This section discusses general rules on dividend income.
Tax on investment income of a child under age 14.
Part of a child's 2001 investment income may be taxed at the parent's tax rate. This may happen if all of the following are true.
- The child was under age 14 on January 1, 2002.
- The child had more than $1,500 of investment income (such as taxable interest and dividends) and has to file a tax return.
- Either parent was alive at the end of 2001.
If all of these statements are true, Form 8615, Tax for Children Under Age 14 Who Have Investment Income of More Than $1,500,
must be completed and attached to the child's tax return. If any of these statements is not true, Form 8615 is not required and the child's
income is taxed at his or her own tax rate.
However, the parent can choose to include the child's interest and dividends on the parent's return if certain requirements are met. Use Form
8814,
Parents' Election To Report Child's Interest and Dividends, for this purpose.
For more information about the tax on investment income of children and the parents' election, see chapter 32.
Beneficiary of an estate or trust.
Dividends and other distributions you receive as a beneficiary of an estate or trust are generally taxable income. You should receive a
Schedule K-1 (Form 1041), Beneficiary's Share of Income, Deductions, Credits, etc.,
from the fiduciary. Your copy of Schedule K-1 and its instructions will tell you where to report the income on your Form 1040.
Social security number (SSN).
You must give your name and SSN (or individual taxpayer identification number (ITIN)) to any person required by federal tax law to make a return,
statement, or other document that relates to you. This includes payers of dividends. If you do not give your SSN or ITIN to the payer of dividends,
you may have to pay a penalty.
For more information on SSNs and ITINs, see Social security number (SSN) in chapter 8.
Backup withholding.
Your dividend income is generally not subject to regular withholding. However, it may be subject to backup withholding to ensure that income tax is
collected on the income. Under backup withholding, the payer of dividends must withhold, as income tax, a percentage of the amount you are paid. For
2002, this percentage is 30%.
Backup withholding may also be required if the Internal Revenue Service (IRS) has determined that you underreported your interest or dividend
income. For more information, see Backup Withholding in chapter 5.
Stock certificate in two or more names.
If two or more persons hold stock as
joint tenants, tenants by the entirety, or tenants in common, each person may receive a share of any dividends
from the stock. Each person's share is determined by local law.
Form 1099-DIV.
Most corporations use Form 1099-DIV, Dividends and Distributions, to show you the distributions you received from them during the
year. Keep this form with your records. You do not have to attach it to your tax return. Even if you do not receive Form 1099-DIV, you must
still report all of your taxable dividend income.
Reporting tax withheld.
If tax is withheld from your dividend income, the payer must give you a Form 1099-DIV that indicates the amount withheld.
Nominees.
If someone receives distributions as a nominee for you, that person will give you a Form 1099-DIV, which will show distributions received on
your behalf.
Form 1099-MISC.
Certain substitute payments in lieu of dividends or tax-exempt interest that are received by a broker on your behalf must be reported to you on
Form 1099-MISC, Miscellaneous Income, or a similar statement. See Reporting Substitute Payments under Short Sales
in chapter 4 of Publication 550
for more information about reporting these payments.
Incorrect amount shown on a Form 1099.
If you receive a Form 1099 that shows an incorrect amount (or other incorrect information), you should ask the issuer for a corrected form. The new
Form 1099 you receive will be marked "Corrected."
Dividends on stock sold.
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.
Dividends received in January.
If a regulated investment company (mutual fund) 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. You report the dividend in the
year it was declared.
Previous | Next
Publication 17 | 2001 Tax Year Archives | Tax Help Archives | Home
