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Instruction Booklet For 1040x

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Instruction Booklet For 1040x

Instruction booklet for 1040x Publication 534 - Introductory Material Table of Contents Important Change for 1995 Introduction How To Use This Publication Important Change for 1995 Major changes to Publications 534 and 946. Instruction booklet for 1040x  This publication, as well as Publication 946,How To Depreciate Property, has been changed. Instruction booklet for 1040x Publication 534 has been shortened. Instruction booklet for 1040x It no longer contains general information on MACRS and the section 179 deduction. Instruction booklet for 1040x It contains a discussion of the accelerated cost recovery system (ACRS), the ACRS Percentage Tables, a discussion of other methods of depreciation, and a limited discussion of listed property. Instruction booklet for 1040x We expanded Publication 946 by adding material taken from Publication 534. Instruction booklet for 1040x We added more detail to the discussions of the section 179 deduction, the modified accelerated cost recovery system (MACRS), and listed property. Instruction booklet for 1040x We replaced the partialMACRS Percentage Tables with the complete ones from Publication 534. Instruction booklet for 1040x We also added the Table of Class Lives and Recovery Periods from Publication 534. Instruction booklet for 1040x We made these changes to eliminate most of the duplication that existed in the two publications. Instruction booklet for 1040x This will save money and make it easier for you to decide which publication you need. Instruction booklet for 1040x Use this publication to figure depreciation on property you placed in service before 1987; use Publication 946 to figure depreciation on property you placed in service after 1986. Instruction booklet for 1040x Introduction The law allows you to recover your cost in business or income-producing property through yearly tax deductions. Instruction booklet for 1040x You do this by depreciating your property, that is, by deducting some of your cost on your tax return each year. Instruction booklet for 1040x You can depreciate both tangible property, such as a car, building, or machinery, and certain intangible property, such as a copyright or a patent. Instruction booklet for 1040x The amount you can deduct depends on: How much the property cost, When you began using it, How long it will take to recover your cost, and Which of several depreciation methods you use. Instruction booklet for 1040x Depreciation defined. Instruction booklet for 1040x   Depreciation is a loss in the value of property over the time the property is being used. Instruction booklet for 1040x Events that can cause property to depreciate include wear and tear, age, deterioration, and obsolescence. Instruction booklet for 1040x You can get back your cost of certain property, such as equipment you use in your business or property used for the production of income by taking deductions for depreciation. Instruction booklet for 1040x Black's Law Dictionary Amortization. Instruction booklet for 1040x   Amortization is similar to depreciation. Instruction booklet for 1040x Using amortization, you can recover your cost or basis in certain property proportionately over a specific number of years or months. Instruction booklet for 1040x Examples of costs you can amortize are the costs of starting a business, reforestation, and pollution control facilities. Instruction booklet for 1040x You can find information on amortization inchapter 12 of Publication 535, Business Expenses. Instruction booklet for 1040x Alternative minimum tax. Instruction booklet for 1040x   If you use accelerated depreciation for real property, or personal property that is leased to others, you may be liable for the alternative minimum tax. Instruction booklet for 1040x Accelerated depreciation is any method, that allows recovery at a faster rate in the earlier years than the straight line method. Instruction booklet for 1040x For more information, you may wish to see the following: Form 6251, Alternative Minimum Tax-Individuals, and Publication 542, Tax Information on Corporations. Instruction booklet for 1040x Ordering publications and forms. Instruction booklet for 1040x   To order free publications and forms, 1-800-TAX-FORM (1-800-829-3676). Instruction booklet for 1040x You can also write to the IRS Forms Distribution Center nearest you. Instruction booklet for 1040x Check your income tax package for the address. Instruction booklet for 1040x   If you have access to a personal computer and a modem, you can also get many forms and publications electronically. Instruction booklet for 1040x See How To Get Forms and Publications in your income tax package for details. Instruction booklet for 1040x Telephone help. Instruction booklet for 1040x   You can call the IRS with your tax question Monday through Friday during regular business hours. Instruction booklet for 1040x Check your telephone book for the local number or you can call1-800-829-1040. Instruction booklet for 1040x Telephone help for hearing-impaired persons. Instruction booklet for 1040x   If you have access to TDD equipment, you can call 1-800-829-4059 with your tax question or to order forms and publications. Instruction booklet for 1040x See your tax package for the hours of operation. Instruction booklet for 1040x How To Use This Publication This publication describes the kinds of property that can be depreciated and the methods used to figure depreciation on property placed in service before 1987. Instruction booklet for 1040x It is divided into three chapters and contains an appendix. Instruction booklet for 1040x Chapter 1 explains the rules for depreciating property under the Accelerated Cost Recovery System (ACRS). Instruction booklet for 1040x Chapter 2 explains the rules for depreciating property first used before 1981. Instruction booklet for 1040x Chapter 3 explains the rules for listed property. Instruction booklet for 1040x Also this chapter defines listed property. Instruction booklet for 1040x The appendix contains the ACRS Percentage Tables. Instruction booklet for 1040x Prev  Up  Next   Home   More Online Publications
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The Instruction Booklet For 1040x

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