When you file your tax return with Form 1040, there’s a chance you may have to include some additional paperwork. You can expect to file Schedule B with your return if you received substantial interest or stock dividend payments throughout the year. Here, we’ll unpack more about what Schedule B is, who needs to file it, and where you can find the information needed to complete it.
What is Schedule B?
Schedule B is an IRS tax form you’re required to submit with your tax return if you earned more than $1,500 of ordinary dividends or taxable interest during the year. What are dividends? They’re payouts some companies give stock shareholders as a way of distributing their profits. Interest, on the other hand, can come from savings accounts, certificates of deposit (CDs), and the like, allowing you to earn money on your savings. Both dividends and interest count as taxable income.
When filling out Schedule B, you provide the name of each payer, as well as the amount paid. This information can be found on tax forms 1099-INT and 1099-DIV. These should be issued by financial institutions that paid you more than $10 in interest or dividends throughout the year.
Who has to file Schedule B?
You have to file Schedule B if you earned more than $1,500 of ordinary dividends or taxable interest during a given tax year. You might also have to file Schedule B if you need to report:
- Accrued interest from a bond
- Interest from a seller-financed mortgage for the buyer’s personal residence
- A bond’s original issue discount (OID) that is less than the amount on your Form 1099-OID
- A financial interest in an account in a foreign country
- Distributions from a foreign trust
- Excluded interest from Series EE or Series I US savings bonds issued after 1989
Where do you get the information to file Schedule B?
The information needed to fill out Schedule B can generally be found in 2 other tax forms: 1099-INT and 1099-DIV.
- Form 1099-INT: This shows interest income you received during the year. You should get one from any person or entity (usually a bank or brokerage firm) that paid you at least $10 in interest in the previous tax year.
- Form 1099-DIV: This contains information about dividends you received during the year. You’ll receive one from each financial institution that distributed at least $10 of dividends or capital gains from mutual funds to you in the previous tax year.
It’s possible to receive multiple 1099-INTs and 1099-DIVs, especially if you have accounts with several banks or brokerages. Have all of these on hand when filling out your Schedule B.
How to file Schedule B
Filing Schedule B is relatively straightforward. Here are the sections to fill out on the form.
Your information
Enter your name as it appears on your tax return, as well as your Social Security number or taxpayer identification number.
Part I: Interest
This is where you report your interest income. List each payer, as well as the amount of interest you received from them. Then add the numbers together and subtract any excludable interest from Series EE or Series I US savings bonds (issued after 1989). If the remaining amount is greater than $1,500, you need to complete part III of the form.
Part II: Dividends
Just like the first part, you need to list each payer’s name and the dollar amount in ordinary dividends you received from them. (Your 1099-DIV form tells you whether your dividends are ordinary, taxed at your ordinary or marginal tax rate, or qualified, subject to generally more favorable long-term capital gains tax rates.) If this total exceeds $1,500, you need to complete part III.
Part III: Foreign Accounts and Trusts
This is where you report information about foreign accounts or trusts. But you must fill it out if you earned more than $1,500 in either interest or ordinary dividends during the tax year, even if these weren’t from foreign accounts. This section asks yes-or-no questions about:
- Whether or not you had a financial interest in, or signature authority over, a foreign financial account—like a bank, securities, or brokerage account
- Whether or not you’re required to file FinCEN Form 114 to report such interests
- The countries that house these foreign accounts
- Whether or not you were the grantor of, transferor to, or received a distribution from a foreign trust
Depending on your answers to these questions, you may have to complete additional tax forms. Failing to do so could result in legal action and significant fines.
When do you have to file Schedule B?
Schedule B is due when your federal tax return is due, which is usually April 15. In years when April 15 falls on a weekend or holiday, your return is due the next business day. Taxpayers who are granted a filing extension have an extra 6 months to turn in their Schedule B and Form 1040. That works out to mid-October. Still, you must pay taxes you owe by the April deadline.
Things to keep in mind when filing Schedule B
Where can you get Schedule B?
Schedule B is available online as a downloadable PDF at IRS.gov. If you use tax-preparation software, it fills out your Schedule B for you.
Do you need to report taxable interest and ordinary dividends without a 1099-INT or 1099-DIV?
There’s a common misconception that if you don’t receive a Form 1099-INT or 1099-DIV, then you don’t need to report that income. The truth is it must be reported whether you receive a form or not—and if your interest or ordinary dividends exceed $1,500, you have to report that income using Schedule B.
Where do you report qualified dividends?
On your Schedule B, you only need to include information about ordinary dividends received during the previous tax year. If your 1099-DIV form says you received qualified dividends, those should go on your 1040—but these should be excluded from your calculations on Schedule B.
A tax professional can help answer any questions and ensure you’re completing the form accurately and according to the IRS’s requirements.