Why it matters
The form tells the preparer which dividends qualify for the lower capital gains rate and which are taxed as ordinary income. Reporting the total without the categories can overstate the tax.
Example
A client holds mutual funds in a taxable account. The fund company sends Form 1099-DIV, and the preparer reports the ordinary and qualified dividends on Schedule B and the return.
Related terms
Questions about Form 1099-DIV
Are all dividends taxed at the same rate?
No. Qualified dividends generally receive the lower capital gains rate, while ordinary dividends are taxed at the ordinary income rate. The form separates the amounts.
What is a capital gain distribution?
It is a distribution of gains the fund realized on its investments. It is reported on Form 1099-DIV and may be taxed as a capital gain even if the taxpayer did not sell the fund.