How to Report Cash in Lieu of a Stock Dividend

by Alia Nikolakopulos

Cash you receive in lieu of stock dividends is treated the same as ordinary dividends. Ordinary dividends are taxed at the same tax rate as the rest of you income. Dividends you receive are either categorized as ordinary or qualified dividends. Both dividends are reported to you on Form 1099-DIV, but the IRS applies special tax treatment to qualified dividends, so it’s important that you report cash you receive in lieu of stock dividends correctly. Failure to do so may result in additional tax assessments from the IRS.

1. Look at the Form 1099-DIV you receive from your broker. The value of cash you receive in lieu of stock dividends is shown in Box 1a.

2. Report the amount shown in Box 1a on line 9a of your Form 1040 income tax return. If your total.

3. Report your ordinary dividends on IRS Schedule B if the total value of your ordinary dividends and interest income is more than $1,500. Schedule B is a form that requires you to provide additional information on your investment income, such as the name of each payer and the amount you receive. Attach Schedule B to your 1040 income tax return.

4. Calculate and report your income, deductions and credits from all sources on your tax return. Add your ordinary dividends to the total and report your taxable income on Form 1040, line 43. The tax for your income, including ordinary dividends, is shown in the tax tables for your filing status and taxable income.