Reporting Dividends & Taxable Interest?
Question:
On line 16 of my NJ-1040 (state return), the line states:
16. Dividends..____ ***Do I list $500.00?
The instructions on the Federal 1040 state to only calculate "Total Income" using amount "A" ORDINARY Dividends.
I have a few specific questions:
1. Do I list Dividens on both my State and Federal returns?
2. Which amounts/which dividens go on each?
3. To calculate TOTAL INCOME on my Federal 1040 I included "Taxable Interest" on an interest bearing Money Market account that I have- line 8a Fed. 1040. I transfer money in and out of this account occasionally.
I also included the Taxable Interest on the stock (that has the 2 types of dividends) ***Note I never sold the stock that I purchased in '06 (Dividends and Taxable Interest).
THANKS!
Answer:
According to the instructions for Form 1099-DIV (link below), the amount reported in box 1b (Qualified Dividends) is that portion of the dividends in box 1a (Total Ordinary Dividends) that qualify for the 5% and 15% capital gains rates. Therefore, the amount in box 1b can never be more than the amount in box 1a. However, you've indicated that box 1a is $200 and box 1b is $300. This seems to be a mistake, and you should look at the detail in your broker's tax reporting statement to reconstruct how these numbers were determined. In any event, the dividends in boxes 1a and 1b are never added together. As it stands now, your total dividends are $200, not $500. If you arrive at different numbers, use them instead of what was reported to you on Form 1099-DIV, and include a note at the back of your return explaining why you have made the change.
To answer your questions:
1. Dividends are reported on both State and Federal tax returns.
2. Unless you determine otherwise from looking at the detail in your broker's statement, the total dividends are $200, which goes on Form 1040, line 9a. The qualified dividends you should report on line 9b is $200, not $300, because the qualified dividends cannot exceed the total dividends.
3. The taxable interest on line 8a is the interest that you've earned in your Money Market account. It does NOT include any earnings on the stock, because that has already been reported as dividends on line 9a. There is no taxable interest on stock, only dividends and capital gains.
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