When I downloaded my dividend information from Wells Fargo, the total ordinary dividends were added to the qualified dividends. I think this doubled my dividend amount?

[cgm42453]

I think  when I down load my dividend information from Wells Fargo the dividend amount is being doubled.

All of my total ordinary dividends are qualified dividends.

I assume I  do not add the total qualified dividends with the ordinary dividends?

[DDollar · Accepted solution]

No, you do not add your qualified dividends to your ordinary dividends, that would result in double taxation.  I recommend you delete the download and enter the 1099-DIV manually.  If you don't have a copy of your Form 1099-DIV, you can get a copy by logging in to your account on the Wells Fargo website.  Additionally, if you know who your registered rep/advisor is you can call them and ask them to email it to you.

[brucefal]

I had the same question about double taxation, and the answers given were not clear.  So I worked it out.  Here is how it goes with numbers.  This is using TT desktop, but that shouldn't matter.

The IRS has a crazy way of reverse calculations.  The whole tax answer is on the "Qualified Dividends and Capital Gains Worksheet".  All of your form taxes are calculated there (I guess it is only for those who have Capital Gains).  It's kind of a pain to find this form in TT; in the Forms list, it is near the top of the list, and titled "QualDiv/CapGN".  Start with the idea that you have total income ("Taxable Income") of $200,000 (Form 1040SR, line 11).  That is the entry that comes in on line 1 of the QualDiv/CapGN form.  Everything is part of this $200,000, i.e wages, business income, SS, IRAs, Standard Deduction, etc. and it includes 100% of the Ordinary Dividends.

Let's assume that of your $200,000 Taxable Income then, that $45,000 are Ordinary Dividends (1099-Div, box 1a), and $13,000 are Qualified Dividends, (1099-DIV, box 1b).  So in terms of just your Dividends, it is $45K (Total) Ordinary Dividends, made up of $13K Qualified, plus $32K of Non-Qualified Dividends.

On line 2 of QualDiv/CapGN form, you enter the Qualified Share, $13K.  That figure carries down to line 4, which is the sum of the Qualified Dividends and the Long Term Capital Gains (stock sales).   

Now the KEY Step that I missed.  Line 5 is the subtraction of line 4 (Qualified Dividend Share- $13K) FROM Line 1, the Taxable Income of $200K, or $187K.  So in plain English, the number in this line ($187K) is (your total income LESS the Qualified Dividend share).  That income of $187K gets taxed at the full boat rate!!  And you know that the  $13K should be taxed at the 10% or 15% reduced rate.

Ignoring the lines 6-16, lines (these are just confusing ways to speciate out what the proper Qualifying Dividend rate should be); the reduced tax on the Qualifying share is calculated on line 18 (15% rate) and line 21 (20% rate).  So in this case $13K * 15% = $2K (TAX 1).  

And finally, the coup-de-gras...line 22 goes all the way back to the top and takes the bypassed amount from line 5 above (the total income minus the Qualified Dividend share), the $187K, AND FIGURES THE TAX on that from the Normal Tax Tables...i.e, if your tax rate is 35%, the 35% * 187K = $65K (TAX 2)---these are the taxes for "everything else".

So the final amount of tax you pay, on line 23, is the sum of Tax 1 + Tax 2.  It is lines 18 ($2K) plus line 21 (0K) plus line 22 ($65K), for final taxes of $67K!

After a check that this is the best rate, this $67K is the number carried up to line 16 of the 1040 and you write a check for it!!!