Form 1099-DIV is a tax document issued by banks and financial institutions to report dividends and other distributions to taxpayers and the IRS. Typically, you’ll receive this form when an investment, such as stocks or mutual funds, pays dividends or capital gains distributions during the year. While receiving this form may seem daunting, it’s simply for tax reporting purposes. The information it contains is crucial for accurately filing your taxes, as the IRS also receives a copy. To avoid penalties and interest, it’s important to report this income correctly and file on time. This guide will walk you through everything you need to know about Form 1099-DIV.
Key Takeaways
- Companies, banks, other financial institutions, and investment companies must file form 1099-DIV if they paid dividends and distributions amounting to $10 or more, withheld and paid any foreign tax on dividends and other distributions on stock, withheld any federal income tax on dividends under the backup withholding rules or paid $600 or more as part of a liquidation.
- 1099-DIV must be provided to the taxpayers by January 31st each year.
- Taxpayers must report the information of 1099-DIV they received on their tax returns. IRS will receive a copy of the filed Form 1099-DIV and will match it on your tax return. Be sure you are not underreporting your income to avoid receiving a notice.
- Late filing of Form 1099-DIV will result in a $120 – $630 penalty plus interest.
- Intentional disregarding of filing 1099-DIV will result in a minimum penalty of $630 or 10% of the aggregate dollar amount of the items required to be reported correctly in which there is no maximum penalty plus the interest.
What is the Purpose of Form 1099-DIV?
Wondering why you received a 1099-DIV? Form 1099-DIV is an informational return issued by banks, financial institutions, and investment companies to report dividends and other distributions to both taxpayers and the IRS. You typically receive this form when your investments, such as stocks or mutual funds, pay out dividends or capital gain distributions during the calendar year. The form includes details such as ordinary and qualified dividends, capital gain distributions, and any federal or state taxes withheld.
The purpose of Form 1099-DIV is to inform you of the income you received and to ensure that the IRS is aware of this income. This allows the IRS to track and confirm proper reporting on your tax return. Taxpayers use the information from Form 1099-DIV to accurately report their dividend income, either on Schedule B or directly on Form 1040. It’s important to note that receiving this form doesn’t automatically mean you owe taxes. If you’re uncertain about how to proceed, it’s advisable to consult your tax accountant.
Companies, banks, and other financial institutions must provide Form 1099-DIV to investors by January 31 each year, but it is only issued if the dividends and distributions exceed $10.
Do I Need to File Form 1099-DIV?
You will need to file form 1099-DIV if you met one or more of the following:
- You paid dividends and distributions amounting to $10 or more,
- withheld and paid any foreign tax on dividends and other distributions on stock,
- withheld any federal income tax on dividends under the backup withholding rules or paid $600 or more as part of a liquidation.
Documents Required to File Form 1099-DIV
You can request a copy of Form W-9 from the person or entity to whom you will issue 1099-DIV. Form W-9 will show the required basic information of the recipient such as full name, address, social security number, and Employer Identification Number.
What’s the Due Date and Where Can I File Form 1099-DIV?
The due date of filing this form will depend on the filing type.
- Recipient Copy: The deadline to provide to the recipient is January 31
- IRS Paper Filing: February 28
- E-fiilng with the IRS: March 31
Form 1099-DIV can be filed electronically using the IRS Filing Information Returns Electronically (FIRE), IRS Affordable Care Act Information Returns (AIR) program, Information Reporting Intake System (IRIS), or other IRS Authorized e-File Service Providers such as Tax1099 and Track1099.
The Importance of Filing Form 1099-DIV
Filing 1099-DIV is important as it will be a basis for the investors in reporting their tax returns and to avoid underreporting of income. The IRS receives a copy of Form 1099-DIV and if you did not report it on your tax return, the IRS might send you a notice for underreporting your income and might charge additional penalties and interest.
If the entity intentionally disregards to provide a correct Form 1099-DIV, it’s subject to a minimum penalty of $580 per form (tax year 2023), $630 per form (tax year 2024), or a 10% of the aggregate dollar amount of the items required to be reported correctly and there is no maximum penalty for it plus interest.
Common Errors Seen on Form 1099-DIV
Common errors often occur on paper-filed Form 1099-DIV, particularly in the basic information of the payer or recipient, the tax identification number, the reported amount, the tax year, and incorrectly checking boxes or filing the form when it isn’t necessary. To avoid the need for filing a corrected form, it’s crucial to carefully review and verify all the information on the form before submitting it. To avoid these errors and ensure your 1099-DIV is filed accurately, contact us and let us handle filing your Form 1099-DIV.
What if I File Form 1099-DIV Late?
Filing Form 1099-DIV late can result in penalties and interest charges. The penalties are as follows for 2024 tax year:
- $60 if filed up to 30 days late.
- $120 if filed between 31 days late and August 1.
- $310 if filed after August 1 or not filed at all.
Additionally, the IRS imposes interest on these penalties, which starts accruing from different dates depending on the penalty type and continues to increase until the full balance is paid.
Can Cleer Tax help me File Form 1099-DIV?
Yes, absolutely! We can help you file 1099-DIV for as low as $199 for each Individual or Entity.
Cleer also provides Corporate Income Tax Packages encompassing federal and state income tax filings for a hassle-free experience. We also offer all-inclusive bookkeeping packages, which include your monthly statements plus your federal and state tax returns. If you need help getting up to date on your books, we also offer support for companies that have fallen behind on their bookkeeping with our bookkeeping catch-up package.
If you need any help reducing your tax liability, schedule a consultation, or feel free to contact us.
