In their rush to lower taxes, our elected leaders tied some unexpected knots in the tax law.

That includes the lower tax rates on dividend income Ñ some dividend income.

One result has been the flood of corrected 1099s mailed out by brokers and mutual fund managers. Another is the puzzling instructions on how to report dividends on Form 1040.

CPAs took a number of hotline calls on these questions.

Q: I received Form 1099-DIV indicating the amount of dividends that were paid to me in 2003. The amount of the dividends I received are shown in Box 1a and Box 1b. The total of these amounts is greater than the total dividends I received. According to the instructions for this form, I am to enter these amounts on Form 1040 Line 9a, and Form 1040, Line 9b. Does this mean I will be taxed on both of these amounts?

A: Larry W. Nichols brought the good news: You do not add these amounts together to determine the dividend income on which you will pay taxes.

You are a beneficiary of one of the tax reductions enacted in 2003. In previous years, your ordinary dividend income was subject to income tax at your highest marginal income tax rate, which for 2003 could be as high as 35 percent.

Under the new 2003 law, qualified dividends are eligible for a lower tax rate than other ordinary income. Generally, the qualified dividends, shown in Box 1b of your Form(s) 1099-DIV and reported on Line 9b of form 1040, are eligible for the new maximum capital gains tax rate of 15 percent (5 percent in some cases).

If you received qualified dividends and you are not required to file Schedule D, use the worksheet on page 37 of Form 1040 instructions to compute your tax.

Q: I filed my tax returns last week and then received another corrected Form 1099. What should I do?

A: Generally, replied CPA Roger W. Lusby III, an amended federal and state tax return (Forms 1040X and 500X) should be filed to reflect the corrected Form 1099. Payments of dividends of $10 or more must be reported on Form 1099-DIV. The new form provides for separate reporting of dividends and qualified dividends, the latter which are subject to the new tax rate of 15 percent. Because of the confusing dividend rules, many financial companies are encountering difficulties in properly reporting the Form 1099 amounts.

An IRS News Release, IR-2004-22, tries to retroactively clarify certain rules pertaining to qualified dividends in an effort to minimize the filing of amended tax returns. You can find it at www.irs.gov/newsroom/index.html.