1099-B vs 1099-DIV: Key Tax Filing Differences Explained

1099-B and 1099-DIV are both investment tax forms but have different purposes. The biggest difference between 1099-B vs 1099-DIV being their reporting requirements. Form 1099-DIV focuses on reporting dividends and distributions. While Form 1099-B focuses on the sale of capital gains or losses.

In this guide, we’ll explain the difference between these two 1099 forms and how you can avoid making the mistake of misreporting dividend payments and sale/exchange of capital assets.

Understanding Form 1099-B

IRS Form 1099-B is used by brokers and barter exchanges to report proceeds from selling investments like stock, bonds, options, or futures. It’s also used to report payouts from a company restructuring or merger and when property or services changed hands through a barter exchange. The form helps the IRS track capital gains and losses.

For example, if a brokerage firm sells shares of stock or mutual funds, the sales must be reported on 1099-B.

What do you need to report on 1099-B?

Box 1a: The description of the asset that was sold or transferred.

Box 1b & 1c: The date of acquisition of the asset and the date it was sold.

Box 1d: The gross proceeds from the sales transaction before commissions or fees.

Box 1e: The cost basis (adjusted basis) of what was originally paid for the asset.

Box 2: Checkbox to indicate whether it’s a short-term gain, long-term gain, or an ordinary gain.

Understanding Form 1099-DIV

Another investment tax form we need to talk about is Form 1099-DIV. This form is filed by corporations, mutual funds, ETFs, or brokers to report $10 or more in dividends or distributions. It could either be cash, stock, or property. You can also use it to report tax withheld and foreign tax paid on their dividends as well as $600 or more in liquidation payouts.

For example, a mutual fund that distributes capital gains to their shareholders needs to report it on Form 1099-DIV.

What do you need to report on 1099-DIV?

Box 1a: The total amount of ordinary dividends received in a year

Box 1b: The dividends reported in Box 1a that qualifies for lower capital gains rate.

Box 2a: The total capital gain distributions (long-term)

Box 3: All the non-dividend distributions or return of capital.

Box 7: Any foreign tax paid on dividends and other distributions.

1099-B vs 1099-DIV: A Side-by-Side Comparison

Why Filers Often Use Both 1099-B and 1099-DIV Forms

Both 1099-B and 1099-DIV can be used at the same time under certain circumstances. Particularly, in cases where a single brokerage account is involved with both sales of assets and dividend payments.

For example, if a brokerage company pays dividends to the account holder, the filer (broker) must issue a Form 1099-DIV to report those dividend payments. And if the account holder later sells those shares, the filer must issue a Form 1099-B to report the proceeds from the sale.

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Common Mistakes Payers Should Avoid

Mistake 1: Ignoring smaller dividend payments (e.g., payments below $20)
Dividend payments should always be reported on 1099-DIV, no matter how small the payout is.

Mistake 2: Classifying dividends as qualified dividends when some are actually ordinary dividends

Some ordinary dividends that meet specific IRS criteria for preferential tax rates need to be reported on Box 1b Form 1099-DIV while ordinary dividends go on Box 1a of 1099-DIV.

Mistake 3: Reporting the wrong cost basis for inheritance

Always confirm the cost basis of inheritances that needs to be reported om 1099-B using the correct fair market value at the date of death.

Mistake 4: Not reporting foreign taxes paid

Do not forget to report taxes paid to foreign governments on Box 7 and 8 on Form 1099-DIV.

Mistake 5: Ignoring adjustments or supplemental pages

Carefully review adjustments which can affect the cost basis or the calculation of gains and losses reported on Form 1099-B.

Mistake 6: Forgetting that reinvested dividends still count as reportable income

Always report reinvested dividends, like cash payments, on Form 1099-DIV.

Filing 1099-DIV and 1099-B The Easier And Simpler Way with Tax1099

Here’s how to file 1099-DIV and 1099-B using an IRS authorized e-filing platform like Tax1099.

Step 1– Ensure every payee has a validated TIN by verifying it against IRS records using our rea-time TIN match feature. Also enable USPS Address Validation for faster delivery of recipient forms.

Step 2– Upload data using bulk Excel or CSV templates or import via supported integrations from your accounting system.

Step 3– Run automated advanced data checks to catch errors before submitting the forms. And assign reviewers with Multi‑user Access.

Step 4– Use our IRS‑compliant eDelivery feature to obtain consent from recipients and provide online, password‑protected access to their forms.

Step 5– Submit electronically to the IRS or schedule the submission in advance.

When to Use 1099-B vs 1099-DIV

1. John, an investor, sold shares of his Apple stock through his brokerage account

In this case, the broker handling John’s Apple stock transactions, must issue Form 1099-B to report the proceeds from his sale and furnish copy to him

2. Sarah has a mutual fund account that pays her quarterly dividends

If Sarah has never sold any shares, but gets dividends, the company holding her mutual fund account will file 1099-DIV and send her a copy for her to use in her tax return.

3. David reinvests his dividends into more shares and later sells them

Since David received dividends from shares and later sold them, he will receive both 1099-DIV and 1099-B. Form 1099-DIV would report the dividends he received. Then, when David sells some of his shares, Form 1099-B would be filed to report the proceeds of the sale.

4. Lena sold some of here Bitcoins via Coinbase

Lena’s cryptocurrency exchange is responsible for filing Form 1099-B to report the sale of her digital assets. She would also receive a recipient copy of the form for her own personal tax return.

FAQs

1. What is the main difference between 1099-B and 1099-DIV?

Though both 1099-B and 1099-DIV forms are investment-related tax filing forms, they are different. Form 1099-B reports proceeds from the sale or exchange of securities. While Form 1099-DIV reports dividends and other distributions paid during the year.

2. Can a recipient receive both 1099-B and 1099-DIV forms in one year?

Yes, a recipient can receive both a 1099-B and a 1099-DIV, if they received dividends and also sold investments within the year.

3. Do reinvested dividends show up on 1099-B?

No, reinvested dividends are reported on Form 1099-DIV. But there is an exception to this rule, if those reinvested shares are later sold, the sale proceeds and gain/loss will be reported on 1099-B.

4. Are both 1099-DIV and 1099-B forms required to be filed with a tax return?

An individual or entity requires the information on 1099-DIV or 1099-B for their tax returns but they do not file 1099 forms themselves.

5. What if a 1099-B is missing cost basis information?

If the broker omits the cost basis information, which is common for older assets, it falls on the recipient/investor to use their own records to determine and report it.

6. Do DRIPs (Dividend Reinvestment Plans) complicate reporting?

Yes, because each reinvestment creates a new tax lot with its own acquisition date and cost basis. Make sure to keep track of each reinvested dividend.

Stop worrying about missing cost basis or dividend details, Tax1099 will catch any errors before you file.

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