A nominee dividend is a dividend reported to you on Form 1099-DIV that actually belongs to someone else. This commonly occurs when an investment account is held jointly or when you receive dividends on behalf of another person.
Since the IRS receives a copy of the Form 1099-DIV, you'll generally need to report the full amount shown on the form. However, you can adjust for the portion that belongs to the other individual so that you're taxed only on the dividends that are actually yours. For example, if you receive a Form 1099-DIV reporting dividends from a jointly owned investment account, part of those dividends may belong to the other account holder. In that case, the nominee portion is not taxable to you.
How Do I Report Nominee Dividends?
When entering your Form 1099-DIV information, report the total amount shown on the form and then enter the portion that belongs to someone else as a nominee dividend adjustment.
Keep in mind:
- The nominee dividend amount cannot exceed the Ordinary Dividends amount reported in Box 1 of Form 1099-DIV.
- Only the portion of ordinary dividends that belongs to another person should be entered as a nominee dividend.
What About Nominee Capital Gain Distributions?
- Reduce the capital gain distribution amount by the nominee portion before reporting it on your return.
- Do not enter nominee capital gain distributions as nominee dividends.
Why Is This Important?
- Match the information reported to the IRS.
- Avoid paying tax on income that belongs to someone else.
- Ensure the actual owner reports the income on their own tax return.
- Reduce the likelihood of IRS notices related to income mismatches.
Common Example
- Box 1a Ordinary Dividends: $1,000
- Box 2a Capital Gain Distributions: $500
- Enter the full $1,000 dividend amount from the Form 1099-DIV.
- Enter $400 as nominee dividends.
- Reduce the reported capital gain distribution amount by $100.
- Do not include that $100 in the nominee dividend field.