How to Fill Out Schedule B for Interest and Dividends

Schedule B, titled “Interest and Ordinary Dividends,” is a supplemental form attached to the U.S. Individual Income Tax Return, Form 1040. Its purpose is to provide the Internal Revenue Service (IRS) with a detailed list of all the interest and ordinary dividend income sources a taxpayer has. When you have multiple financial accounts or investments that generate this type of income, Schedule B offers a structured way to report each one individually. The totals from this schedule are then carried over to the main Form 1040, ensuring that all income is properly accounted for in your tax calculation.

Determining if You Need to File Schedule B

The requirement to file Schedule B is triggered by specific circumstances related to your income and foreign financial activities. The most common reason for filing is if your total taxable interest is more than $1,500 or if your total ordinary dividends are more than $1,500 for the tax year. Each type of income is considered separately against this threshold.

A separate trigger for filing Schedule B involves foreign financial assets. You must file the form, regardless of the amount of your interest or dividend income, if you had a financial interest in or signature authority over a financial account located in a foreign country. This includes bank accounts, securities accounts, or other types of financial accounts. The requirement also applies if you received a distribution from, or were a grantor of or transferor to, a foreign trust.

Information and Documents Needed to Complete Schedule B

Before you begin filling out Schedule B, gathering the correct documents will streamline the process. The primary forms you will need are provided by the financial institutions that paid you interest or dividends.

For interest income, you will use Form 1099-INT, “Interest Income.” This form details the payer’s name and the total taxable interest paid to you. For dividend income, you will need Form 1099-DIV, “Dividends and Distributions,” which reports the ordinary dividends you received in Box 1a. Another relevant document might be Form 1099-OID, “Original Issue Discount,” which reports a specific type of interest from certain bonds or notes bought at a discount; the taxable amount is generally shown in Box 1 or Box 8.

If Part III applies to you, you must also compile a list of the foreign countries in which you hold a financial account. You do not need account numbers or balances for Schedule B itself, but you must be prepared to identify each country where an account is located.

A Step-by-Step Guide to Completing Schedule B

Part I – Interest

Part I focuses on interest income. On Line 1, you will list the name of every payer who sent you a Form 1099-INT or 1099-OID, along with the corresponding amount of taxable interest shown on the form. If you sold a property and provided seller financing, you should list the interest paid by the buyer here as well.

After listing all your individual interest payments, you will add them together. This total is entered on Line 2, “Total interest.” The form includes a line for “Excludable interest on series EE and I U.S. savings bonds,” which allows for a specific deduction related to educational expenses, detailed in Form 8815. After subtracting any such excludable interest, you will enter the final taxable interest amount on Line 4.

Part II – Ordinary Dividends

Part II of Schedule B is for reporting ordinary dividend income. Using your Form 1099-DIV statements, you will list the name of each payer and the amount of ordinary dividends from Box 1a on Line 5. Ensure that you are reporting the “ordinary dividends” amount, not the “qualified dividends,” which are a subset of ordinary dividends treated differently for tax rate purposes.

After you have listed all your dividend payers and the amounts received, you will sum them up. This total is entered on Line 6, “Total ordinary dividends,” and represents your total ordinary dividend income for the year.

Part III – Foreign Accounts and Trusts

Part III addresses foreign financial holdings and is a series of “yes” or “no” questions. Question 7a asks if you had a financial interest in or signature authority over a financial account in a foreign country. If you answer “yes,” you must also complete Question 7b by listing the name of each foreign country where you have an account. Answering “yes” to this question may also trigger a separate reporting requirement. If the total value of your foreign financial accounts exceeded $10,000 at any time during the year, you must also file FinCEN Form 114, Report of Foreign Bank and Financial Accounts (FBAR).

Question 8 asks if you received a distribution from, or were the grantor of, or transferor to, a foreign trust. If you answer “yes,” you may be required to file Form 3520, Annual Return To Report Transactions With Foreign Trusts and Receipt of Certain Foreign Gifts. It is important to answer these questions accurately, as failure to disclose foreign accounts or trust activity can lead to significant penalties.

Transferring Totals to Form 1040

After you have accurately completed all parts of Schedule B, the final step is to transfer the totals to your main tax return, Form 1040. The total taxable interest from Schedule B, Line 4, is carried over to Line 2b of Form 1040. Similarly, the total ordinary dividends from Schedule B, Line 6, must be reported on Form 1040, Line 3b. Once completed, Schedule B must be physically or electronically attached to your Form 1040 when you file your return with the IRS.