• Enter information from a Form 1099-DIV as described on NTTC 4012 pages D-22 to 23.
    • Warning: Form 1099-DIV, and the entire tax return, is out-of-scope if there are any entries in boxes 2c, 2d, 9, or 10, or if the “FATCA Filing Requirement” box is checked. 
    • Note for CA returns: CA doesn’t recognize HSA trusts. Dividend income earned in such a trust is taxable for CA – see the section Health Savings Accounts in CA, page 108.
  • Go to the Dividend Income (Form 1099-DIV) page [Income > Form 1099-INT / 1099-DIV > Interest or Dividend Income > Dividend Income, Form 1099-DIV].  Enter each 1099-DIV separately.

When there are multiple 1099-DIVs for multiple accounts listed on the same form (for example, Vanguard or American Funds), best practice is to enter each separately.

  • The Payer’s Name is required but can be abbreviated.
  • CA process note: The Payer’s TIN and Payer’s Address do not need to be entered.
  • CA process note: For MFJ returns, because CA is a community property state there is no need to change the default of “Taxpayer”, on the line “Taxpayer, Spouse, or Joint.”
  • Enter amounts from boxes 1a, 1b, 2a (“Total capital gain distr.”), 2b, 3, and 4 in TaxSlayer.
    • Note: Box 2b, “Unrecaptured Section 1250 Gain”, is in-scope.
    • Note: If there’s an amount in box 3, advise the taxpayer that nondividend distributions are a return of investment (principal) and reduce the cost basis of their investments. Such distributions are nontaxable.
  • Other in-scope information that appears on the Form 1099-DIV is entered as follows:
    • Box 5, “Section 199A dividends”
      • 20% of this amount entered flows to the Qualified Business Income (QBI) deduction.
    • Box 6, “Investment Expenses”, was part of the 2%-of-AGI deductions on Schedule A; that category is eliminated federally through 2025.
      • Note for CA returns: California conforms to federal Schedule A deductions as of 2015, so this expense is a CA itemized deduction, subject to a 2%-of-AGI reduction.
        • TaxSlayer handles this expense automatically; the box 6 amount flows to CA Schedule CA Part II line 21.
    • Box 7, “Foreign Tax Paid”: An amount entered here will be included on Schedule 3 Line 1, Foreign Tax Credit.  If this total exceeds $300 per taxpayer, there are potential complications. See discussion on Foreign Tax Credit, page 87.
    • Box 12, “Exempt Interest Dividends”:  TaxSlayer assumes that all federally tax-exempt dividends are also exempt from state tax. If that isn’t true, then the amount that is taxable by a state must be entered in TaxSlayer – click “ADD INTEREST ITEMS.” 
      • Generally the payer reports the percentages of the exempt income that is from various states; those figures are used to determine how much of the exempt income is taxable by a state.
      • Note for CA returns: (A).  Dividends from state and municipal bonds of states other than CA are taxable for the CA return. But dividends from U.S. territories such as Puerto Rico, Guam, and the U.S. Virgin Islands are treated the same as tax-exempt obligations issued by Calif.
        • If less than 50% of assets were invested in CA, then all box 11 interest is taxable by CA.
        • If 50% or more of the assets were invested in CA-exempt obligations, only the income that is not from those obligations is subject to CA tax.
        • Review the broker’s statement or other documentation in detail to determine the amount.
    • Box 13: To understand the context of any private activity bond (PAB) amount, see the discussion above regarding Box 9 of Interest Income on Form 1099-INT, that begins on page 31,.

Foreign Account or Assets

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