Federal Tax Return Dividends (Dumb) Question

[Mo Money]

I have always (correctly) claimed to be math- and tax-challenged when posting on this wonderful site. Here is some more proof for that claim:

A recent thread about bond investing had some wise insights on how a position in a bond "bucket" can be drawn upon longer than many might believe, because in a down market (when you might not want to sell stocks), you can spend dividends before turning to selling bonds. That insight never occurred to me...

So I just revisited my 2016 Form 1040 to determine my dividends for last year. (I do have my dividends paid to me instead of being reinvested.)

Using fictitious numbers for privacy, say Line 9a has $20,000 in ordinary dividends and Line 9b has $10,000. While I understand that the dividends on 9a and 9b are taxed differently, is Line 9b a subset of 9a? That is, were my total 2016 dividends $20,000 (Line 9a), or $30,000 (Line 9a + 9b)?

I suspect the answer is $20,000, but I know you folks will get it right...

 

[LOL!]

Using fictitious numbers for privacy, say Line 9a has $20,000 in ordinary dividends and Line 9b has $10,000. While I understand that the dividends on 9a and 9b are taxed differently, is Line 9b a subset of 9a? That is, were my total 2016 dividends $20,000 (Line 9a), or $30,000 (Line 9a + 9b)?

I suspect the answer is $20,000, but I know you folks will get it right...

Yes, line 9b is included in line 9a. Line 9a is ALL ordinary dividends. Line 9b is qualified ordinary dividends. That is, line 9a include qualified ordinary dividends and non-qualified ordinary dividends.

Something similar happens on your 1099-DIV forms.

There are non-ordinary dividends reported elsewhere, but we are not talking about those. Very often one reads "qualified dividends" with the word "ordinary" left out which just leads to confusion.

See also the instructions for Form 1040 Schedule B and IRS Publication 550. One has to be able to read, but no math is involved.

One can spend equity fund dividends just as surely as one can spend bond fund dividends. Money is money.

 

[Mo Money]

There are non-ordinary dividends reported elsewhere, but we are not talking about those.

Pray tell: Where are the other dividends reported? (I am hoping your answer will be something like: "Look at line 117b." But I should know better... )

 

[FIRE'd@51]

Line 9b is a subset of line 9a, so in your example your total dividends would be 20K (the amount shown on line 9a). Actually it's line 9a minus line 9b that is taxed as ordinary income, while line 9b is taxed at the lower qualified dividend rate.

 

[euro]

I don't necessarily consider myself mathchallenged but I have tripped over this myself in the past. As LOL says, 9b is included in line 9a, but there seems to be no consistency on the forms and terms various companies use to report this, so it CAN get confusing at times.

 

[LOL!]

Pray tell: Where are the other dividends reported? (I am hoping your answer will be something like: "Look at line 117b." But I should know better... )

Tax-exempt interest from tax-exempt bond funds is non-ordinary, but whether it is dividends or interest is another matter. It is reported on line 8b.

But maybe google can find non-ordinary dividend for you?

 

[Mo Money]

Trust me, this is not a LMGTFY scenario; I was there quite a while before I posted!

 

[FIRE'd@51]

Some confusion may be arising from the fact that most mutual fund interest gets reported as an ordinary dividend (e.g. money market funds), whereas taxable interest (e.g. from an individual bond or T-bill) ends up on line 8a. The breakdon is shown more clearly on Schedule B.

 

[LOL!]

Trust me, this is not a LMGTFY scenario; I was there quite a while before I posted!

OK, it's not non-ordinary dividend, but it is non-ordinary income:
Capital gains income. Goes on Schedule D and flows to Line 13.