It is being treated correctly, but I agree it can be more than just a bit misleading to look at just that form....and the IRS isn't making things easier for normal human beings to comprehend what the heck they are doing by listing it all right there.
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Look at your form 1040. Line 9a is your total dividends....ordinary or otherwise, and 9b is the sub-portion that are also considered qualified. And 9b can be equal to, or lower than 9a. At this point, no consideration is being given to the 9b value
9a is included in all your total AGI, but it still isn't telling you how it is being taxed differently based on the 9b value.
What happens doesn't occur until you get down to line 43.
IF line 43 is a zero, because all your exemptions and deductions erase all your taxable income, then the tax return doesn't care what your qualified dividends are....you have no taxes anyhow.
IF line 43 is a positive number, then, in your situation, a special tax form is used to calculate your taxes. The "Qualified Dividends and Capital Gain Tax Worksheet" is used, which will only now take into consideration those qualified dividends,(and any capital gains you get too) into consideration for either zero taxes, or a lowered tax rate, depending on your particular set of data.
IF you look at that worksheet, you'll see your 9b $$ right there on line 2 of the worksheet....(the rest of the worksheet just gives me brain cramps.)
____________*Answers are correct to the best of my knowledge when posted, but should not be considered to be legal or official tax advice.*
