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How Are Dividends and Other Corporate Distributions Taxed? 
 
by kmhagen July 07, 2005

How To Report

Ordinary Dividends

You cannot use Form 1040EZ if you receive any dividend income.  You may be able to use Form 1040A.  Ordinary dividend income is reported on line 9a of Form 1040A or 1040.  If you receive any non-dividend distributions that have to be reported as capital gains, you will need to use Form 1040.

If you file Form 1040A, you will need to complete Schedule I, Part II if your dividends are more than $1,500, or if you received dividends as a nominee for someone else.  If you file Form 1040 you will need to complete Part II of Schedule B under the same circumstances.  Dividends should be reported separately by payer (which can be a brokerage firm).

Qualified Dividends

Qualified dividends are reported on line 9b of either Form 1040A or 1040, and the tax is calculated using the Qualified Dividends and Capital Gain Tax Worksheet in the Form 1040A or 1040 instructions.  If you have other capital gains or losses and are filing Schedule D, you would use the Schedule D Tax Worksheet to calculate the tax on your qualifying dividends.

Capital Gain Distributions

If you have other capital gains or losses and are filing Schedule D, you would include your capital gain distributions on Schedule D.  Otherwise, you can report capital gain distributions directly on Form 1040A or 1040.

Non-Dividend Distributions

You would only need to report non-dividend distributions if you recovered more than your basis in the stock, or you recovered less than your basis in a total liquidating distribution.  In the case you receive more than your basis, you would report the gain as a capital gain on Schedule D.  If you receive less than your basis in a liquidating distribution, you would report your loss as a capital loss on Schedule D.  The gain or loss would be short-term if you held the stock for one year or less, and  long-term if you held the stock for more than one year.

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