Why do I have to pay taxes on ordinary dividends when I am not receiving any distribution? The dividends are rolled over.

[TomYoung]

The use of the term "rolled over" is a misnomer as that does, typically, suggest that gain or income is deferred.  

The correct terminology is "reinvested."  That makes clear that you, essentially, had "cash in hand" and decided to take that cash to buy more stock.

[wcg-2425]

thanks

[MichaelL1 · Accepted solution]

It is income to you as you can change the election and get the money if you chose to.

You made the decision to reinvest the dividends (probably when the stock or mutual fund was purchased) so you have the right to the money but chose to buy more stock.

These dividends you report as income right now get added to the basis or cost of the stock and reduce the taxable gain when it is sold.

[wcg-2425]

thanks

[VolvoGirl]

So be sure to add in the dividend to your cost when you sell.  A reinvested dividend is really 2 transactions,  you got a dividend then you bought more shares.