Cash liquidation distribution proceedings are intimated through the Form 1099-DIV.When a corporation liquidates its assets in part or in entirety, the corporation may issue liquidating distributions, also known as liquidating dividends, to its stockholders.
Simply put, instead of receiving .24 in dividends, the company automatically purchases for you however many shares (or portions of a share) that .24 will buy.
This nets you a little more stock each time, so that, ultimately, you end up with more shares than you started with.
Do you know how it affects your taxes or your investments? Regardless, you should still understand what is reported on the 1099-DIV, the tax consequences of each box, and how it might affect your investments.
Unfortunately, not all dividends and distributions are taxed the same. In turn, it might even help you build a more tax efficient investment strategy and lower your taxes in the long run.
Specifically, it is important to understand the different types of dividends, what you can expect as far as paying taxes on them, and how to read the 1099-DIV tax form so you’re adequately prepared.
There are three main categories of money you might receive: ordinary dividends, qualified dividends, and capital gain distributions. Keep in mind that you must report all dividends received on your taxes, but the company that paid dividends doesn’t have to send you a 1099-DIV unless you received more than that year.You may receive dividends in stock or cash, and you can frequently reinvest cash dividends to buy more stock.Depending upon how you receive dividends, you may need to plan ahead for tax day.Form 1099-DIV is one form you get when your investments pay out dividends and distributions.If you’re like me, it means you spend a little more quality time with tax software each year. But do you really understand what is reported in each box of a 1099-DIV?The Form 1099-DIV is issued by banks, brokers, and fund companies when you earn at least in dividends and distribution.