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:
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:
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:
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.