Did you earn any dividends from investments during the year? If your answer is yes and you pay dividends or fund distributions, you will have to file a Form 1099-DIV. The reporting form ensures that both your investors and the IRS have the same information. However, not all dividends are taxed in a similar way! Let’s take a closer look.
Defining Dividends
Dividends are distributions of earnings from a company to its shareholders. And these distributions can be in cash or in the form of additional shares. Dividends issued by the stock will be taxable income if the stock is held within a taxable brokerage account in the tax year.
Generally, dividends are reported to the IRS on Form 1099-DIV. Now, next on the agenda is to find out the types of dividends and distributions that go into the form.
Types of Dividends reported in 1099-DIV
Form 1099-DIV reports different types of dividends
Total Ordinary Dividends (Box 1a)
This is the total divided income you got during the year. It includes regular cash dividends, reinvested dividends, money-market fund dividends, and short-term capital gain distributions from stocks and mutual funds. It does not include amounts that are really interest and reported on Form 1099-INT.
Qualified Dividends (Box 1b)
This is the part of Box 1a that qualifies for lower long-term capital gains tax rates. They are usually dividends from U.S. companies and certain foreign companies, and you must have held the shares long enough under IRS rules.
Nonqualified Dividends (Part of Box 1a – Ordinary Dividends)
This is the portion of Box 1a that does not meet the IRS rules to be treated as qualified dividends. These dividends are taxed at your regular income tax rates (the same as wages or interest), not at the lower long-term capital gains rates.
Who must file (and who doesn’t)
You must file a 1099-DIV for each recipient if any of these happen: you paid $10 or more in dividends or other distributions (including capital gain and exempt-interest), any amount was subject to backup withholding or foreign tax, or you paid $600 or more in liquidation distributions.
Here’s the tricky part: common exceptions apply (for example, certain payments to corporations and tax-exempt entities, retirement plans, and payments made through brokers acting as custodians), unless backup withholding applies. Don’t report substitute payments in lieu of dividends here. Those belong on Form 1099-MISC, box 8.
1099-DIV Filing Requirements
Think of this as your pre-flight:
- Payer profile: legal name, address, EIN.
- Recipient profile: name, address, TIN. You may truncate the recipient’s TIN on payee statements you furnish (not on what you file with the IRS) per Reg. §301.6109-4 and the 1099-DIV instructions.
Box-by-box Instructions
Amounts mapped to the right boxes:
Box 1a- Total ordinary dividends.
Think of 1a as the total payout bucket.
Box 1b is for qualified dividends (apply holding-period rules).
Box 2a – Total Capital Gain Distributions
This shows long-term capital gains paid out by mutual funds, ETFs, RICs, and REITs. It includes the amount that are also divided in Boxes 2b, 2c, 2d and 2f, and is usually taxed like long-term capital gain on your tax return.
Box 2b -Unrecaptured Section 1250 Gain
This is the part of Box 2a that comes from certain real-estate investments (depreciable property). It’s taxed at a special rate of up to 25%, calculated on a separate worksheet.
Box 2c -Section 1202 Gain
This is also the part of Box 2a that comes from qualified small business stock. Some or most of this gain may be excluded from tax, depending on when you bought the stock and the specific rules.
6Box -2d Collectibles (28%) Gain
This is the part of Box 2a that comes from collectibles like certain coins, art, or metals. It can be taxed at a maximum 28% rate, which is different from the usual capital gains rates.
Box 2e -Section 897 Ordinary Dividends
This is the part of ordinary dividends in Box 1a that is related to U.S. real property interests (USRPI), usually through RICs or REITs. It mainly matters for special real-estate rules and for some foreign shareholders.
Box 2f -Section 897 Capital Gain
This is the part of capital gain distributions in Box 2a that comes from U.S. real property interests under section 897. Again, it’s mostly important for real-estate funds and foreign investors.
Box 3-Nondividend Distributions (Return of Capital)
These payments are a return of your own investment, not current profit. They are usually not taxed right away, but they reduce your cost basis; once your basis hits zero, any extra becomes taxable capital gain.
Box 5-Section 199A Dividends
These are qualified REIT and certain RIC dividends that are already included in Box 1a. They may qualify for up to a 20% deduction (the QBI deduction) if you meet the section 199A rules and holding-period requirements.
Box 7- Foreign Tax Paid
This shows the total foreign tax that was taken out of your dividends and distributions during the year. Shareholders can usually use this amount to claim a foreign tax credit or deduction on their tax return, if they meet IRS rules.
Box 8 – Foreign Country or U.S. Possession
This box would normally show the country where the foreign tax was paid. However, for shareholder statements you generally don’t need to fill this in, since Box 8 isn’t required under Reg. §1.853-4.
Box 9 – Cash Liquidation Distributions
This is cash you receive when a corporation, fund, or REIT shut down or liquidates part or all of its business. For tax purposes, it’s usually treated like you sold your shares (capital gain or loss), not as a regular dividend.
Box 10 – Noncash Liquidation Distributions
This shows the fair market value of property (not cash) you get in a liquidation. Like Box 9, it’s generally treated as part of figuring the gain or loss when your shares are considered sold.
Box 11 – FATCA Filing Requirement
This box is only checked if the payer is required to report the account under FATCA rules. It mainly applies to certain foreign financial accounts and doesn’t, by itself, change how the shareholder reports income on their tax return.
Box 12 – Exempt-Interest Dividends
These are dividends from funds (often municipal bond funds) that counts as tax-exempt interest. They are usually not taxed at the federal level, but they may affect AMT or be taxed by your state, depending on where you live.
Box 13 – Specified Private Activity Bond Interest Dividends
This is the part of Box 12 that comes from private activity bonds. It is generally still federally tax-exempt for regular tax, but it must be included in AMT calculations, which is why it’s shown separately.
Key Dates you shouldn’t miss (TY 2025 filings in 2026)
- Furnish recipient statements:Monday, February 2, 2026. If you issue a consolidated statement that includes Form 1099-B (or certain 1099-MISC boxes 8 or 10), the recipient due date becomes Tuesday, February 17, 2026 (Feb 15 is Sunday and Feb 16 is a federal holiday).
- File with the IRS: March 2, 2026 if paper (include Form 1096) or March 31, 2026 if e-filing. When a due date falls on a weekend or federal holiday, use the next business day.
How to e-file 1099-DIV
IRIS, FIRE, and the 10-return rule:
If you file 10 or more information returns in aggregate, you must e-file. You can submit 1099-DIV at no cost through IRIS (Taxpayer Portal or A2A). You may also e-file using the legacy FIRE specs in Publication 1220 if your systems are still wired that way. IRIS supports any Form 1099 for TY 2022 or later. FIRE remains available until its targeted retirement after Tax Year 2026 and Filing Season 2027. In practice, pick your path early so testing doesn’t collide with peak season.
Quick checklist
1. Validate your data: run TIN and name matches (IRS TIN Matching helps), confirm the $10 and $600 triggers, and tie out totals across Boxes 1a, 1b, 2a–2d, 3, 5, 7, 9–10. If you shorten TINs on recipient statements, make sure the un-truncated values are in the IRS file.
2. Classify correctly: only mark qualified dividends when holding-period rules are met. Keep return of capital in Box 3 and liquidations in Boxes 9–10. Substitute payments go on 1099-MISC box 8, not here.
3. Choose your e-file lane: if you cross the 10-return threshold, you’re e-filing. Pick IRIS (no-cost, portal upload or A2A) or follow Pub. 1220. If you use FIRE-format files, test roles and credentials early.
4. Plan delivery: decide whether you’ll send stand-alone 1099-DIV statements (due Feb 2, 2026 this year) or a consolidated statement with 1099-B (due Feb 17, 2026). If you furnish electronically, retain documented recipient consent per the General Instructions.
Reconcile and retain: tie backup withholding to Form 945 and keep statements and transmission receipts per your retention policy and IRS guidance. It’s easy to overlook receipt retention until you need it.
Fixing mistakes
Correct e-filed returns electronically. If you were required to e-file the original, you must e-file the corrections as well. Use Pub. 1220 for FIRE or Pub. 5717/5718 for IRIS to apply the right correction indicators.
- Most fixes (Error Type 1): wrong dollar amounts, codes, or checkboxes, or a return filed that shouldn’t have been filed. Prepare a new 1099-DIV, mark CORRECTED if on paper, fix the fields, and include a new Form 1096 for paper submissions. For e-file, use the correct correction indicator in your system.
- Identity or type errors (Error Type 2): missing or incorrect payee TIN or name, or wrong form type. Use a two-step approach:
1. File a CORRECTED return that repeats the original payer and recipient info and enter -0- for all money amounts.
2. File a new original (don’t check CORRECTED) with the correct payer and recipient info. Furnish corrected statements to recipients.
- Paper in, paper out: if your original was paper-filed, send Copy A of the corrected return with a new Form 1096 to the IRS and furnish corrected statements to recipients. If you e-filed the original but want to correct on paper, you’ll need an approved waiver.
Final Thought
You will file a 1099-DIV whenever distributions hit $10, whenever backup withholding or foreign tax shows up, or when liquidation payments reach $600. Map each amount to the right box, pick your e-file method early, and keep those recipient and IRS dates front and center for your operations team. Do that consistently and your filing stays easy, compliant, and accurate.
FAQs
1. When should I (payer) issue Form 1099-DIV?
A payer should issue a form 1099-DIV in multiple scenarios like when the amount is withheld for tax or when the total dividends, capital-gain distribution or liquidation process reaches to the applicable threshold.
2. Do S-corporations also need to file 1099-DIV?
Yes, but only in certain scenarios like when the S-corporation has accrued C-corporation earnings and profits and distributes them as dividends. Otherwise, S-corporations should use Schedule K-1.
3. How long should I keep the documents and records with me?
You should keep copies for at least 3 years from the due date (4 years in case of the backup withholding was imposed)
4. Can multiple classes of stock be combined on one 1099-DIV?
Yes, In case if the recipient TIN is the same; report total by payment type.
File your 1099-DIV forms for 2025 today and stay IRS-compliant year‑round.