In your personal portfolio account, not a qualified 401K retirement account, you get paid a dividend and it automatically gets reinvested, (meaning you buy more of this stock or fund), but it never touches your hands or enters into your bank account; therefore what does that mean from a tax liability standpoint at the end of the year. L Since the money never passed through your bank, you do not owe taxes on that money in that year It never entered your bank account, but the dividends are taxed in the year it was received Since its a dividend, those have already been taxed at the corporate level so you owe no taxes Since its a dividend, you pay taxes when you withdraw that money