Lines 3a and 3b refer to Dividends you receive from stock. Qualified dividends are entered in box 3a and are eligible for a lower tax rate than other ordinary income. Generally, these dividends are shown on box 1b of Form(s) 1099-DIV. Some dividends reported aren’t qualified dividends if received as a nominee. For example, you receive it on your child’s behalf (I’m sure right now my kids are wishing they received some dividends!) The social security number listed as well as the dividend amount will decipher if you must include it on your 1040. The amount of time the stock is held along with the ex-dividend date decides if it’s a qualified dividend or not. For Ordinary Dividends, each payer should send you a Form 1099-DIV as well and should be shown in box 1a of Form(s) 1099-DIV. As previously explained, if more than $1,500 you must fill in and attach Schedule B… you know… for the IRS’ reading pleasure.
Lines 4a and 4b are for those IRA distributions you may have received. You should receive a Form 1099-R showing the total amount of any distribution from your IRA before income tax or other deductions were withheld. This should be shown in box 1. If it’s a rollover, then write “Rollover” next to line 4b, then enter 0 on line 4b. Generally, a rollover must be made within 60 days after you received the distribution. If you didn’t rollover some or all of the distribution, then refer to the distribution code on how to calculate the tax due. If more than one exception applies you can include a statement showing the amount of each exception instead of making an entry next to line 4b.
You should also receive a 1099-R if you received any Pensions or annuities (for lines 5a and 5b). The amounts before taxes will be shown in box 1 as well.
Pensions and annuities can be fully taxable if you didn’t contribute to the cost or got your entire cost back tax free before 2021.
There are exceptions for insurance premiums paid for retired public safety officers. You know… the awesome women and men who fight fires, enforce the law, or save your life (EMTs)… and soul (Chaplains).
These are just some basic information to get you started to understand these line items. As per usual, if you are unsure of your tax situation, please visit your trusted tax professional to guide you with your specific tax situation and get your taxes filed accurately and professionally.
Schedule your next tax appointment with Angie Love’s Taxes.
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