1) Q: I know I earned dividends on an investment, but I did not receive a 1099. How should I go about figuring out how much income to report?

A: Make sure the dividends are not earned on an investment in an IRA account or tax deferred account. If that is the case the dividends should not be reported. Assuming the dividends are earned on a regular account try to contact the institution and request a duplicate 1099. If that is not possible, calculate the interest earned based on the statements that you have available.

Example: A taxpayer has $10,000 invested in a Mutual Fund but can not find the 1099 stating how much dividends were paid on that investment. The taxpayer contacts the institution holding the fund and asks them to fax him a copy of the 1099 so he will have the exact amount to report.

2) Q: I earned dividends on municipal bonds. How should I report this?

A: If the dividends are earned on municipal bonds issued by the state in which you are a resident, no tax is payable but you still need to report the amount of dividends you earned. If you are a non-resident, you will have to pay state taxes.

Example: A Los Angeles resident invested in a security issued by the city of Baker, California. The Los Angeles resident will not have to pay taxes on the dividends earned because he lives in the same state in which the bond was issued

3) Q: I earned dividends on money in a foreign investment. How should I report this?

A: Americans are taxed on their worldwide income so these dividends must be reported and it will be taxable. If foreign taxes were paid on this income the amount that was paid can be offset against US Federal taxes using the foreign tax credit. This tax credit prevents double taxation.

Example: An American citizen invests in a Canadian company. The American citizen receives a year-end statement detailing the dividends he earned and the Canadian taxes remitted to the Canadian Government. The American citizen must report the dividends earned on his tax return, but he can offset some of these taxes using the foreign tax credit.

4) Q: I earned dividends on investments held in a partnership. How should this be reported?

A: Earnings generated through a partnership will be reported to you on a K-1 form. There is a special line on this form for dividend income. The dividends should be reported along with other dividend income separately from the rest of the partnership income.

Example: A taxpayer owns a 10% share in a partnership. The partnership invests its cash reserve in a mutual fund. This investment earns some dividend income. When the taxpayer receives his K-1 stating his share of the partnership income there is a separate line for the dividend income earned. The taxpayer reports this amount on his return on Schedule B along with other dividend income.