Chapter 4

Dividend and Interest Income

Dividends and interest that are paid to you in 2012 are reported by the payer to the IRS on Forms 1099.

You will receive copies of:

• Forms 1099-DIV, for dividends
• Forms 1099-INT, for interest
• Forms 1099-OID, for original issue discount

Dividends paid by most domestic corporations and many foreign corporations are subject to the same preferential tax rates as net long-term capital gains (4.2).

Report the amounts shown on the Forms 1099 on your tax return. The IRS uses the Forms 1099 to check the income you report. If you fail to report income reported on Forms 1099, you will receive a statement asking for an explanation and a bill for the tax deficiency. If you receive a Form 1099 that you believe is incorrect, contact the payer for a corrected form.

Do not attach your copies of Forms 1099 to your return. Keep them with a copy of your tax return.

4.1 Reporting Dividends and Mutual-Fund Distributions

4.2 Qualified Corporate Dividends Taxed at Favorable Capital Gain Rates

4.3 Dividends From a Partnership, S Corporation, Estate, or Trust

4.4 Real Estate Investment Trust (REIT) Dividends

4.5 Taxable Dividends of Earnings and Profits

4.6 Stock Dividends on Common Stock

4.7 Dividends Paid in Property

4.8 Taxable Stock Dividends

4.9 Who Reports the Dividends

4.10 Year Dividends Are Reported

4.11 Distribution Not Out of Earnings: Return of Capital

4.12 Reporting Interest on Your Tax Return

4.13 Interest on Frozen Accounts Not Taxed

4.14 Interest Income on Debts Owed to You

4.15 Reporting Interest on Bonds Bought or Sold

4.16 Forfeiture of Interest on Premature Withdrawals

4.17 Amortization of Bond Premium

4.18 Discount on Bonds

4.19 Reporting Original Issue Discount on Your Return

4.20 Reporting Income on Market Discount Bonds

4.21 Discount on Short-Term Obligations

4.22 Stripped Coupon Bonds and Stock

4.23 Sale or Retirement of Bonds and Notes

4.24 State and City Interest Generally Tax Exempt

4.25 Taxable State and City Interest

4.26 Tax-Exempt Bonds Bought at a Discount

4.27 Treasury Bills, Notes, and Bonds

4.28 Interest on United States Savings Bonds

4.29 Deferring United States Savings Bond Interest

4.30 Minimum Interest Rules

4.31 Interest-Free or Below-Market-Interest Loans

4.32 Minimum Interest on Seller-Financed Sales