Line 3 - Dividends

Enter information from a Form 1099-DIV as described on Pub 4012 pages D-18 and D-19.

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 has been checked.
Note for CA returns: CA doesn’t recognize HSA trusts. Dividend income earned in such a trust isn’t federally taxed but is taxable for CA – see the section Health Savings Accounts in CA, page 112.

Go to the Dividend Income (Form 1099-DIV) page [Income > Form 1099-INT / 1099-DIV > Interest or Dividend Income > Dividend Income, Form 1099-DIV].
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; ignore any statement to the contrary in Pub 4491.

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:

Of the amount entered in this box, 20% flows to the Qualified Business Income (QBI) deduction.

Box 6, “Investment Expenses”, was part of the category of deductions that were subject to a 2%-of-AGI reduction; that category was eliminated from the federal Schedule A for tax years 2018 through 2025.

Note for CA returns: California conforms to federal Schedule A deductions as of 2015, so this expense is allowable as a CA itemized deduction, subject to a 2%-of-AGI reduction.

TaxSlayer handles this expense automatically; the amount entered in Box 6 flows to CA Schedule CA Part II line 21. No entry is needed in Schedule A.

Box 7, “Foreign Tax Paid”: An amount entered here will be included on Schedule 3 Line 1, Foreign Tax Credit. If this total is greater than $300 ($600 for a MFJ return), there are potential complications. See discussion in the section Foreign Tax Credit, page 89.

Box 12, “Exempt Interest Dividends”. TaxSlayer starts with the assumption that all dividends that are tax exempt on the federal return are also exempt from state tax. If that is not 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-interest dividend income is taxable by a state.

Note for CA returns: Interest and dividends from state and municipal bonds of states other than CA is taxable for the CA return. But interest and 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.

The general rule is that 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; if less than 50% were invested in CA, then all of the interest reported in box 11 is taxable by CA.
Determining the amount requires a detailed review of the broker’s statement or other documentation for the Form 1099-DIV.

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 33.

Box 16: If there’s an amount in this box, see the section State Tax Withheld, page 116.

If the 1099-DIV appears to be from a foreign source, see the section Foreign Accounts or Assets, page 32.