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Individual Income Tax Guide

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Page 3: Form 1040, line 9a to line 12

Chapter 2 –  Income

Line 9a – Ordinary Dividends: Include your total ordinary dividends on this line. Payers should report ordinary dividends to you in box 1a on Form 1099-DIV, Dividends and Distributions. If you own an interest in a partnership or S corporation, the entity may report ordinary dividends to you on a Schedule K-1 that you should include on this line. If you received ordinary dividends from all sources of more than $1,500, or you received nominee dividends, you must complete Schedule B, Interest Income and Ordinary Dividends.

You should not report insurance policy dividends on this line. To the extent that policy dividends exceed the total of all net premiums you paid for the insurance policy, you include them on line 21 (Other income).

If you receive dividends that are not reported on a Form 1099-DIV, you will have to determine independently if they are qualified dividends that you should include on line 9b.

Line 9b – Qualified Dividends: Report your total qualified dividends, which are taxed at the lower rate applicable to long-term capital gains, on this line. Your qualified dividends are also included in the total ordinary dividends reported on line 9a.

A payer should report qualified dividends to you in box 1b on Form 1099-DIV. The payer should also include the qualified dividend amount in the ordinary dividends reported in box 1a on Form 1099-DIV. If you own an interest in a partnership or S corporation, the entity may report qualified dividends to you on a Schedule K-1 that you must include on this line.

For more information about qualified dividends, go to the Qualified Dividends page.

Line 10 – Taxable Refunds, Credits or Offsets of State and Local Income Taxes: If you received a refund, credit, or offset of a state or local income tax that you paid in a prior year in which you itemized deductions, you may have to report some or all of the amount you received on this line. A state making the refund, credit, or offset of tax may report it to you on Form 1099-G, Certain Government Payments.

If you did not itemize your deductions  or if you itemized deductions in the year the tax was paid but elected that year to deduct state and local general sales taxes instead of deducting state and local income taxes, none of your refund is taxable.

If you applied all or part of a refund you received in 2016 to your 2016 estimated taxes, the amount that you applied is treated as received in 2016. If the refund you received was for tax paid in 2015, you itemized deductions for 2015, and you deducted the tax paid on Schedule A, Itemized Deductions, use this state and local income tax refund worksheet to calculate the amount you should report on line 10.

NOTE: Do not use the state and local income tax refund worksheet (and instead refer to  the Itemized Deduction Recoveries page) if any of the following exceptions apply:

1. You received a refund in 2016 that is for a tax year other than 2015.

2. You received a refund other than an income tax refund, such as a general sales tax or real property tax refund, in 2016 of an amount deducted or credit claimed in an earlier year.

3. The amount on your 2015 Form 1040, line 42, was more than the amount on your 2015 Form 1040, line 41.

4. You had taxable income on your 2015 Form 1040, line 43, but no tax on your Form 1040, line 44, because of the 0% tax rate on net capital gain and qualified dividends in certain situations.

5. Your 2015 state and local income tax refund is more than your 2015 state and local income tax deduction minus the amount you could have deducted as your 2015 state and local general sales taxes.

6. You made your last payment of 2015 estimated state or local income tax in 2016.

7. You owed alternative minimum tax in 2015.

8. You could not use the full amount of credits you were entitled to in 2015 because the total credits were more than the amount shown on your 2015 Form 1040, line 47.

9. Someone else could claim you as a dependent in 2015.

10. You received a refund because of a jointly filed state or local income tax return, but you are not filing a joint 2016 Form 1040 with the same person.

11. You had to use the Itemized Deductions Worksheet in the 2015 Instructions for Schedule A and both of the following apply:

For more infomation about the inclusion of state and local income taxes in income, see the State and Local Income Tax Refunds page.

Line 11 – Alimony Received: Enter the amounts you received as alimony or separate maintenance on this line. For more information about what qualifies as alimony or separate maintenance, see the Alimony page.

Line 12 – Business Income or Loss: Enter the amount of your business income or loss from a business you operated as a sole proprietorship on this line. The amount of income or loss from the business is calculated on Schedule C, Profit or Loss From Business (Sole Proprietorship), or Schedule C-EZ, Net Profit From Business (Sole Proprietorship). If you have more than one business operated as sole proprietorship, enter the total of the income or loss from all your Schedule Cs on this line.

NOTE: Losses from a Schedule C trade or business are potentially subject to limitation under the passive activty loss rules and the at-risk rules.