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Stocks (Options, Splits, Traders)

Question: How are reinvested dividends reported on my tax return?

Answer:

When dividends are reinvested on your behalf and used to purchase additional shares or fractions of shares for you:

  • If the reinvested dividends buy shares at a price equal to their fair market value, you must report the dividends as income along with any other ordinary dividends.
  • If you are a member of a dividend reinvestment plan that lets you buy more stock at a price less than its fair market value, you must also report as dividend income the fair market value of the additional stock on the dividend payment date.

Report your reinvested dividends with your other dividends if any, on Form 1040 or Form 1040A, U.S. Individual Income Tax Return. You must complete Schedule B (Form 1040A or 1040) and attach it to your Form 1040 or Form 1040A, if your ordinary dividends (in box 1a of Form 1099-DIV, Interest and Ordinary Dividends) and your reinvested dividends are more than $1,500.

Note: Keep records of the amount of the reinvested dividends, the number of additional shares purchased, and the purchase dates. You will need this information to establish your basis when you sell the shares.

Additional Information:


Category: Capital Gains, Losses, and Sale of Home
Subcategory: Stocks (Options, Splits, Traders)

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The OMB number for this study is 1545-1432.
If you have any comments regarding this study, please write to:
IRS, Tax Products Coordinating Committee
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