How do I calculate the US Government interest for 1099-DIV?

[ccam]

My 1099-DIV has an entry in Box 10.  Is that the "amount of dividends that represents interest from US Government obligations"?  I have selected the first entry in the "uncommon situations" dialog when manually entering 1099 information for a brokerage company.  I've already entered the Box 10 and Box 11 information for the form.

[GeoffreyG · Accepted solution]

It seems like you understand the Form 1099-DIV data entry process pretty well already.  Boxes 10 and 11 are for municipal (tax-exempt) bonds, and private activity bonds (a sub-set of municipal bonds).

After your main entry screen in TurboTax, however, you are given the opportunity to enter certain additional information, such as US government interest.  (Please see the screen-capture image below; simply click to open.)  Typically, such federal government interest would come from holding a mutual fund or ETF that invests some (or all) of its assets in US government securities, and then pays you "dividends" as an investor in that fund.

This bring us back to your original question, and the way that you would have to determine that number.  Basically, you have to look to your brokerage firm's 1099-DIV statement, which may have a breakout of some kind, for US government interest, and that will be the (percentage) figure you would use to figure out the amount of your dividends that were, in fact, federal interest.

If your brokerage firm hasn't done the legwork for you, then you'd need to do it yourself.  Essentially this will involve looking at the website for fund company that sponsors each of your investments (Vanguard, Fidelity, Pimco, etc.), and then accessing their taxpayer information webpage(s).  Typically, they will have a federal interest breakdown shown there, by fund.

If you have further questions, encounter any difficulties, or just want to speak with a live tax expert who can walk you through your TurboTax entries (including the ability to screen-share with your computer), please feel free to contact us.  We would be happy to help you (and as a Premier customer, the call is free to you).  Here is a link where you can create a support ticket and reach us:

https://support.turbotax.intuit.com/contact/

Thank you for asking this question.

[ccam]

Thanks so much for a nice detailed answer.  This helps me a lot.  My tax information statement does indeed have a breakdown, so I believe I can calculate the necessary values from that.  It's good to know I have the TT help center as a fallback though!

[GeoffreyG]

You're very welcome, ccam.  Yes, some brokerages do a much better job than others in reporting this type of (breakdown) information to their customers.  It's a classic example of you get what you pay for.  Since it's not a requirement under law, some financial institutions take the trouble to help and put in the extra work, and others do not.  It sounds like you've got one of the "good" ones, in terms of financial institutions, and that's great to hear.  But, if anything is missing from your statements, or if you have any other questions, we're here to help.  Good luck with your future investing activities.

[emaven]

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[emaven]

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[sam-ehrlichman]

Hello -- I have a follow-up question about this.  Let's use an example.  Suppose my 1099-DIV has ordinary dividends (box 1a) of $100 and exempt dividends (box 10) of $1,000.  Suppose also that the mutual fund company reports 50% of income from US government obligations.  Then should I answer "Enter US Government Interest" with $50, $500, or $550 ?

[sam-ehrlichman]

Hello -- I have a follow-up question about this.  Let's use an example.  Suppose my 1099-DIV has ordinary dividends (box 1a) of $100 and exempt dividends (box 10) of $1,000.  Suppose also that the mutual fund company reports 50% of income from US government obligations.  Then should I answer "Enter US Government Interest" with $50, $500, or $550 ?

[brettsky]

Is there a follow-up to this question?  I have the same question.  Thank you.  Some examples to follow would be great.

[BarbaraW22]

The 2019 Form 1099-DIV reports Noncash liquidation distributions in Box 10 and Exempt interest in Box 11. The question and examples provided by sam-ehrlichman in the above message state that tax exempt interest is in box 10.

In addition, the amount listed as "Exempt interest" in Box 11 of Form 1099-DIV would not be from U.S. Government obligations. Interest from U.S. government obligations are fully taxable on the federal return. The amount reported in Box 11 is not subject to federal income tax and is generally interest from municipal bonds. This amount would be reported in Box 2a of Form 1040. The amount in Box 11 may be subject to state income tax; however, depending on the state. 

The amount reported in Box 10 of Form 1099-DIV as Noncash liquidation distributions is generally a nontaxable return of capital. This amount is not reported on your tax return. Instead you adjust the basis of your stock by the amount reported.

If a percentage of your dividend reported on Form 1099-DIV is from US Government obligations, you would calculate the percentage of the amount reported to you in Box 1a and include this in the section "U.S. Government interest" in TurboTax.

In the example above where ordinary dividends of $100 were reported in Box 1a and 50% of this was from U.S. Government obligations, the amount you would report in TurboTax for U.S. Government interest would be $50. 

@brettsky

[psdeckers]

In addition to that reported in box 1a, does the "US Government Interest" also include a percentage of US Government income from capital gains distribution reported in box 2a?

[JulieS]

No, Capital Gains Distributions are not US Government interest because there are gains and not interest.

[yeadubs]

That explanation was great.  I just want to verify I understand with an example. 

If I received a $100 of non qualified dividend income from ISHARES SHORT TREASURY BOND ETF, which according to the supplemental information holds 91.12% in US Treasury, the US Government Interest would be $91.12?

[chris_or]

I have the same question as @yeadubs above.

and a related Q: I have a supplemental dividend report from etrade, but I see no mention of "US government interest". Is there an easy way to determine if I have NO US government interest by reading my 1099-DIV? Will any of the fields on the 1099-DIV statement tell me if I have no US government interest? For example, if box 10 is zero/blank for me, does that mean I have no US government interest?

[patmorsecpa]

Try using the MPFCO.COM program.  It's cheap and it works for all mutual funds to determine the US Government portion of interest and dividend income from the funds.