Dividends are distributions of money, stock, or other property a corporation pays you if you own stock in that corporation. You also might receive dividends through:

• Partnerships
• Estates
• Trusts
• S corporations
• Associations taxed as a corporation

If you receive dividends in significant amounts, you might have to pay estimated tax.

You should receive a Form 1099-DIV from each payor for distributions of $10 or more. Also, if you receive dividends from any of these entities, you should receive a Schedule K-1 from that entity showing the dividends taxable to your:

• Partnership
• Estate
• Trust
• S corporation

Even if you don't receive a Form 1099-DIV or Schedule K-1, you still must report all taxable dividends.

Ordinary dividends are the most common type of distribution from a corporation. They’re taxable as ordinary income unless they’re qualified dividends. Qualified dividends are ordinary dividends taxed at the lower rates that apply to net long-term capital gain.Qualified dividends must meet certain requirements.

Nondividend distributions are distributions not paid from a corporation's profits. Nondividend distributions are usually:

• Cash 
• Tax-free distribution of additional shares of stock or stock rights

A return of capital is a return of some or all of your investment in the stock of the company. A return of capital distribution:

• Reduces the basis of your stock 
• Isn’t taxed until your basis in the stock is fully recovered

After the basis of your stock is reduced to 0, any further return of capital is taxed as capital gain.

A liquidating distribution is paid to you in complete or partial liquidation of a corporation you own stock in. The difference between the amount of the distribution and your basis in the shares is usually a capital gain or loss.

Capital gain distributions might be paid by:

• Regulated investment companies (mutual funds) 
• Real estate investment trusts (REITs) 

Capital gain distributions are always reported as long-term capital gains. You must also report any undistributed capital gain that mutual funds or REITs have designated to you in a written notice. Those undistributed capital gains are reported to you on Form 2439.

Form 1099-DIV should list the distribution in the various categories. If it doesn’t, contact the payor.

To learn more, see these tax tips:

• Interest Income
• Form 1099