What's New for 2002?
Recent legislation reduced the backup withholding rate. The backup
withholding rate will be 30% for reportable payments made in 2002 and
2003.
An Item To Note
In addition to these specific instructions, you should also use the
2002 General Instructions for Forms 1099, 1098, 5498, and W-2G.
Those general instructions include information about:
- Backup withholding
- Magnetic media and electronic reporting requirements
- Penalties
- When and where to file
- Taxpayer identification numbers
- Statements to recipients
- Corrected and void returns
- Other general topics
You can get the general instructions from the IRS Web Site at
www.irs.gov or by calling 1-800-TAX-FORM (1-800-829-3676).
Specific Instructions for Form 1099-DIV
File Form 1099-DIV, Dividends and Distributions, for
each person:
- To whom you have paid dividends (including capital gains
dividends) and other distributions on stock of $10 or more,
- For whom you have withheld and paid any foreign tax on
dividends and other distributions on stock,
- For whom you have withheld any Federal income tax under the
backup withholding rules, or
- To whom you paid $600 or more as part of a
liquidation.
Dividends
If you make a payment that may be a dividend but you are unable to
determine whether any part of the payment is a dividend by the time
you must file Form 1099-DIV, the entire payment must be reported as a
dividend. See regulations under section 6042 for a definition of
dividends.
Exceptions
You are not required to report on Form 1099-DIV the following:
- Taxable dividend distributions from life insurance
contracts. Taxable dividend distributions from life insurance
contracts are reported on Form 1099-R, Distributions From
Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs,
Insurance Contracts, etc.
- Exempt-interest dividends from regulated investment
companies. Exempt-interest dividends from regulated investment
companies retain their tax-exempt status and are not reported on Form
1099-DIV or 1099-INT, Interest Income. Instead, see section
852(b)(5) for reporting requirements.
- Substitute payments in lieu of dividends. For
payments received by a broker on behalf of a customer in lieu of
dividends as a result of the transfer of a customer's securities for
use in a short sale, see Box 8 in the 2002
Instructions for Form 1099-MISC.
- Payments made to certain payees. Payments made to
certain payees including a corporation, tax-exempt organization, any
IRA, U.S. agency, state, the District of Columbia, U.S. possession, or
registered securities or commodities dealer are not reported on Form
1099-DIV.
Certain distributions commonly referred to as dividends are
actually interest and are to be reported on Form 1099-INT. These
include so-called dividends on deposit or on share accounts in
cooperative banks, credit unions, domestic building and loan
associations, domestic and Federal savings and loan associations, and
mutual savings banks.
Section 404(k) Dividend
Report on Form 1099-DIV dividends distributed under section 404(k)
on stock held by an employee stock ownership plan (ESOP) or a tax
credit ESOP. If a section 404(k) distribution is made in the same year
as a total distribution from the ESOP, you may report the entire
amount on Form 1099-R or you may report the dividends on Form 1099-DIV
and the remaining amount on Form 1099-R.
Section 404(k) dividends are
not subject to backup withholding.
RICs and REITs
Dividend payment delayed until January.
If a regulated investment company (RIC) or a real estate investment
trust (REIT) declares a dividend in October, November, or December
payable to shareholders of record on a specified date in such a month,
the dividends are treated as paid by the RIC or REIT and received by
the shareholders on December 31 of such year as long as the dividends
are actually paid by the RIC or REIT during January of the following
year. Report the dividends on Form 1099-DIV for the year preceding the
January they are actually paid. See sections 852(b)(7) and 857(b)(9).
If a dividend paid in January is subject to backup withholding,
withhold when the dividend is actually paid. Therefore, backup
withhold in January, deposit the withholding when appropriate, and
reflect it on Form 945, Annual Return of Withheld Federal
Income Tax, for the year withheld. However, since the dividend is
reportable on Form 1099-DIV in the prior year, the related backup
withholding is also reportable on the prior year Form 1099-DIV.
Qualified 5-year gain.
If any part of the capital gain distribution reported in box 2a is
qualified 5-year gain, report the gain in box 2c, Qualified
5-year gain. Taxed at a rate of 8%, qualified 5-year gain is the
aggregate long-term capital gain taken into account by the RIC or REIT
in a tax year beginning after December 31, 2000, from property held
for more than 5 years. The qualified 5-year gain is determined without
regard to collectibles gain, unrecaptured section 1250 gain (described
in section 1(h)(7)(A)(i)) from certain depreciable real property, and
gain on qualified small business stock.
Qualified small business stock - RICs.
Under section 1202, a 50% exclusion may be allowed on the gain from
the sale or exchange of qualified small business stock (QSBS) issued
after August 10, 1993, and held for more than 5 years. If any part of
the capital gain distribution reported in box 2a may qualify for this
exclusion (taking into consideration the shareholder's holding
period), report the gain in box 2e, and furnish the recipient a
statement that reports separately for each designated section 1202
gain the:
- Name of the corporation that issued the stock that was
sold,
- Date(s) on which the RIC acquired the stock,
- Date sold,
- Shareholder's part of the sales price,
- Shareholder's part of the RIC's basis in the stock,
and
- Amount of the shareholder's section 1202 gain.
Restricted Stock
For information about reporting dividends on restricted stock, see
Rev. Procs. 80-11, 1980-1 C.B. 616, and 83-38, 1983-1 C.B. 773, and
Rev. Rul. 83-22, 1983-1 C.B. 17.
Statements to Recipients
If you are required to file Form 1099-DIV, you must provide a
statement to the recipient. For information about the requirement to
furnish an official or acceptable substitute Form 1099-DIV to
recipients in person or by statement mailing, see part H in
the 2002 General Instructions for Forms 1099, 1098, 5498, and
W-2G.
2nd TIN Not.
You may enter an X in this box if you were notified by the
IRS twice within 3 calendar years that the payee provided an incorrect
taxpayer identification number (TIN). If you mark this box, the IRS
will not send you any further notices about this account.
Box 1. Ordinary Dividends
Enter ordinary dividends, including dividends from money market
funds, net short-term capital gains from mutual funds, and other
distributions on stock. Include reinvested dividends and section
404(k) dividends. Include the recipient's share of investment expenses
that you report in box 5.
An S corporation reports as dividends on Form 1099-DIV only
distributions made during 2002 out of accumulated earnings and
profits. See section 1368 for more information.
Box 2a. Total Capital Gain Distr.
Enter total capital gain distributions (long-term). Include all
amounts shown in boxes 2b, 2c, 2d, and 2e.
For more information about reporting amounts in boxes 2a through
2e, see Notice 97-64, 1997-2 C.B. 323, and section 1(h).
Box 2b. 28% Rate Gain
Enter any amount included in box 2a that is a 28% rate gain from
sales or exchanges of collectibles.
Box 2c. Qualified 5-Year Gain
Enter any amount included in box 2a that is a qualified 5-year
gain. See Qualified 5-year gain on page DIV-1.
Box 2d. Unrecap. Sec. 1250 Gain
Enter any amount included in box 2a that is an unrecaptured section
1250 gain from certain depreciable real property.
Box 2e. Section 1202 Gain
Enter any amount included in box 2a that is a section 1202 gain
from certain qualified small business stock. See Qualified small
business stock - RICs on page DIV-1.
Box 3. Nontaxable Distributions
Enter nontaxable distributions, if determinable.
File Form 5452, Corporate Report of Nondividend
Distributions, if you pay nontaxable distributions to shareholders.
Box 4. Federal Income Tax Withheld
Enter backup withholding. For example, if a recipient does not
furnish its TIN to you in the manner required, you must backup
withhold at a 30% rate on certain dividend payments reported on this
form. Use Form W-9, Request for Taxpayer Identification
Number and Certification, to request the TIN of the recipient.
Box 5. Investment Expenses
Enter the stockholder's pro rata share of certain amounts
deductible by a nonpublicly offered RIC in computing its taxable
income. This amount is includible in the stockholder's gross income
under section 67(c) and must also be included in box 1.
Box 6. Foreign Tax Paid
Enter any foreign tax withheld and paid on dividends and other
distributions on stock. A RIC must report only the amount it elects to
pass through to the shareholder. Report this amount in U.S. dollars.
Box 7. Foreign Country or U.S. Possession
Enter the name of the foreign country or U.S. possession to which
the withheld tax applies.
Boxes 8 and 9 apply only to corporations in partial or complete
liquidation. Do not include these amounts in
box 1.
Box 8. Cash Liquidation Distr.
Enter cash distributed as part of a liquidation.
Box 9. Noncash Liquidation Distr.
Enter noncash distributions made as part of a liquidation. Show the
fair market value as of the date of distribution.
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