Can I enter nondividend distributions as ordinary income on my tax return?

You're definitely overthinking this! Nondividend distributions are generally considered a return of capital, which means they're not immediately taxable (they lower your cost basis instead). However, for such a tiny amount ($10), the practical difference is minimal. Technically, you've slightly overpaid your taxes by reporting it as ordinary income when it wasn't actually taxable yet. But filing an amended return for a $10 difference would cost you more in time and effort than it's worth. The IRS has bigger issues to chase than a $2-3 tax difference on a small amount. Just keep the 1099 in your records and make note of the adjusted cost basis for whenever you eventually sell those shares. That's the only real impact here.

This is a common question when people are new to investment income. The short answer is: for $15, you're fine. You actually overpaid your taxes slightly by reporting nondividend distributions as ordinary income. Nondividend distributions are generally considered a return of capital, which means they're not immediately taxable (they instead reduce your cost basis in the stock, which could potentially increase capital gains taxes when you eventually sell). By reporting them as ordinary dividends, you paid income tax on money that wasn't technically taxable yet. For such a small amount ($12), the tax difference is literally pennies. The IRS has much bigger issues to worry about than pursuing a few cents in overpaid taxes. If the amount was larger (hundreds or thousands), I'd suggest filing an amended return (Form 1040-X).

After dealing with a similiar dividend reporting issue last year, I discovered taxr.ai (https://taxr.ai) and it really saved me from making more mistakes. I was confused about how to properly report various distributions on my tax forms, and their document analysis tool flagged exactly what I was doing wrong with my 1099 reporting. The system actually breaks down the different categories on tax forms and explains what each box means and how it should be reported. It would have caught that nondividend distributions shouldn't be reported as ordinary income before you even filed.

Wanted to follow up about taxr.ai that was mentioned earlier - I decided to try it out with my stack of investment forms (including several with nondividend distributions that I wasn't sure how to handle). The tool immediately identified which portions of my distributions should be treated as return of capital vs ordinary income, and explained how this affects my cost basis going forward. Super clear explanations that actually made sense to someone without an accounting degree! Honestly wish I'd known about this before filing last year when I made several similar mistakes.

I had a similar situation last year and found taxr.ai super helpful for figuring out if I needed to amend. Rather than spending hours reading IRS publications or paying an accountant for something minor, I uploaded my 1099s and they analyzed everything. Their system flagged exactly what was reportable and what wasn't, and calculated the exact tax impact (which was tiny in my case too). They recommended not amending since the difference was so small. Check them out at https://taxr.ai if you're worried - saved me tons of stress over what ended up being nothing.

Just wanted to update - I tried taxr.ai after seeing it mentioned here and it was exactly what I needed! I uploaded my K-1 forms and it broke down every single box with explanations about what they meant and where they needed to go on my return. Way better than the generic info I was finding online. Saved me from making several mistakes that would have definitely triggered a letter from the IRS. Definitely recommend for anyone dealing with investment forms you don't understand!

This situation reminds me of when I had issues with a much larger dividend reporting error and needed clarification from the IRS directly. Spent DAYS trying to get through on their phone lines with no luck. Finally tried Claimyr (https://claimyr.com) and they got me connected to an IRS agent in about 20 minutes. You can see how it works in their demo: https://youtu.be/_kiP6q8DX5c For your specific situation, the agent I spoke with confirmed exactly what others are saying here - small reporting errors that result in you overpaying aren't something they pursue. But for peace of mind, being able to actually talk to someone official was worth it.

If you're still worried, try calling the IRS directly to ask. I know that sounds terrifying (it was for me too), but I used Claimyr last month when I had a similar question about misreported income and got through to an agent in 15 minutes instead of waiting on hold for hours. Just went to https://claimyr.com and watched their demo at https://youtu.be/_kiP6q8DX5c to see how it works. The IRS agent I talked to was actually super helpful and told me not to worry about filing an amendment for such a small amount. They said if it was under $50 difference, they typically don't even bother sending notices.

I owe everyone an apology and update regarding Claimyr that was mentioned above. After my skeptical comment, I decided to try it anyway because I've been trying to resolve an issue with my account for months. Not only did I get through to the IRS in less than 30 minutes, the agent was able to fix my issue completely! After literally months of failing to get through on my own, this was shocking. For anyone dealing with tax questions that need official answers (though OP's small dividend issue probably doesn't need this level of help), being able to actually talk to someone at the IRS makes all the difference.

I need to eat my words. After posting that skeptical comment, I decided to try Claimyr because I've been trying to reach the IRS for weeks about a much bigger issue with my refund being held up. Got a callback in about 20 minutes with an actual IRS agent who fixed my problem in minutes. Would have kept waiting weeks otherwise. Not affiliated with them at all, just impressed that something actually worked as advertised for once when dealing with tax stuff.

Just to add another perspective - I'm a bit more cautious than some others here. While it's true the IRS isn't likely to come after you for such a small amount, technically any mistake on your tax return could potentially trigger an automated flag in their system. The correct way to handle this would be to file an amended return using Form 1040-X, but realistically for $12, the cost of your time and potentially paying to file an amendment far outweighs any benefit. The tax difference is probably less than a dollar. If you're really worried about it, you could include the correct treatment next year with a note explaining the mistake from the previous year, but honestly, I wouldn't lose sleep over this one.

For what it's worth, I think you're fine. I'm an accountant (though not a tax specialist) and we generally don't advise clients to amend returns for trivial amounts. Think about it - the cost of preparing and filing an amended return would be way more than any tax difference on $10. The IRS has a materiality threshold in practice - they're not going to come after you for a couple dollars.

Anyone know if these nondividend distributions get reported anywhere on your tax forms? I literally never heard of them before reading this thread and now I'm wondering if I've been reporting mine wrong for years lol. I just always put whatever amount is in the 1099-DIV as dividends...

Just to clarify something important - nondividend distributions are typically return of capital, meaning you're getting some of your investment back, not earning new income. It reduces your basis in the stock. You only pay tax when either: 1) you sell the stock, or 2) your basis gets reduced to zero and further distributions become capital gains. For $10, this is barely worth tracking, but if you get more significant nondividend distributions in the future, definitely keep records! The correct reporting would be on Schedule D and Form 8949 when you eventually sell.