The Internal Revenue Service considers all income that is not specifically exempted by law from taxation to be taxable income. This includes both earned income, such as your wages, commissions and salary; and unearned income, such as investment capital gains, stock dividends and interest on your savings account. Credit unions typically refer to interest as dividend payments. Regardless of what it is called, the IRS considers it to be taxable income that you must report when you file your federal income tax return.
Identify your credit union dividends. Your credit union will report the amount of any dividends credited to your interest-bearing accounts on your monthly statement. Your credit union should also provide you with a Form 1099-INT after the end of the tax year if your total dividends for the year amounted to $10 or more. Credit unions are structured differently than banks. Banks are for-profit companies that are owned by private investors, while credit unions are non-profit financial cooperatives that are owned by their members. Banks pay interest on their deposit accounts and may return a portion of the bank's profits to its shareholders in the form of a dividend. Since the depositors at a credit union are member-owners, credit unions consider amounts paid on interest-bearing deposit accounts to be dividends. For tax purposes dividend payments on deposit or share accounts in credit unions must be reported as interest income, according to the IRS.
Determine the appropriate form for filing your income tax return. If you have interest income of $1,500 or less, including dividend income from your credit union accounts, you have the option of using Form 1040, Form 1040A or Form 1040EZ. If your interest income, including credit union dividends, is more than $1,500 you cannot file your taxes using Form 1040EZ. If your interest income, including credit union dividends, exceeds $1,500, you have to complete Schedule B of Form 1040, detailing the sources and amounts of your interest income.
Complete your federal income tax form. Include the total amount of your credit union dividends combined with all other taxable interest on Line 2 of Form 1040EZ, or on Line 8a if you file using Form 1040 or Form 1040A. You must include all credit union dividends regardless of the amount and regardless of whether your credit union provided you with a Form 1099-INT. The IRS considers you to have received credit union dividends once they have been credited to your account and are available for you to withdraw them.
- Internal Revenue Service: 1099-DIV Dividend Income
- Internal Revenue Service: Publication 550, Interest Income
- Members Own Credit Union: Savings Accounts FAQ
- Wisconsin Department of Financial Institutions: Differences between Banks, Credit Unions and Savings Institutions
- Internal Revenue Service: Instructions for Forms 1099-INT and 1099-OID
Mike Parker is a full-time writer, publisher and independent businessman. His background includes a career as an investments broker with such NYSE member firms as Edward Jones & Company, AG Edwards & Sons and Dean Witter. He helped launch DiscoverCard as one of the company's first merchant sales reps.