What Schedule B Is For

Schedule B (Form 1040A or 1040) is an attachment to your main tax return used to report interest and ordinary dividends you received during 2013. Think of it as a detailed breakdown that supports the summary numbers you enter on your Form 1040. The form also serves a critical secondary purpose: it asks important questions about foreign financial accounts and trusts to ensure taxpayers comply with international reporting requirements.

You'll use Schedule B to list each payer of interest or dividends—such as banks, brokerage firms, and corporations—along with the amounts you received. The IRS requires this level of detail when your interest or dividend income exceeds certain thresholds, or when you have special situations like seller-financed mortgages or foreign accounts. The form consists of three parts: Part I for interest income, Part II for ordinary dividends, and Part III for foreign accounts and trusts. IRS.gov

When You’d Use Schedule B (Late/Amended)

Most taxpayers file Schedule B as part of their original return, which was due April 15, 2014 for the 2013 tax year. However, you may need to file Schedule B late or as part of an amended return in several scenarios.

If you forgot to file Schedule B with your original return, or if you received additional Forms 1099-INT or 1099-DIV after filing, you'll need to file Form 1040X (Amended U.S. Individual Income Tax Return) with a corrected or new Schedule B attached. Generally, you have three years from the date you filed your original return (or April 15, 2014, if you filed early) to file an amended return to claim a refund. If you're correcting an error that results in owing more tax, you should file the amendment as soon as possible to minimize interest and potential penalties.

Additionally, if you initially didn't realize you had foreign account reporting obligations, filing an amended return with a complete Schedule B Part III is critical. Missing or incomplete foreign account disclosures can trigger substantial penalties, so correcting these omissions promptly is essential.

Key Rules or Details for 2013

The primary filing requirement for Schedule B in 2013 was straightforward: you must file if your taxable interest or ordinary dividends exceeded $1,500. But several other situations also trigger the filing requirement, even if you're below that threshold. These include receiving interest from a seller-financed mortgage where the buyer used the property as a personal residence, having accrued interest from bonds, reporting original issue discount (OID) differently than shown on Form 1099-OID, reducing interest income by amortizable bond premium, claiming the exclusion on Series EE or I U.S. savings bonds for education expenses, receiving interest or dividends as a "nominee" (meaning in your name but belonging to someone else), or having foreign financial accounts or trust interests. IRS.gov

The $1,500 threshold is crucial because it also determines whether you must complete Part III regarding foreign accounts. If your interest or dividends exceed this amount, you're required to answer the foreign account questions even if you don't have any foreign accounts.

For foreign account holders, 2013 continued the stringent reporting requirements established in previous years. If you had a financial interest in or signature authority over foreign financial accounts with an aggregate value exceeding $10,000 at any time during 2013, you were required to file FinCEN Form 114 (FBAR) separately from your tax return. This form was due June 30, 2014, with no extension available, and had to be filed electronically through FinCEN's BSA E-Filing System—not attached to your tax return.

Step-by-Step (High Level)

Step 1: Gather Your Documents

Collect all Forms 1099-INT (interest income), 1099-OID (original issue discount), and 1099-DIV (dividend income) from banks, brokerages, and other payers. Also gather any documentation related to seller-financed mortgages, foreign accounts, or trust distributions.

Step 2: Complete Part I – Interest (Lines 1-4)

On line 1, list each payer's name and the interest amount received. If you have seller-financed mortgage interest where the buyer used the property as a personal residence, list this first and include the buyer's name, address, and Social Security number. Add special handling for nominee situations, accrued interest, or bond premium adjustments by creating subtotals and subtracting adjustments. Total all interest on line 2. If you're excluding interest from Series EE or I savings bonds for education (using Form 8815), enter that amount on line 3. Subtract line 3 from line 2 and enter the result on line 4—this is your taxable interest that also goes on Form 1040, line 8a.

Step 3: Complete Part II – Ordinary Dividends (Lines 5-6)

List each payer's name and dividend amount on line 5, using information from box 1a of your Forms 1099-DIV. Handle nominee dividends the same way as nominee interest. Total all dividends on line 6 and transfer this amount to Form 1040, line 9a.

Step 4: Complete Part III – Foreign Accounts and Trusts (Lines 7-8)

If either line 4 or line 6 exceeds $1,500, you must complete Part III. Answer line 7a's first question about whether you had a financial interest in or signature authority over foreign financial accounts. If yes, answer the second part about whether you're required to file FinCEN Form 114 (FBAR). If you must file the FBAR, list the foreign countries on line 7b. Answer line 8 about foreign trust distributions or grantor/transferor status—if yes, you'll likely need to file Form 3520.

Step 5: Attach and File

Attach your completed Schedule B to Form 1040 or 1040A when you file. Remember that FinCEN Form 114 (if required) is filed separately and electronically—never attach it to your tax return.

Common Mistakes and How to Avoid Them

Missing payers or amounts

The most common error is incomplete reporting. Taxpayers often forget about small accounts or overlook interest from sources like seller-financed mortgages. Solution: Use your 1099 forms as a checklist, and review your bank and investment statements to ensure you haven't missed any accounts. If you receive a consolidated 1099 from a brokerage, you can list the brokerage name once with the total amount rather than listing each individual security.

Incorrect nominee handling

When you receive interest or dividends in your name but some belongs to someone else (like a joint account where you're not the true owner), you must report the full amount and then subtract the nominee portion. Many taxpayers either forget to report the nominee income entirely or fail to subtract it properly. Solution: Create a subtotal, clearly write "Nominee Distribution," show the subtracted amount, and issue Form 1099-INT or 1099-DIV to the actual owner (unless it's your spouse). IRS.gov

Seller-financed mortgage errors

If you sold property and the buyer is paying you interest on a mortgage, you must list this interest first on line 1 with the buyer's complete information. Failure to provide the buyer's name, address, and SSN can result in a $50 penalty. Solution: Contact the buyer early in the tax year to obtain their SSN, and maintain records of all payments received.

Incomplete Part III for foreign accounts

Some taxpayers answer "no" to the foreign account questions without fully understanding what qualifies as a foreign account. Others answer "yes" but fail to file the required FinCEN Form 114 (FBAR). Solution: Carefully review the definitions in the Schedule B instructions. Remember that even accounts under $10,000 must be disclosed on Schedule B if your interest/dividends exceed $1,500—the $10,000 threshold only determines whether you must file the FBAR. Note that FinCEN Form 114 had a hard deadline of June 30, 2014, with no extension available.

Confusion between related forms

Taxpayers sometimes confuse Schedule B with Form 8938 (Statement of Specified Foreign Financial Assets), which has different thresholds and reporting requirements. For 2013, both forms might be required depending on your situation. Solution: Consult the instructions for both Schedule B Part III and Form 8938, or seek professional assistance if you have foreign assets.

What Happens After You File

Once you file your return with Schedule B attached, the IRS processes your information through its automated systems. The IRS matches the interest and dividend amounts you reported against the information returns (Forms 1099-INT and 1099-DIV) that banks and brokers filed separately. This matching process typically occurs several months after you file.

If everything matches, your return processes normally and you'll receive your refund (if any) or your payment will be recorded. The IRS generally doesn't send a separate confirmation that your Schedule B was accepted—no news is good news in this case.

However, if the IRS discovers discrepancies between what you reported and what appears on the 1099 forms they received, you'll receive a notice (commonly a CP2000, "Proposed Changes to Your Tax Return"). This notice will show the difference and propose adjusting your tax liability. You'll have an opportunity to respond, provide missing documentation, or explain any discrepancies. Often these mismatches occur because of timing differences, nominee situations, or payers reporting under slightly different names.

For foreign account reporting, the consequences after filing are more serious if you made errors. The IRS and Treasury Department's Financial Crimes Enforcement Network (FinCEN) actively enforce foreign account reporting. Civil penalties for non-willful FBAR violations can reach $10,000 per violation, while willful violations can trigger penalties of the greater of $100,000 or 50% of the account balance, plus potential criminal penalties. The IRS may also examine returns with foreign account indicators more closely for compliance. IRS.gov

If you later realize you made an error on Schedule B, you should file Form 1040X with a corrected Schedule B as soon as possible. The earlier you correct mistakes voluntarily, the better your chances of avoiding or reducing penalties. For foreign account disclosure issues, the IRS has offered various voluntary disclosure programs that can significantly reduce penalties for taxpayers who come forward before being contacted.

FAQs

1. Do I need Schedule B if I only earned $800 in interest and $200 in dividends?

No, you don't need to file Schedule B in this case since your combined total is $1,000, which is below the $1,500 threshold. Simply report the $800 on Form 1040 line 8a and the $200 on line 9a. However, you'd still need Schedule B if you had any of the special situations listed (seller-financed mortgage, foreign accounts, nominee income, etc.), even with amounts under $1,500.

2. My brokerage sent me one 1099 showing interest from 15 different bonds. Do I have to list all 15 separately?

No. You can list your brokerage firm's name once and show the total interest amount. The Schedule B instructions specifically allow you to consolidate information from a single institution, which makes the form much more manageable for investors with multiple holdings. IRS.gov

3. What's the difference between ordinary dividends on Schedule B and qualified dividends on Form 1040?

Schedule B reports ordinary dividends (shown in box 1a of Form 1099-DIV), which is the total dividend income you received. Qualified dividends (box 1b) are a subset of ordinary dividends that qualify for lower capital gains tax rates. You report ordinary dividends on Form 1040 line 9a and qualified dividends on line 9b. Schedule B only deals with the total ordinary dividend amount; the qualified dividend calculation happens elsewhere on your return.

4. I have a joint bank account with my elderly parent, but all the money is theirs. Do I need to report the interest on my Schedule B?

Yes, if the account is in your name, you'll initially receive a 1099-INT showing the interest. However, you should report it as nominee income on Schedule B: include the full amount, then subtract it as "Nominee Distribution." You must also give your parent a Form 1099-INT showing their share (since they're not your spouse) and file it with the IRS along with Form 1096. This properly transfers the tax liability to the true owner.

5. I forgot to report $2,000 in interest income on my 2013 return. How do I fix this?

You need to file Form 1040X (Amended U.S. Individual Income Tax Return) with a completed Schedule B showing all your interest income, including the $2,000 you missed. You'll need to recalculate your tax liability, pay any additional tax owed, plus interest from the original filing deadline. File the amendment as soon as you discover the error—waiting only increases the interest charges and could result in penalties.

6. Can I e-file Schedule B, or do I have to mail it?

For 2013, you could e-file Schedule B as part of your Form 1040 through approved tax software or a tax professional. E-filing is generally faster, more secure, and reduces errors. However, FinCEN Form 114 (FBAR) for foreign accounts must be filed separately through FinCEN's electronic filing system at bsaefiling.fincen.treas.gov—it cannot be attached to your tax return regardless of how you file.

7. What happens if I answered "no" to Part III about foreign accounts but later realized I should have answered "yes"?

This is a serious issue that requires immediate correction. File Form 1040X with a corrected Schedule B Part III, and file the required FinCEN Form 114 if you met the $10,000 threshold. Consider consulting a tax professional, especially if significant amounts are involved, as you may want to enter the IRS's voluntary disclosure programs. The penalties for non-compliance can be severe, but voluntary disclosure before IRS contact typically results in more favorable treatment. The sooner you correct this, the better your outcome is likely to be.

Sources: All information in this guide comes from official IRS publications: Schedule B Form 1040 (2013) and Form 1040 Instructions (2013).