The IRS has created tax forms to cover every type of taxable income in the code. Earned income, rental income, salaries, wages and Social Security are each reported to recipients on the appropriate 1099 form so that they can report this income on their tax returns each year. Investment income is no exception, and anyone who owns stocks, bonds, mutual funds, annuities and/or retirement plans and accounts from which they are taking distributions must know which forms they can expect to receive during tax season, and where and how they must report this information on the 1040.

Types of Investment Income
Income from investments can be divided into four main categories:

Interest – Interest income is paid on bonds and other types of fixed-income securities such as fixed annuities. Interest is always taxable as ordinary income unless it is paid inside an IRA or qualified plan or annuity contract. Municipal bond interest is also tax-free, and interest from treasury securities is exempt from taxation at the state and local levels.

Dividends – These represent a portion of a company’s current profits that it passes on to shareholders. Dividends can be taxed as ordinary income, or they may qualify for lower capital gains treatment in some cases if they are coded as “qualified” dividends.

Capital Gains – This represents the amount of profit realized when an investment is sold at a higher price than that for which it was bought. Long-term gains are realized for investments held for at least a year and a day before they were sold, and are taxed at a lower rate than ordinary income. Short-term gains are taxed as ordinary income.

Retirement and Annuity Distributions – Although distributions from retirement plans are not technically a form of investment income, they are listed here because IRA and retirement plan owners can only access the gains from their investments in these accounts by taking distributions. Normal distributions are always taxed as ordinary income.

Tax Forms
Each income type listed above is broken out on a corresponding 1099 form issued by the broker or issuer of the income generated. Every form includes the name, address and tax ID number of the issuing entity. These forms are listed as follows:
1099-INT – Breaks out the interest paid to the investor. This form is issued to anyone who owns bonds, CDs or mutual funds that invest in fixed-income securities or cash or has an interest-bearing bank or brokerage account.

  • Box 1 shows total taxable interest paid
  • Box 2 shows the amount of early withdrawal penalty, if any
  • Box 3 shows the amount of U.S. Treasury security interest paid
  • Box 4 shows the amount of tax withheld
  • Box 5 shows investment expenses
  • Box 6 shows foreign tax paid
  • Box 7 shows the foreign payor
  • Box 8 shows tax-exempt interest
  • Box 9 shows interest from special private activity bonds
  • Box 10 shows the CUSIP number for tax-free bond interest
  • Boxes 11-13 show state ID information and withholding

1099-DIV – This breaks down the total amount of dividends paid to an investor. It is issued to holders of any common or preferred stock or mutual fund that invests in them. However, it is not issued to owners of cash value life insurance policies, as those dividends are merely a return of premium.

  • Box 1a shows total ordinary dividends
  • Box 1b shows total qualified dividends
  • Boxes 2a-d break down capital gains from mutual funds, REITs and collectibles
  • Box 3 shows nondividend distributions
  • Box 4 shows federal tax withheld
  • Box 5 shows investment expenses
  • Boxes 6 and 7 show foreign tax paid and the foreign payor
  • Boxes 8 and 9 show cash and noncash liquidation distributions
  • Box 10 shows private interest dividends
  • Box 11 shows specified private activity bond interest dividends
  • Boxes 12-14 show state ID information and withholding

1099-B – This form breaks down the amount of capital gain or loss that the investor realized for that tax year. It is issued to everyone who bought or sold publicly traded securities at a gain or loss. Many brokerage firms issue additional statements that break down the loss or gain for each trade and then quantify them into net long- and/or short-term gains and losses for the year.

  • Box 1a shows the date of sale or exchange
  • Box 1b shows the date of acquisition
  • Box 1c shows whether it is a long- or short-term gain or loss
  • Box 1d shows the ticker symbol of the security
  • Box 1e shows the quantity sold
  • Box 2a shows the gross proceeds reported to the IRS both before and after commission and expenses
  • Box 2b shows a checkbox if loss not allowed due to amount shown in box 2a
  • Box 3 shows cost or other basis
  • Box 4 shows federal tax withheld
  • Box 5 shows any amount of wash sale loss that was disallowed
  • Box 6 has checkboxes for noncovered securities and for sales where the basis in box 3 was reported to the IRS
  • Box 7 shows income from bartering
  • Box 8 is for a description of the security if needed
  • Boxes 9-12 break down realized and unrealized gains and losses from derivatives contracts
  • Boxes 13-15 show state ID information and withholding

1099-R – This form is issued to everyone who receives distributions from IRAs, qualified retirement plans or annuity contracts that are not housed inside a tax-deferred account or plan.

  • Box 1 shows the gross distribution amount
  • Box 2a shows the amount of taxable distribution
  • Box 2b has checkboxes for taxable amount not determined and total distribution
  • Box 3 shows amount of capital gain included in box 2a
  • Box 4 shows federal tax withheld
  • Box 5 shows employee/Roth contributions
  • Box 6 shows net unrealized appreciation in employer securities
  • Box 7 shows the distribution code that determines how the distribution is taxed
  • Box 8 shows the value of any annuity contract included in the distribution
  • Box 9a shows the value of distribution percentage that belongs to the recipient
  • Box 9b shows the amount of the employee’s investment for annuity distributions where the exclusion ratio must be computed
  • If Box 10 is filled, refer to instructions on Form 5329
  • Box 11 shows the year the recipient first made a Roth contribution of any kind
  • Boxes 12-17 show state and local ID information and withholding

1099 MISC – Although most of this form pertains to earned income, it is also used to report royalty income (box 1) and working interest income (box 7) in oil and gas leases.

Form 5498 – The receiving custodian of a qualified plan rollover or IRA transfer issues this to the account holder as proof that the transfer was not a taxable event and should not be counted as a distribution.

Reporting Your Income
Although it might seem that the form numbers on the tax return would correspond to those issued to investors, this is not the case. Interest and dividends are reported on Schedule B of the 1040, and capital gains and losses are netted out on Schedule D. Much of the information on Schedule D is now computed on form 8949 and then carried over to this schedule to provide the IRS with a clearer picture of how the taxpayer calculated gains and/or losses.

The Bottom Line
Taxpayers who receive retirement or investment income need to know which forms they should receive and what information should be listed on them. Many investment firms issue consolidated 1099s that cover all of the forms listed above in a single statement. For more information on investment tax forms, visit or consult your financial advisor.

Related Articles
  1. Taxes

    How To File Your Child's First Income Tax Return

    Use this quick parental guide to help your child learn the tax filing process and establish good habits.
  2. Investing Basics

    Investment Tax Basics For All Investors

    Nothing can be said to be certain, except death and taxes even in your investments.
  3. Investing Basics

    Capital Losses and Tax

    Capital losses are never fun to incur, but they can reduce your taxable income. Knowing the rules for capital losses can help you maximize your deductions and make better choices about when to ...
  4. Taxes

    IRA Contributions: Deductions and Tax Credits

    We outline the incentives and help you take full advantage of the benefits.
  5. Taxes

    Form 9465: Don't Pay Your Back Taxes Without It

    This form can lighten your tax load if you owe Uncle Sam.
  6. Taxes

    What You Need To Know About Capital Gains And Taxes

    Find out how your profits are taxed and what to consider when making investment decisions.
  7. Investing Basics

    Explaining Unrealized Gain

    An unrealized gain occurs when the current price of a security exceeds the price an investor paid for the security.
  8. Taxes

    What IRS Form 8949 Is For

    Selling a painting or that lake property? Disposing of your fossil fuel stocks? You need to know about this IRS form.
  9. Economics

    The Top 9 Things to Know About Hillary Clinton's Economic View

    Find out where former secretary of state and Democratic presidential candidate Hillary Clinton stands on the economy, jobs, trade and education.
  10. Professionals

    Holding Out for Capital Gains Could Be a Mistake

    Holding stocks for the sole purpose of avoiding short-term capital gains taxes may be a mistake, especially if all the signs say get out.
  1. Enterprise Investment Scheme (EIS)

    A UK program that helps smaller, riskier companies to raise capital ...
  2. Target Payout Ratio

    A target payout ratio is a measure of what size a company's dividends ...
  3. Guideline Premium And Corridor ...

    A test used to determine whether an insurance product can be ...
  4. Cash Value Accumulation Test (CVAT)

    A test method used to determine whether a financial product can ...
  5. Accelerated Dividend

    Special dividends paid by a company ahead of an imminent change ...
  6. Capital Growth

    The increase in value of an asset or investment over time. It ...
  1. How are non-qualified variable annuities taxed?

    Non-qualified variable annuities are tax-deferred investment vehicles with a unique tax structure. After-tax money is deposited ... Read Full Answer >>
  2. When does the holding period on a stock dividend start?

    The holding period on a stock dividend typically begins the day after it is purchased. Understanding the holding period is ... Read Full Answer >>
  3. How do gains from my 401(k) figure into my taxable income?

    Capital gains from a 401(k) account figure into taxable income in that capital gains are taxed at the ordinary income rate ... Read Full Answer >>
  4. What are the tax implications for both the company and investors in a divestiture ...

    In finance, divestiture is defined as a reduction of a company's assets as a result of asset closures or the selling of business ... Read Full Answer >>
  5. What is the importance of calculating tax equivalent bond yield?

    Fixed-income investors measure portfolio returns using yields. Since most bonds do not produce high returns like equity markets, ... Read Full Answer >>
  6. What are the drawbacks of a small investor buying blue-chip stocks?

    Blue-chip stocks are generally safer for investors. However, their drawbacks for small investors include moderate growth ... Read Full Answer >>

You May Also Like

Trading Center

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!