Updated October 24, 2026. Quick answer: Tax Topic 404 is the IRS page on dividends and other corporate distributions. It says dividends are ordinary or qualified, that you should get a Form 1099-DIV for distributions of at least $10, and that a return of capital is not a dividend.
Quick reference
| Item | What the IRS topic says |
|---|---|
| What a dividend is | “Dividends are distributions of earnings and profits paid by a corporation to stockholders.” |
| Qualified dividends | “qualified dividends are those ordinary dividends that qualify to be taxed at lower capital gain rates.” |
| Form 1099-DIV | “You should receive a Form 1099-DIV from each payer for distributions of at least $10.” |
| Schedule B | “If you receive over $1,500 of taxable ordinary dividends, you must report these dividends on Schedule B (Form 1040), Interest and Ordinary Dividends.” |
| Return of capital | “Distributions that qualify as a return of capital aren’t dividends.” |
Ordinary, qualified and fund distributions
The topic begins with a definition. The IRS topic says “Dividends are distributions of earnings and profits paid by a corporation to stockholders.” It notes that “While most dividends are paid in cash, you may also be issued stock, stock rights, and other property or services.”
On classification it says “Dividends can be classified either as ordinary or qualified.” It continues “While all taxable dividends are considered ordinary income, qualified dividends are those ordinary dividends that qualify to be taxed at lower capital gain rates.” The payer does the sorting: “The payer of the dividend is required to correctly identify which of your ordinary dividends are also qualified dividends when reporting them on your Form 1099-DIV, Dividends and Distributions.” See 1099-DIV boxes 1a and 1b.
Funds are covered too. The topic says “In addition to dividends, RICs and REITs may also pay capital gain distributions.” It adds “Capital gain distributions are always reported as long-term capital gains.”
Return of capital
The topic separates some payouts from dividends. It says “Distributions that qualify as a return of capital aren’t dividends.” It explains “A return of capital is a return of some or all of your investment in the stock of the company, which reduces the adjusted cost basis of your stock.”
It also says “For nondividend distributions, once the adjusted cost basis of your stock has been reduced to zero, any further nondividend distribution is a taxable capital gain.” See 1099-DIV box 3 for the nondividend box.
Form 1099-DIV and reporting
On the form, the topic says “You should receive a Form 1099-DIV from each payer for distributions of at least $10.” It also says “Only attach it to your tax return if federal income tax was withheld.”
A missing form does not remove the duty: “Even if you do not receive a Form 1099-DIV, you must still report all taxable dividend income.” For the Schedule B threshold it says “If you receive over $1,500 of taxable ordinary dividends, you must report these dividends on Schedule B (Form 1040), Interest and Ordinary Dividends.” Our Schedule B lines 5 and 6 page covers that part of the form.
On bank accounts, the topic says “Dividends paid on deposits with mutual savings banks, cooperative banks, credit unions, U.S. building and loan associations, U.S. savings and loan associations, federal savings and loan associations, and similar financial institutions are actually interest.” It refers readers to Topic no. 403 for interest and Topic no. 559 for the net investment income tax.
Where this comes from
This page describes the IRS page titled Topic no. 404, Dividends and other corporate distributions, as served on irs.gov on October 24, 2026. The IRS page shows that it was last reviewed or updated on 08 Oct 2026. The IRS can change a topic after we read it, and the IRS page controls. General information, not tax or legal advice.
Common mistakes
- Treating every dividend as qualified. The topic says “Dividends can be classified either as ordinary or qualified.”
- Waiting for a Form 1099-DIV before reporting. The topic says you must report dividends “Even if you do not receive a Form 1099-DIV”
- Calling a return of capital a dividend. The topic says such payouts “aren’t dividends”
- Treating credit union or savings bank dividends as dividends. The topic says they “are actually interest”
- Attaching every Form 1099-DIV to the return. The topic says “Only attach it to your tax return if federal income tax was withheld.”
Related: IRS tax topics by number, 1099-DIV boxes 1a and 1b, 1099-DIV box 2a: capital gain distributions, 1099-DIV box 3: nondividend distributions, Schedule B lines 5 and 6, Net investment income tax, and Dividends vs ordinary income tax comparer.
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Answer againSources
- IRS, Topic no. 404, Dividends and other corporate distributions (irs.gov): https://www.irs.gov/taxtopics/tc404
- IRS, Tax topics index (irs.gov): https://www.irs.gov/taxtopics
Read from the IRS pages linked above on October 24, 2026. General information, not tax or legal advice. The IRS topic page and the instructions for your own form control, and your own facts decide the outcome.