Should taxpayers keep records of nondividend distributions shown on Form 1099-DIV?

Taxpayers should indeed keep records of nondividend distributions shown on Form 1099-DIV because these distributions can affect the adjusted basis of their investment in the stock. Nondividend distributions typically refer to amounts that are returned to shareholders that are not treated as taxable dividends. Instead, they reduce the basis of the shares owned in a corporation. Keeping accurate records of these distributions is crucial because they directly impact how much gain or loss will be recognized when the shares are sold.

If a taxpayer fails to track these figures, they might miscalculate their adjusted basis, potentially leading to incorrect tax reporting upon the sale of the stock. Therefore, it is important for taxpayers who receive nondividend distributions to retain documentation of these amounts for accurate future calculations and reporting.