Every year during tax season, many taxpayers are surprised to receive 1099 forms in the mail. Both of these forms are the most frequently received forms and are about the income you have earned outside of your regular job. But how are these forms different from each other, and how do they affect our taxes?
In this blog, we will unfold 1099-INT vs 1099-DIV, explain what each form reports, and help you understand how they fit into your overall tax return.
What is a 1099 INT?
Basically, the 1099-INT Form serves the purpose of reporting any interest income you have earned from a bank, credit union, or other financial institution during the Year. You will receive this form if you earn at least $10 in interest.
Familiar Sources of Interest Income:
- Savings accounts
- Certificates of deposit
- U.S. Treasury bonds or savings bonds
- Interest-bearing checking accounts
Key Boxes on 1099-INT:
- Box 1: Interest income
- Box 2: Early withdrawal penalties
- Box 3: Interest on U.S. savings bonds and Treasury obligations
- Box 4: Federal income tax withheld
Note: You have to report it on your tax return, even if you earned less than $10 in interest.
What Is a 1099 DIV?
The IRS requires financial institutions to issue Form 1099-DIV when you earn $10 or above in dividends from assets like mutual funds, stocks or ETFs. This form is sent by the company or brokerage managing your income.
Common Sources of Dividend Income:
- Corporate stock dividends
- Mutual fund distributions
- Real estate investment trusts
Key Boxes on 1099-DIV:
- Box 1a: Total ordinary dividends
- Box 1b: Qualified dividends, eligible for lower tax rates
- Box 2a: Capital gain distributions
- Box 4: Federal income tax withheld
The qualified dividends may be taxed at the lower capital gains rate, while ordinary dividends are taxed as regular income.
1099 INT vs 1099 DIV:
Both of these forms are different. 1099-INT vs. 1099-DIV lies in the type of income they report, interest from savings or bonds vs. dividends from investments. Both are important to your tax return, understanding these forms can help you file with confidence.
| Features | 1099-INT | 1099-DIV |
| Reports | Interest income | Dividend income |
| Sources | Banks, CDs, Bonds | Stock, Mutual Fund |
| Minimum Amount to File | $10 | $10 |
| Tax Treatment | Ordinary Income | Ordinary or Capital Gain |
| Received Form | Banks & Credits Union | Corporations, Brokerages |
Final Thoughts:
1099-INT and 1099-DIV report different types of income. 1099 INT shows interest from banks, savings accounts, or bonds. 1099-DIV shows dividends from stocks, mutual funds, or other investments. Interest income is taxed as regular income.
Dividends can be taxed as regular income or at a lower rate if they are qualified. Both forms affect your tax return and should be included when filing. Knowing which income comes from which form helps you stay organized and file correctly.
At E-file Workforce Payroll, we understand the complexities of tax reporting and can help streamline your payroll and tax filing processes. Let us assist you in managing your tax documents accurately and efficiently, ensuring that your business stays compliant year-round.
FAQ’s
Can I Receive Both 1099-INT and 1099-DIV?
Yes! Many people receive both a 1099-INT and a 1099-DIV in the same year. The banks, brokerages, and investment accounts may issue both if they offer interest and dividends.
Do I need to report both 1099 INT and 1099 DIV on my taxes?
Yes! You need to report both 1099-INT and 1099-DIV. Below is the simple breakdown to make you understand:
- Form 1099-INT reports interest income from savings accounts or CS’s.
- From 1099-DIV reports dividend income from stocks, mutual funds or other investments.
The IRS also gets a copy of these forms. So, if you don’t report them, it could lead to a notice, additional taxes or other possible penalties.
What happens if I forget to report 1099-INT or 1099-DIV?
If you forget to report these forms, banks and investment companies will send information directly to the IRS. And probably the IRS will catch it and send you a letter. This notice is called the CP2000 notice.
You can end up owing more tax, including some interest and penalties.
Solution: If you realize you forgot something, you can fix it by filing an amended tax return using Form 1040-X.
Are 1099 DIV and 1099 INT taxed differently?
Yes! From 1099-INT, the interest income is taxed like your regular income. Dividends from 1099-DIV can be a bit different. Some are taxed like regular income, but qualified dividends usually get a nicer, lower tax rate.
