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1099 Div Box 2a Form: What You Should Know

Dividends and Capital Gains — Capital Gains and Dividends As capital gains distributions come from mutual funds or the exchange-traded funds that make them, you should keep a close watch on the price and the amount of income you expect to receive on both types of distributions. As a general rule, you Dividends are normally treated as taxable income, subject to some exceptions. The dividends from exchange-traded funds that earn the dividends reported on box 2a will generally be subject to the standard tax rate, just like the dividends reported on your Form 1099-DIV. In general, there are two types of capital losses due to short-term events for dividends that are not capital gain distributions.

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FAQ - 1099 Div Box 2a

How does income tax on mutual funds work?

The tax treatment of mutual fund income can be complicated, because mutual funds by their nature will invest in multiple types of securities and the types of income earned can cross a number of boundaries. In the typical case, where you invest a sum of cash in the fund and then just let the fund manage it, you will still typically earn interest (some of which may be tax-exempt), dividends (some of which may be tax-exempt), and capital gains (even if you don't sell shares of the mutual funds yourself).Normally, you will receive a consolidated Form 1099 from the fund, which will usually include a Form 1099-INT and a Form 1099-DIV. Mostu00a0 of the time, if all you do is invest money and let the mutual fundu00a0 manage it, there will be no other entries or forms provided to you.The Form 1099-INT, if you get one, will show your taxable interest income in Box 1 and your tax-exempt interest income (if any) in Box 8, and may also have an entry in Box 9 (which represents the portion of tax-exempt interest income that is subject to Alternative Minimum Tax, or AMT). Taxable interest is reported on line 8a of form 1040, tax-exempt interest on line 8b; you only worry about line 9 if you are subject to AMT.Form 1099-DIV normally has several entries that you would need to report. Ordinary dividends (box 1a) are reported on line 9a of your Form 1040, qualified dividends (box 1b) are reported on line 9b. Box 2a contains capital gains distributions - these are distributions of capital gains that the fund manager makes to all of the shareholders based on the fund's performance over the year, and you receive them even when you yourself had no transactions during the year. These are reported as long-term capital gains, either on Schedule D or directly on line 13 of Form 1040 (if you had no other capital gains or losses during the year). Box 10 and Box 11 show tax-exempt dividends and the portion of tax-exempt dividends subject to AMT, respectively - you report them as you do tax-exempt interest.Normally, you wouldn't need to pay estimated taxes quarterly on an investment as small as $10,000 - your annual rate of return is usually somewhere between 10-15% and it's taxed at a maximum rate of 15%.

How do I check my tax return?

Check the spelling of all names and double check all SSNs. Typos in these are among the most common errors! Make sure the name is entered exactly the way it is on your SS cardif you just got married, but have not changed your name with Social Security and gotten a new card, use your pre-marraige/maiden name on your taxes.Make sure you use the same taxpayer/spouse order that you used last year if you are married filing jointly - the IRS does not care whose name is first, but they DO care that it is in the same order.If you are using tax software, donu2019t worry about the calculations, check that the basic numbers look reasonable. Almost all your income is feeding into the first 6 lines of the 1040. If the numbers feeding in here match your income documents, you are probably fine. Check the biggest numbers.WAGES: Look at the wages line on your 1040 (Line 1 on the new form) and add up the gross wages from all your W-2s (the numbers in Box 1 on each W-2). Compare those two numbers - they should be the same. (NOTE: If you are paid on a 1099-MISC, add that in, too.)BUSINESS/SIDE-GIGs: Check the income and total deductions on Schedule C - are they about what you expected? Keep good records! This data is all your responsibility.INTEREST/DIVIDENDS: Check the totals on Lines 2a and 3a against your documents (1099-INT, 1099-DIV for the most part)CAPITAL GAINS: Check the total gain/loss reported on Schedule D. Does it match your brokerage statement? (1099-B)PENSIONS/ANNUITIES/SOCIAL SECURITY - do the totals on Lines 4a and 5a match your documents? (1099-R, 1099-SSA, 1099-RRB are the most common documents here)There are, of course, always bits and pieces that can be missed, but this should have gotten most of the error-prone spots.

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