Agency Information Collection Activities: Dividends (1099-DIV) & Long-Term Contracts (Sec. 460)

IRS Reviews Compliance Burden for Dividends and Contracts

The IRS is soliciting public input on the compliance burden associated with dividend reporting and the accounting for long-term contracts. This request for comments, with a deadline of March 30, 2026, focuses on the paperwork required for Form 1099-DIV, used to report dividends and distributions, and the complex rules of Section 460, which governs accounting for long-term contracts. While framed as a routine extension under the Paperwork Reduction Act, this notice underscores the massive scale of information reporting overseen by the agency and the significant impact these regulations have on businesses and investors.

The 51-Million-Hour Burden: Form 1099-DIV

The IRS uses Form 1099-DIV to ensure that dividends are properly reported, as required by Internal Revenue Code Section 6402, which addresses the IRS's authority to make credits or refunds for overpayments of tax. It also ensures liquidation distributions are correctly reported, as mandated by Section 6403, concerning overpayment of tax installments, and to determine whether payees are accurately reporting their income. The IRS estimates the annual burden for complying with Form 1099-DIV requirements to be over 51 million hours. Specifically:

• Affected Public: Businesses and other for-profit groups (typically financial institutions) that issue dividends and distributions.
• Estimated Number of Respondents: 110,115,626.
• Estimated Time per Respondent: 28 minutes.
• Estimated Total Annual Burden Hours: 51,754,344.

Construction and Manufacturing: Section 460 Oversight

Section 460 imposes special accounting rules for "long-term contracts," generally defined as contracts for the manufacture, building, or construction of property where the contract is not completed within the same tax year it was entered into. These rules typically require use of the percentage-of-completion method (PCM), which dictates that income is recognized proportionally as work progresses, rather than waiting until the project's completion. The IRS is seeking comments on the burden of complying with these rules.

Industry Impact and Comment Opportunity

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The 51-Million-Hour Burden: Form 1099-DIV

The IRS also reviewed the compliance burden associated with Form 1099-DIV, which is used to report dividends and distributions. This form plays a vital role in ensuring that income is properly reported under Internal Revenue Code (IRC) Sections 6402 and 6403. Section 6402 grants the IRS authority to credit overpayments against tax liabilities or refund them. Section 6403 addresses overpayment of tax installments, ensuring excess payments are correctly applied. Form 1099-DIV serves as a critical tool for the IRS to verify that taxpayers are accurately reporting dividend and liquidation distributions, ensuring compliance with these sections.

The numbers associated with Form 1099-DIV are substantial:

• Respondents: Approximately 110 million
• Annual Burden Hours: Over 51 million

The IRS clarified that while the collection itself remains unchanged, the estimated number of responses has been updated to align with the most current filing data.

Construction and Manufacturing: Section 460 Oversight

Following updates to Form 1099-DIV, the IRS is also reviewing the compliance burden associated with accounting for long-term contracts under Section 460 of the Internal Revenue Code. Section 460 mandates that income from "long-term contracts" – generally defined as contracts for the manufacture, building, or construction of property where the project isn't completed within the same tax year it began – be determined using the Percentage of Completion Method (PCM). This can create significant complexity for affected businesses.

The IRS is soliciting comments regarding OMB Control No. 1545–1732, which is related to these special rules for long-term contracts. Construction and manufacturing firms, industry lobbyists, and tax practitioners who wish to provide input on the information collection requirements associated with Section 460 can direct their requests for additional information to Jason Schoonmaker at (801) 620–6008.

Industry Impact and Comment Opportunity

The IRS's review of the compliance burdens associated with Form 1099-DIV and Section 460 will disproportionately affect certain stakeholders:

• Financial Institutions (Form 1099-DIV Issuers): These institutions, which issue Form 1099-DIV to report dividends and other distributions of $10 or more to taxpayers and the IRS, bear the brunt of the estimated 51-million-hour burden. Changes to reporting requirements, such as the electronic filing thresholds which decreased from 250 to 10 forms effective January 1, 2024, directly impact their operational costs and compliance procedures.
• Large Construction and Manufacturing Firms (Section 460 Compliance): Companies engaged in long-term contracts, defined under Section 460 as contracts for the manufacture, building, or construction of property where completion extends beyond the tax year, face significant compliance costs. These costs stem from the mandate to use the Percentage of Completion Method (PCM) for income recognition and the "look-back" method to adjust for discrepancies between estimated and actual costs, potentially triggering interest payments. The IRS is soliciting comments regarding OMB Control No. 1545–1732, which is related to these special rules for long-term contracts.

Industry representatives, tax practitioners, and affected businesses are encouraged to submit comments to Andres Garcia at the IRS (pra.comments@irs.gov) by March 30, 2026. These comments will directly influence the IRS's assessment of the information collection requirements associated with both Form 1099-DIV and Section 460, potentially leading to adjustments in the final regulations and a reduction in the compliance burden.