to report the income on your Form 1040. Us irs e file free Social security number (SSN) or individual taxpayer identification number (ITIN). Us irs e file free    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. Us irs e file free This includes payers of dividends. Us irs e file free If you do not give your SSN or ITIN to the payer of dividends, you may have to pay a penalty. Us irs e file free For more information on SSNs and ITINs, see Social Security Number (SSN) in chapter 1. Us irs e file free Backup withholding. Us irs e file free   Your dividend income is generally not subject to regular withholding. Us irs e file free However, it may be subject to backup withholding to ensure that income tax is collected on the income. Us irs e file free Under backup withholding, the payer of dividends must withhold, as income tax, on the amount you are paid, applying the appropriate withholding rate. Us irs e file free   Backup withholding may also be required if the IRS has determined that you underreported your interest or dividend income. Us irs e file free For more information, see Backup Withholding in chapter 4. Us irs e file free Stock certificate in two or more names. Us irs e file free   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. Us irs e file free Form 1099-DIV. Us irs e file free   Most corporations and mutual funds use Form 1099-DIV, Dividends and Distributions, to show you the distributions you received from them during the year. Us irs e file free Keep this form with your records. Us irs e file free You do not have to attach it to your tax return. Us irs e file free Dividends not reported on Form 1099-DIV. Us irs e file free   Even if you do not receive Form 1099-DIV, you must still report all your taxable dividend income. Us irs e file free For example, you may receive distributive shares of dividends from partnerships or S corporations. Us irs e file free These dividends are reported to you on Schedule K-1 (Form 1065), Partner's Share of Income, Deductions, Credits, etc. Us irs e file free , and Schedule K-1 (Form 1120S), Shareholder's Share of Income, Deductions, Credits, etc. Us irs e file free Reporting tax withheld. Us irs e file free   If tax is withheld from your dividend income, the payer must give you a Form 1099-DIV that indicates the amount withheld. Us irs e file free Nominees. Us irs e file free   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. Us irs e file free Form 1099-MISC. Us irs e file free   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. Us irs e file free See Reporting Substitute Payments under Short Sales in chapter 4 of Publication 550 for more information about reporting these payments. Us irs e file free Incorrect amount shown on a Form 1099. Us irs e file free   If you receive a Form 1099 that shows an incorrect amount (or other incorrect information), you should ask the issuer for a corrected form. Us irs e file free The new Form 1099 you receive will be marked “Corrected. Us irs e file free ” Dividends on stock sold. Us irs e file free   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. Us irs e file free Dividends received in January. Us irs e file free   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. Us irs e file free You report the dividend in the year it was declared. Us irs e file free Ordinary Dividends Ordinary (taxable) dividends are the most common type of distribution from a corporation or a mutual fund. Us irs e file free They are paid out of earnings and profits and are ordinary income to you. Us irs e file free This means they are not capital gains. Us irs e file free 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. Us irs e file free Ordinary dividends will be shown in box 1a of the Form 1099-DIV you receive. Us irs e file free 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. Us irs e file free They should be shown in box 1b of the Form 1099-DIV you receive. Us irs e file free The maximum rate of tax on qualified dividends is: 0% on any amount that otherwise would be taxed at a 10% or 15% rate. Us irs e file free 15% on any amount that otherwise would be taxed at rates greater than 15% but less than 39. Us irs e file free 6%. Us irs e file free 20% on any amount that otherwise would be taxed at a 39. Us irs e file free 6% rate. Us irs e file free To qualify for the maximum rate, all of the following requirements must be met. Us irs e file free The dividends must have been paid by a U. Us irs e file free S. Us irs e file free corporation or a qualified foreign corporation. Us irs e file free (See Qualified foreign corporation , later. Us irs e file free ) The dividends are not of the type listed later under Dividends that are not qualified dividends . Us irs e file free You meet the holding period (discussed next). Us irs e file free Holding period. Us irs e file free   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. Us irs e file free 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. Us irs e file free Instead, the seller will get the dividend. Us irs e file free   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. Us irs e file free See the examples later. Us irs e file free Exception for preferred stock. Us irs e file free   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. Us irs e file free If the preferred dividends are due to periods totaling less than 367 days, the holding period in the previous paragraph applies. Us irs e file free Example 1. Us irs e file free You bought 5,000 shares of XYZ Corp. Us irs e file free common stock on July 9, 2013. Us irs e file free XYZ Corp. Us irs e file free paid a cash dividend of 10 cents per share. Us irs e file free The ex-dividend date was July 16, 2013. Us irs e file free Your Form 1099-DIV from XYZ Corp. Us irs e file free shows $500 in box 1a (ordinary dividends) and in box 1b (qualified dividends). Us irs e file free However, you sold the 5,000 shares on August 12, 2013. Us irs e file free You held your shares of XYZ Corp. Us irs e file free for only 34 days of the 121-day period (from July 10, 2013, through August 12, 2013). Us irs e file free The 121-day period began on May 17, 2013 (60 days before the ex-dividend date), and ended on September 14, 2013. Us irs e file free You have no qualified dividends from XYZ Corp. Us irs e file free because you held the XYZ stock for less than 61 days. Us irs e file free Example 2. Us irs e file free 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. Us irs e file free You held the stock for 63 days (from July 16, 2013, through September 16, 2013). Us irs e file free 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). Us irs e file free Example 3. Us irs e file free You bought 10,000 shares of ABC Mutual Fund common stock on July 9, 2013. Us irs e file free ABC Mutual Fund paid a cash dividend of 10 cents a share. Us irs e file free The ex-dividend date was July 16, 2013. Us irs e file free The ABC Mutual Fund advises you that the portion of the dividend eligible to be treated as qualified dividends equals 2 cents per share. Us irs e file free Your Form 1099-DIV from ABC Mutual Fund shows total ordinary dividends of $1,000 and qualified dividends of $200. Us irs e file free However, you sold the 10,000 shares on August 12, 2013. Us irs e file free You have no qualified dividends from ABC Mutual Fund because you held the ABC Mutual Fund stock for less than 61 days. Us irs e file free Holding period reduced where risk of loss is diminished. Us irs e file free   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. Us irs e file free 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. Us irs e file free You were grantor (writer) of an option to buy substantially identical stock or securities. Us irs e file free Your risk of loss is diminished by holding one or more other positions in substantially similar or related property. Us irs e file free   For information about how to apply condition (3), see Regulations section 1. Us irs e file free 246-5. Us irs e file free Qualified foreign corporation. Us irs e file free   A foreign corporation is a qualified foreign corporation if it meets any of the following conditions. Us irs e file free The corporation is incorporated in a U. Us irs e file free S. Us irs e file free possession. Us irs e file free 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. Us irs e file free For a list of those treaties, see Table 8-1. Us irs e file free 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. Us irs e file free See Readily tradable stock , later. Us irs e file free Exception. Us irs e file free   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. Us irs e file free Readily tradable stock. Us irs e file free   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. Us irs e file free For a list of the exchanges that meet these requirements, see www. Us irs e file free sec. Us irs e file free gov/divisions/marketreg/mrexchanges. Us irs e file free shtml. Us irs e file free Dividends that are not qualified dividends. Us irs e file free   The following dividends are not qualified dividends. Us irs e file free They are not qualified dividends even if they are shown in box 1b of Form 1099-DIV. Us irs e file free Capital gain distributions. Us irs e file free Dividends paid on deposits with mutual savings banks, cooperative banks, credit unions, U. Us irs e file free S. Us irs e file free building and loan associations, U. Us irs e file free S. Us irs e file free savings and loan associations, federal savings and loan associations, and similar financial institutions. Us irs e file free (Report these amounts as interest income. Us irs e file free ) 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. Us irs e file free 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. Us irs e file free 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. Us irs e file free Payments in lieu of dividends, but only if you know or have reason to know the payments are not qualified dividends. Us irs e file free 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. Us irs e file free Table 8-1. Us irs e file free Income Tax Treaties Income tax treaties the United States has with the following countries satisfy requirement (2) under Qualified foreign corporation. Us irs e file free 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. Us irs e file free 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. Us irs e file free Most mutual funds also permit shareholders to automatically reinvest distributions in more shares in the fund, instead of receiving cash. Us irs e file free 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. Us irs e file free 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. Us irs e file free 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. Us irs e file free But you may be able to deduct the service charge. Us irs e file free See chapter 28 for more information about deducting expenses of producing income. Us irs e file free In some dividend reinvestment plans, you can invest more cash to buy shares of stock at a price less than fair market value. Us irs e file free 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. Us irs e file free When figuring this amount, use the fair market value of the stock on the dividend payment date. Us irs e file free Money Market Funds Report amounts you receive from money market funds as dividend income. Us irs e file free Money market funds are a type of mutual fund and should not be confused with bank money market accounts that pay interest. Us irs e file free 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). Us irs e file free They will be shown in box 2a of the Form 1099-DIV you receive from the mutual fund or REIT. Us irs e file free Report capital gain distributions as long-term capital gains, regardless of how long you owned your shares in the mutual fund or REIT. Us irs e file free Undistributed capital gains of mutual funds and REITs. Us irs e file free    Some mutual funds and REITs keep their long-term capital gains and pay tax on them. Us irs e file free You must treat your share of these gains as distributions, even though you did not actually receive them. Us irs e file free However, they are not included on Form 1099-DIV. Us irs e file free Instead, they are reported to you in box 1a of Form 2439. Us irs e file free   Report undistributed capital gains (box 1a of Form 2439) as long-term capital gains on Schedule D (Form 1040), column (h), line 11. Us irs e file free   The tax paid on these gains by the mutual fund or REIT is shown in box 2 of Form 2439. Us irs e file free You take credit for this tax by including it on Form 1040, line 71, and checking box a on that line. Us irs e file free Attach Copy B of Form 2439 to your return, and keep Copy C for your records. Us irs e file free Basis adjustment. Us irs e file free   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. Us irs e file free Additional information. Us irs e file free   For more information on the treatment of distributions from mutual funds, see Publication 550. Us irs e file free 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. Us irs e file free You should receive a Form 1099-DIV or other statement showing the nondividend distribution. Us irs e file free On Form 1099-DIV, a nondividend distribution will be shown in box 3. Us irs e file free If you do not receive such a statement, you report the distribution as an ordinary dividend. Us irs e file free Basis adjustment. Us irs e file free   A nondividend distribution reduces the basis of your stock. Us irs e file free It is not taxed until your basis in the stock is fully recovered. Us irs e file free This nontaxable portion is also called a return of capital; it is a return of your investment in the stock of the company. Us irs e file free 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. Us irs e file free   When the basis of your stock has been reduced to zero, report any additional nondividend distribution you receive as a capital gain. Us irs e file free Whether you report it as a long-term or short-term capital gain depends on how long you have held the stock. Us irs e file free See Holding Period in chapter 14. Us irs e file free Example. Us irs e file free You bought stock in 2000 for $100. Us irs e file free In 2003, you received a nondividend distribution of $80. Us irs e file free You did not include this amount in your income, but you reduced the basis of your stock to $20. Us irs e file free You received a nondividend distribution of $30 in 2013. Us irs e file free The first $20 of this amount reduced your basis to zero. Us irs e file free You report the other $10 as a long-term capital gain for 2013. Us irs e file free You must report as a long-term capital gain any nondividend distribution you receive on this stock in later years. Us irs e file free Liquidating Distributions Liquidating distributions, sometimes called liquidating dividends, are distributions you receive during a partial or complete liquidation of a corporation. Us irs e file free These distributions are, at least in part, one form of a return of capital. Us irs e file free They may be paid in one or more installments. Us irs e file free You will receive Form 1099-DIV from the corporation showing you the amount of the liquidating distribution in box 8 or 9. Us irs e file free For more information on liquidating distributions, see chapter 1 of Publication 550. Us irs e file free Distributions of Stock and Stock Rights Distributions by a corporation of its own stock are commonly known as stock dividends. Us irs e file free Stock rights (also known as “stock options”) are distributions by a corporation of rights to acquire the corporation's stock. Us irs e file free Generally, stock dividends and stock rights are not taxable to you, and you do not report them on your return. Us irs e file free Taxable stock dividends and stock rights. Us irs e file free   Distributions of stock dividends and stock rights are taxable to you if any of the following apply. Us irs e file free You or any other shareholder have the choice to receive cash or other property instead of stock or stock rights. Us irs e file free 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. Us irs e file free The distribution is in convertible preferred stock and has the same result as in (2). Us irs e file free The distribution gives preferred stock to some common stock shareholders and common stock to other common stock shareholders. Us irs e file free The distribution is on preferred stock. Us irs e file free (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. Us irs e file free )   The term “stock” includes rights to acquire stock, and the term “shareholder” includes a holder of rights or of convertible securities. Us irs e file free If you receive taxable stock dividends or stock rights, include their fair market value at the time of distribution in your income. Us irs e file free Preferred stock redeemable at a premium. Us irs e file free   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. Us irs e file free For more information, see chapter 1 of Publication 550. Us irs e file free Basis. Us irs e file free   Your basis in stock or stock rights received in a taxable distribution is their fair market value when distributed. Us irs e file free 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. Us irs e file free Fractional shares. Us irs e file free    You may not own enough stock in a corporation to receive a full share of stock if the corporation declares a stock dividend. Us irs e file free 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. Us irs e file free Any cash you receive for fractional shares under such a plan is treated as an amount realized on the sale of the fractional shares. Us irs e file free Report this transaction on Form 8949, Sales and Other Dispositions of Capital Assets. Us irs e file free 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. Us irs e file free    Report these transactions on Form 8949 with the correct box checked. Us irs e file free   For more information on Form 8949 and Schedule D (Form 1040), see chapter 4 of Publication 550. Us irs e file free Also see the Instructions for Form 8949 and the Instructions for Schedule D (Form 1040). Us irs e file free Example. Us irs e file free You own one share of common stock that you bought on January 3, 2004, for $100. Us irs e file free The corporation declared a common stock dividend of 5% on June 29, 2013. Us irs e file free The fair market value of the stock at the time the stock dividend was declared was $200. Us irs e file free You were paid $10 for the fractional-share stock dividend under a plan described in the discussion above. Us irs e file free You figure your gain or loss as follows: Fair market value of old stock $200. Us irs e file free 00 Fair market value of stock dividend (cash received) +10. Us irs e file free 00 Fair market value of old stock and stock dividend $210. Us irs e file free 00 Basis (cost) of old stock after the stock dividend (($200 ÷ $210) × $100) $95. Us irs e file free 24 Basis (cost) of stock dividend (($10 ÷ $210) × $100) + 4. Us irs e file free 76 Total $100. Us irs e file free 00 Cash received $10. Us irs e file free 00 Basis (cost) of stock dividend − 4. Us irs e file free 76 Gain $5. Us irs e file free 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. Us irs e file free Scrip dividends. Us irs e file free   A corporation that declares a stock dividend may issue you a scrip certificate that entitles you to a fractional share. Us irs e file free The certificate is generally nontaxable when you receive it. Us irs e file free 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. Us irs e file free   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. Us irs e file free You must include its fair market value in income on the date you receive it. Us irs e file free Other Distributions You may receive any of the following distributions during the year. Us irs e file free Exempt-interest dividends. Us irs e file free   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. Us irs e file free Exempt-interest dividends should be shown in box 10 of Form 1099-DIV. Us irs e file free Information reporting requirement. Us irs e file free   Although exempt-interest dividends are not taxable, you must show them on your tax return if you have to file a return. Us irs e file free This is an information reporting requirement and does not change the exempt-interest dividends to taxable income. Us irs e file free Alternative minimum tax treatment. Us irs e file free   Exempt-interest dividends paid from specified private activity bonds may be subject to the alternative minimum tax. Us irs e file free See Alternative Minimum Tax (AMT) in chapter 30 for more information. Us irs e file free Dividends on insurance policies. Us irs e file free    Insurance policy dividends the insurer keeps and uses to pay your premiums are not taxable. Us irs e file free However, you must report as taxable interest income the interest that is paid or credited on dividends left with the insurance company. Us irs e file free    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. Us irs e file free Do not include them in your gross income until they are more than the total of all net premiums you paid for the contract. Us irs e file free Report any taxable distributions on insurance policies on Form 1040, line 21. Us irs e file free Dividends on veterans' insurance. Us irs e file free   Dividends you receive on veterans' insurance policies are not taxable. Us irs e file free In addition, interest on dividends left with the Department of Veterans Affairs is not taxable. Us irs e file free Patronage dividends. Us irs e file free   Generally, patronage dividends you receive in money from a cooperative organization are included in your income. Us irs e file free   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. Us irs e file free But you must reduce the basis (cost) of the items bought. Us irs e file free If the dividend is more than the adjusted basis of the assets, you must report the excess as income. Us irs e file free   These rules are the same whether the cooperative paying the dividend is a taxable or tax-exempt cooperative. Us irs e file free Alaska Permanent Fund dividends. Us irs e file free    Do not report these amounts as dividends. Us irs e file free Instead, report these amounts on Form 1040, line 21; Form 1040A, line 13; or Form 1040EZ, line 3. Us irs e file free How To Report Dividend Income Generally, you can use either Form 1040 or Form 1040A to report your dividend income. Us irs e file free Report the total of your ordinary dividends on line 9a of Form 1040 or Form 1040A. Us irs e file free Report qualified dividends on line 9b of Form 1040 or Form 1040A. Us irs e file free If you receive capital gain distributions, you may be able to use Form 1040A or you may have to use Form 1040. Us irs e file free See Exceptions to filing Form 8949 and Schedule D (Form 1040) in chapter 16. Us irs e file free If you receive nondividend distributions required to be reported as capital gains, you must use Form 1040. Us irs e file free You cannot use Form 1040EZ if you receive any dividend income. Us irs e file free Form 1099-DIV. Us irs e file free   If you owned stock on which you received $10 or more in dividends and other distributions, you should receive a Form 1099-DIV. Us irs e file free Even if you do not receive Form 1099-DIV, you must report all your dividend income. Us irs e file free   See Form 1099-DIV for more information on how to report dividend income. Us irs e file free Form 1040A or 1040. Us irs e file free    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. Us irs e file free If your ordinary dividends are more than $1,500, you must also complete Schedule B (Form 1040A or 1040), Part III. Us irs e file free   List on Schedule B (Form 1040A or 1040), Part II, line 5, each payer's name and the ordinary dividends you received. Us irs e file free 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. Us irs e file free 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. Us irs e file free   Enter on line 6 the total of the amounts listed on line 5. Us irs e file free Also enter this total on line 9a of Form 1040A or 1040. Us irs e file free Qualified dividends. Us irs e file free   Report qualified dividends (Form 1099-DIV, box 1b) on line 9b of Form 1040 or Form 1040A. Us irs e file free The amount in box 1b is already included in box 1a. Us irs e file free Do not add the amount in box 1b to, or substract it from, the amount in box 1a. Us irs e file free   Do not include any of the following on line 9b. Us irs e file free Qualified dividends you received as a nominee. Us irs e file free See Nominees under How to Report Dividend Income in chapter 1 of Publication 550. Us irs e file free Dividends on stock for which you did not meet the holding period. Us irs e file free See Holding period , earlier under Qualified Dividends. Us irs e file free 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. Us irs e file free Payments in lieu of dividends, but only if you know or have reason to know the payments are not qualified dividends. Us irs e file free 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. Us irs e file free   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. Us irs e file free Enter qualified dividends on line 2 of the worksheet. Us irs e file free Investment interest deducted. Us irs e file free   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. Us irs e file free Reduce it by the qualified dividends you choose to include in investment income when figuring the limit on your investment interest deduction. Us irs e file free This is done on the Qualified Dividends and Capital Gain Tax Worksheet or the Schedule D Tax Worksheet. Us irs e file free For more information about the limit on investment interest, see Investment expenses in chapter 23. Us irs e file free Expenses related to dividend income. Us irs e file free   You may be able to deduct expenses related to dividend income if you itemize your deductions on Schedule A (Form 1040). Us irs e file free See chapter 28 for general information about deducting expenses of producing income. Us irs e file free More information. Us irs e file free    For more information about how to report dividend income, see chapter 1 of Publication 550 or the instructions for the form you must file. Us irs e file free Prev  Up  Next   Home   More Online Publications