Schedule B

Schedule B (Interest and Ordinary Dividends) is an IRS tax form used to report interest income and ordinary dividend income when amounts exceed certain thresholds, and to disclose foreign accounts and trusts. This schedule provides detailed information about sources of interest and dividend income that must be reported on your Form 1040, ensuring proper tax compliance for investment earnings.

You must file Schedule B if you received more than $1,500 in taxable interest or ordinary dividends during the tax year, or if you have certain foreign financial accounts or received distributions from foreign trusts. Even if your interest or dividends are below these thresholds, you may need Schedule B if you’re claiming tax-exempt interest, accrued interest on bonds, or have other special reporting requirements. The form does not apply to qualified dividends, which are reported elsewhere and taxed at preferential capital gains rates.

Schedule B has three parts. Part I lists all sources of taxable interest income, including banks, savings and loans, credit unions, bonds, Treasury securities, seller-financed mortgages, and other interest-bearing accounts. You must identify each payer and the amount of interest received. Part II lists all sources of ordinary dividends, including stocks, mutual funds, and money market funds, with each payer’s name and dividend amount reported separately. Part III addresses foreign accounts and trusts, requiring you to answer whether you had financial interest in or signature authority over foreign financial accounts with aggregate values exceeding $10,000 at any time during the year.

If you answer “Yes” to foreign account questions, you may also need to file FinCEN Form 114 (FBAR – Report of Foreign Bank and Financial Accounts) separately. Failure to properly report foreign accounts can result in substantial penalties. The IRS receives matching documents from financial institutions via Forms 1099-INT and 1099-DIV, making accurate Schedule B reporting essential.

Total interest and dividends from Schedule B are transferred to Form 1040, where they’re included in your adjusted gross income. Interest income is always taxed as ordinary income at your regular tax rate, while ordinary dividends are also taxed at ordinary rates unless they qualify as qualified dividends.