How to Report Taxable Mutual Fund Dividends
The distribution of ordinary dividends by a mutual fund is reported to you in Box 1a of Form 1099-DIV. Box 1b shows ordinary dividends which are classified as qualified dividends. Report qualified dividends on line 9b of your tax return Form 1040 or Form 1040A so they are taxed at the lower rates applicable to capital gains.
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Instructions
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Review Form 1099-DIV, which you should receive from your mutual fund company after year end. The dividend amounts reported in Box 1a of the form should compare to the amounts shown on your periodic mutual fund statements.
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Note that any dividend distributions that are not out of earnings and profits are not taxable as ordinary dividends and are reported in Box 3 of Form 1099-DIV. Instead, the tax basis in your shares will be reduced by the amounts shown in Box 3 of the form.
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Reflect all ordinary dividends from Box 1a of Form 1099-DIV as dividend income on line 9a of your income tax return. However, if the dividend amounts total over $1,500 they should be individually listed on Schedule B of your Form 1040 tax return.
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Exclude from dividend income any dividend paid from exempt interest earned by the fund, which would be a tax exempt dividend and should not be reported to you as ordinary dividends. Report these amounts on line 8b of your tax return as tax exempt income.
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Use the Qualified Dividend and Capital Gain Tax Worksheet, or the Schedule D Tax Worksheet, in the tax return instructions to compute the tax on the qualified dividends.
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