How to File Schedule B – Interest and Ordinary Dividends

Schedule B (Form 1040) is used to report taxable interest and ordinary dividends when your income exceeds IRS reporting thresholds or when you have certain types of financial accounts. This guide explains how to complete Schedule B line by line, who must file it, key deadlines, penalties, and common mistakes to avoid.

Who Must File Schedule B?

You must file Schedule B if you have more than $1,500 in taxable interest or ordinary dividends or you meet any of the IRS special reporting requirements listed below.

You must file Schedule B if any of the following apply:

• Interest Threshold: You have over $1,500 in taxable interest income for the year.
• Dividend Threshold: You have over $1,500 in ordinary dividends.

Schedule B is also mandatory, even if your interest or dividend totals are below $1,500, if:

• You received interest from a seller-financed mortgage and the buyer uses the property as a personal residence.
• You received interest from a tax-exempt bond but must report alternative minimum tax (AMT) adjustments.
• You received dividends from a controlled foreign corporation (CFC).
• You received dividends from a foreign corporation.
• You had a foreign bank account or were a signer/authorized person on one (requires Part III of Schedule B).
• You received interest from the U.S. Savings Bonds (Series EE or I) in certain situations.
• You received Original Issue Discount (OID) interest that was not reported on Form 1099-OID.

If any of these special rules apply, Schedule B is required even if your total interest and dividend income is relatively small.

How Do You Complete Schedule B? (Line-by-Line Instructions)

Schedule B is divided into three parts:

Part I — Interest Income (Lines 1–6)

List each payer and the amount of interest received, then total it and transfer to Form 1040.

Step-by-step:

1. Gather all Forms 1099-INT and 1099-OID: Collect statements from banks, credit unions, brokers, and any other institutions where you earned interest.
2. List each payer: On Lines 1–5, list each payer by name (for example, ABC Bank, XYZ Brokerage).
3. Enter the interest amounts: Enter the interest amount shown on each information return (1099-INT, 1099-OID, or similar).
4. Include all applicable interest types, such as:
   • Bank savings and checking accounts
   • Credit union accounts
   • Certificates of deposit (CDs)
   • Treasury bills, notes, and bonds
   • Corporate bonds
   • OID instruments
5. Calculate your total interest: Add all interest amounts and enter the total on Line 6. Then transfer this total to Form 1040, Line 2b.

Special notes:

• Tax-exempt interest does not go on Schedule B. Report it separately on Form 1040, Line 2a.
• Interest under $10 may not generate a 1099-INT, but it is still taxable and must be included.
• If you received interest from a seller-financed mortgage or certain foreign accounts, make sure those amounts are included and that you meet any additional reporting requirements.

Part II — Ordinary Dividends (Lines 7–9)

Report ordinary dividends as shown on your Forms 1099-DIV and transfer the total to Form 1040.

Step-by-step:

1. Gather Forms 1099-DIV: Collect all 1099-DIV statements from brokerage accounts, mutual fund companies, and other financial institutions.
2. List each payer: On Lines 7–8, list the name of each payer (e.g., brokerage firms, mutual funds, REITs).
3. Enter ordinary dividends: Enter the amount from Box 1a (Total ordinary dividends) of each Form 1099-DIV.
4. Total your ordinary dividends: Add all ordinary dividends and enter the sum on Line 9. Transfer this amount to Form 1040, Line 3b.

Special notes:

• Qualified dividends (Box 1b) are reported separately on Form 1040, Line 3a, and may be taxed at lower capital gains rates.
• Dividends from REITs, mutual funds, ETFs, and brokerage accounts are typically included as ordinary dividends.
• Reinvested dividends—where the cash is automatically used to purchase more shares—are still taxable and must be reported, even though you did not receive cash in hand.

Part III — Foreign Accounts and Trusts (Lines 10–12)

Complete Part III if you had any foreign financial accounts or relationships with foreign trusts.

Part III is a key informational section that helps the IRS monitor foreign financial assets and compliance.

Step-by-step:

1. Line 10 – Foreign Accounts
   • Check “Yes” if you had a financial interest in, or signature authority over, a foreign bank, securities, or other financial account.
   • If “Yes,” you may also be required to file FinCEN Form 114 (FBAR) if the aggregate value of your foreign accounts exceeded certain thresholds during the year.
2. Line 11 – Foreign Interest/Dividends
   • Check “Yes” if any of your interest or dividends came from foreign sources, such as foreign banks or foreign corporations.
3. Line 12 – Foreign Trusts
   • Check “Yes” if you received a distribution from a foreign trust or were a grantor or transferor of one.
   • If “Yes,” you may need to attach Form 3520 or Form 3520-A.

Failing to report foreign accounts or trust relationships can result in severe penalties, even when the income involved is relatively small.

When Is Schedule B Due?

Schedule B is due on April 15, 2025, along with your Form 1040 for the 2024 tax year.

Because Schedule B is an attachment to Form 1040, it follows the same filing deadlines:

• Regular due date: April 15, 2025
• Extended due date: October 15, 2025 (if you file Form 4868 for an automatic extension)

An extension gives you more time to file your return but does not extend the time to pay any tax due. You must estimate and pay your 2024 tax liability by April 15, 2025 to avoid interest and late payment penalties.

Penalties for Filing Schedule B Incorrectly

Errors or omissions on Schedule B can lead to significant IRS consequences, especially since banks and brokers report your interest and dividends directly to the IRS.

Potential issues include:

• 20% accuracy-related penalties for negligence or substantial understatement of income
• Interest on underpayment of tax from the original due date of the return
• Foreign account penalties, which can range from $10,000 to over $100,000 in serious cases of non-compliance
• Audits triggered by mismatches between your tax return and Forms 1099-INT or 1099-DIV

The IRS automatically compares your return to all information returns filed by financial institutions. If you omit or under-report interest or dividends, the discrepancy is often detected quickly.

Need Help Filing Schedule B?

Interest and dividend reporting is one of the most common IRS audit and notice triggers, especially for taxpayers with:

• Multiple brokerage accounts
• Foreign financial accounts
• Complex investment portfolios

Dimov Tax & CPA Services can assist with:

• Accurate preparation of Schedule B and Form 1040
• Reconciliation of brokerage and bank statements
• Foreign account compliance, including FBAR (FinCEN Form 114) and FATCA reporting
• Responding to and resolving IRS mismatch notices and CP2000 letters

If you want peace of mind that every interest and dividend dollar is reported correctly, contact Dimov Tax & CPA Services today for expert help with Schedule B and your entire tax return.

Frequently Asked Questions

Do I need to file Schedule B if I earned less than $1,500?

Not always. If your total taxable interest and ordinary dividends are less than $1,500, you generally do not need Schedule B—unless special rules apply. You must still file Schedule B if you have certain foreign accounts, seller-financed mortgage interest, controlled foreign corporation (CFC) dividends, or other special situations listed earlier.

What types of interest are taxable?

Common types of taxable interest include:

• Bank and credit union interest
• Brokerage and margin interest
• U.S. Treasury interest (bills, notes, bonds)
• Corporate bond interest
• Original Issue Discount (OID) interest
• Interest from seller-financed mortgages

Most of this will be reported on Form 1099-INT or Form 1099-OID.

What dividends go on Schedule B?

You report ordinary dividends from:

• Individual stocks
• Exchange-traded funds (ETFs)
• Mutual funds
• Real Estate Investment Trusts (REITs)
• Foreign corporations

These are typically reported in Box 1a of Form 1099-DIV.

Do I need Schedule B for tax-exempt interest?

No. Tax-exempt interest is not reported on Schedule B. Instead, it goes on Form 1040, Line 2a. However, certain tax-exempt bonds may require additional AMT reporting, which can still trigger a Schedule B filing requirement.

Is dividend reinvestment taxable?

Yes. Dividends are taxable in the year they are paid, even if they are automatically reinvested to buy more shares. Reinvested dividends still appear on Form 1099-DIV and must be reported on your return.