Nominee Distribution re: Form 1099-DIV

[RandyTax]

I need to do a nominee distribution adjustment for a 1099-DIV.  I entered the data per the 1099-DIV which includes ordinary dividends, qualified dividends, capital gain distributions, non-dividend distributions and section 199A dividends. I then follow the step-by-step instructions in TurboTax Deluxe to make the nominee adjustment, but there is no way to adjust the other items on the 1099-DIV.  In addition, the amount for qualified dividends on the return is not the same as I entered from the 1099-DIV.  I have read many posts, but most are from several years ago.  Is there any way to adjust all the elements on the 1099-DIV for a nominee adjustment and be compliant with the way the IRS instructs?

[Anonymous_ · Accepted solution]

How TurboTax Uses Your Dividend Adjustment Amount

TurboTax assumes you want to adjust the total income from dividends and capital gain distributions reported on your 1099-DIV by the dividend adjustment amount you enter. If that is NOT how you want to handle this adjustment, select Back, adjust the amount of each separate income item, and uncheck the adjustment choice. Be sure to attach a statement to your return explaining each adjusted amount.

Examples:

-You entered $1,000 of ordinary dividends (box 1a), $1,000 of qualified dividends (box 1b), and an adjustment amount of $100. Both ordinary dividends and qualified dividends will be reduced by $100 to $900.

- You entered $1,000 of ordinary dividends (box 1a), $800 of qualified dividends (box 1b), and an adjustment amount of $100. Ordinary dividends will be reduced by $100 to $900. Qualified dividends will be reduced by $80 ($800/$1,000 x $100) to $720.

-You entered $1,000 of ordinary dividends (box 1a), $1,000 of qualified dividends (box 1b), $500 of capital gain distributions (box 2a), and an adjustment amount of $100. TurboTax will add together the $1,000 of ordinary dividends and $500 of capital gain distributions to determine the total amount of income ($1,500) to adjust. Both ordinary dividends and qualified dividends will be reduced by $67 ($1,000/$1,500 x $100) to $933. Capital gain distributions will be reduced by $33 ($500/$1,500 x $100) to $467.

- You entered $1,000 of ordinary dividends (box 1a), $800 of qualified dividends (box 1b), $500 of capital gain distributions (box 2a), and an adjustment amount of $100. TurboTax will add together the $1,000 of ordinary dividends and $500 of capital gain distributions to determine the total amount of income ($1,500) to adjust. Ordinary dividends will be reduced by $67 ($1,000/$1,500 x $100) to $933. Qualified dividends will be reduced by $53 ($800/$1,500 x $100) to $747. Capital gain distributions will reduced by $33 ($500/$1,500 x $10) to $467.

[Anonymous_]

Note that if you want to adjust the figures on your 1099-DIV manually, you can usually accomplish that using Forms Mode (desktop only).

The nondividend distributions are different in the sense that they generally only serve to reduce basis in the security.

[RandyTax]

Thanks for the quick reply.  Since the manner in which TurboTax applies the nominee distribution adjustment to ordinary dividends to qualified dividends and capital gain distributions is different from what actually occurred, it looks like the best way if for me to enter the actual numbers and attach a schedule as you suggested.

I noticed that I could right click on each number in the 1099-DIV input screen and click on "Add Supporting Details."  Here i could enter a line for the amount on the 1099-DIV from the broker and then put in a line named "Nominee Distribution" for each adjustment amount which resulted in the actual net number I need for each line item.  In addition, TurboTax produced a schedule titled "Additional Information from 2022 Federal Tax Return" showing the details for each line item that would be great to attach to the return to show the IRS how the numbers went from the 1099-DIV to the numbers on the return.  My question is can I attach this schedule to the return to e-file or will I be forced to mail a paper return?

[Anonymous_]

I would say that your best bet would be to print and mail the return with the schedule.

[RandyTax]

Sounds like the plan.  Thanks for your help.

[maps4you]

I understand the computation but where is this adjustment amount coming from.

Foe instance in the TT example:

-You entered $1,000 of ordinary dividends (box 1a), $1,000 of qualified dividends (box 1b), and an adjustment amount of $100. Both ordinary dividends and qualified dividends will be reduced by $100 to $900.

Where is the $100 coming from -- not the W2 I assume or the 1099-DIV.  Can someone please identify where I find the adjustment amount.

Thanks

[Anonymous_]

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@maps4you wrote:

Can someone please identify where I find the adjustment amount.

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It was a hypothetical. You need to figure out how much to adjust.

[maps4you]

Appreciate your response....Yes understand it was a hypothetical figure and not present on W2; but how would one compute that figure? I took the difference between Lines 1a and 1b on 1099DIV but that may be too much. For instance, my 1a is 17k and 1b is 11k  with a difference of 6k but my line 13 of Tax Exempt dividends is only $3600, So probably not a good assumption since I'm reducing it by roughly twice. Then again maybe I am not entitled to reduce it, how would one know that?

[maps4you]

I think I have the answer...It appears the value required to make the adjustment would be populated in Box 3 (nondividend distributions) of 1099DIV.

[VolvoGirl]

@maps4you   Huh?  The adjustment is for assigning part of the dividend to someone else.  You would know the percentage you are giving them like half 50%.  So you adjust each amount by 50%.  ..

Whoever's ssn is on the 1099 enters the whole amount on their return.  Then at the bottom of the entry screen, pick the second one "I need to adjust the amount."

Then on the next page fill in the amount as a POSITIVE number and pick the first reason "I received all or part of these dividends for someone else".

Then on the other person's return you enter it as a 1099-Div and put  the amounts in the boxes.

[Anonymous_]

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@maps4you wrote:

Then again maybe I am not entitled to reduce it, how would one know that?

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I am perplexed in the sense that I am not sure why you are reducing any figure on your 1099-DIV.

The reduction being discussed in this thread is for a nominee distribution. Is that what you are trying to accomplish? 

If so, then you should know the amount you received on behalf of another taxpayer and that would be the amount of the reduction.

EDIT: This message was posted before I saw @VolvoGirl's post and my first reaction was also "Huh?".