What the Form Is For

Schedule B is an attachment to your main tax return (Form 1040 or 1040A) that helps you report interest income and ordinary dividends you received during the 2015 tax year. Think of it as a detailed worksheet that breaks down where your investment income came from—whether it's interest from your savings account, certificates of deposit, bonds, or dividends from stocks and mutual funds.

The form serves three main purposes: First, it requires you to list each payer (bank, brokerage, company) and the amount they paid you when your total interest or dividends exceed $1,500. Second, it handles special situations like seller-financed mortgages where you're the lender, or cases where you received interest or dividends on behalf of someone else. Third, it includes crucial questions about foreign financial accounts and trusts that the IRS uses to ensure compliance with international tax reporting requirements.

The income you report on Schedule B ultimately transfers to specific lines on your Form 1040 or 1040A—the final interest amount goes to line 8a, and ordinary dividends go to line 9a of your main return.

When You'd Use It (Including Late or Amended Returns)

For the 2015 tax year, you were required to file Schedule B with your original return if any of these situations applied to you:

You must file Schedule B if:

• Your taxable interest or ordinary dividends totaled more than $1,500
• You received interest from a mortgage you provided to someone who used the property as their personal residence (seller-financed mortgage)
• You're reporting original issue discount (OID) differently than what appears on Form 1099-OID
• You're reducing bond interest income by amortizable bond premium
• You're excluding interest from Series EE or I U.S. savings bonds used for qualified education expenses
• You received interest or dividends as a "nominee" (meaning the money was in your name but actually belonged to someone else)
• You had a financial interest in or signature authority over a foreign bank account
• You received distributions from, or were a grantor or transferor to, a foreign trust

For late or amended returns: The original due date for 2015 returns was April 18, 2016 (not the typical April 15 because that date fell on a holiday). If you filed your 2015 return on time but later discovered you should have included Schedule B—perhaps you forgot about interest income or received a corrected 1099 form—you'll need to file Form 1040X (Amended U.S. Individual Income Tax Return). Attach a completed Schedule B to your Form 1040X and explain the changes in Part III of that form. Generally, you have three years from the original filing date to amend your return and claim a refund.

Key Rules and Thresholds for 2015

The $1,500 Threshold

This is the key number to remember. If your combined taxable interest and ordinary dividends totaled $1,500 or less, you could simply report the totals directly on Form 1040 or 1040A without filing Schedule B. Once you crossed that threshold, Schedule B became mandatory, and you had to list each payer individually.

Reporting Taxable Income Only

You report taxable interest on Schedule B, but tax-exempt interest (such as municipal bond interest shown in box 8 of Form 1099-INT) gets reported elsewhere—specifically on line 8b of Form 1040 or 1040A. Don't include it on Schedule B.

Seller-Financed Mortgage Special Rule

If you sold property in 2015 or earlier and the buyer is making payments to you with interest, and they're using that property as their personal home, you must list this interest first on Schedule B. You're also required to include the buyer's name, address, and Social Security number, and the buyer must know your SSN. Failure to provide this information can result in a $50 penalty.

Foreign Account Reporting

This was particularly important in 2015. If you had financial interest in or signature authority over any foreign bank account, you had to answer "Yes" to question 7a on Part III of Schedule B. If the combined value of all your foreign accounts exceeded $10,000 at any time during the year, you also had to file FinCEN Form 114 (FBAR) separately by June 30, 2016. The penalties for failing to report foreign accounts were severe—up to $10,000 for non-willful violations and up to $100,000 or 50% of the account balance for willful violations.

Form 1099 Reconciliation

The amounts you report should match the Forms 1099-INT and 1099-DIV you received from banks, brokerages, and companies. These forms were sent to both you and the IRS, so discrepancies could trigger IRS inquiries.

Step-by-Step Guide (High Level)

Part I – Interest (Lines 1–4)

Start by gathering all your Forms 1099-INT and 1099-OID. On line 1, list each payer's name and the amount of interest they paid you. If you received seller-financed mortgage interest, list that first with the buyer's details. Add up all the interest amounts and enter the total on line 2. If you're excluding savings bond interest used for qualified education expenses (using Form 8815), subtract that amount on line 3. The result goes on line 4, and this same number transfers to line 8a of your Form 1040 or 1040A.

Part II – Ordinary Dividends (Lines 5–6)

Pull out your Forms 1099-DIV. On line 5, list each company or fund that paid you ordinary dividends (box 1a of Form 1099-DIV) along with the amounts. Add these up and enter the total on line 6. This number goes directly to line 9a of your main tax return.

Part III – Foreign Accounts and Trusts (Lines 7–8)

Question 7a asks if you had any interest in or authority over foreign financial accounts at any time during 2015. Answer honestly—check "Yes" or "No." If "Yes," question 7b asks whether you're required to file FinCEN Form 114 (which depends on the $10,000 threshold mentioned earlier). If required, list the countries where your accounts were located. Question 8 asks about foreign trusts—answer "Yes" if you received distributions from a foreign trust or created/transferred assets to one.

Common Mistakes and How to Avoid Them

Mistake #1: Forgetting small accounts

Many taxpayers forget to include interest from smaller savings accounts or credit union dividends because the amounts seem insignificant. However, if these small amounts push your total over $1,500, you must file Schedule B and list every source. Review all your bank and investment statements, not just the 1099 forms you received (sometimes institutions don't send 1099s for amounts under $10, but you still must report the income).

How to avoid it: Create a checklist of all financial institutions where you have accounts, then systematically check each one for interest or dividends received in 2015.

Mistake #2: Confusing total dividends with ordinary dividends

Form 1099-DIV shows several boxes, including total dividends, ordinary dividends, and qualified dividends. For Schedule B line 5, you only report ordinary dividends (box 1a). Qualified dividends get reported separately on Form 1040 line 9b but are not listed individually on Schedule B.

How to avoid it: Look specifically at box 1a of each 1099-DIV form—that's your ordinary dividend amount for Schedule B.

Mistake #3: Not reporting foreign accounts

Some taxpayers believe that if they paid taxes in a foreign country, they don't need to report the account to the IRS. This is incorrect. You must answer the foreign account questions on Schedule B Part III regardless of where you paid taxes. The reporting requirements are separate from tax liability.

How to avoid it: If you had any foreign financial account in 2015—even if you only deposited money and earned no interest—check "Yes" to question 7a and follow the instructions carefully.

Mistake #4: Improper nominee reporting

If your account earned interest but part of it actually belongs to someone else (like a joint account where you're listed but your elderly parent owns the funds), you must report the full amount received on Schedule B, then subtract the nominee portion with proper labeling. Many taxpayers either omit the income entirely or report only "their share," both of which are incorrect.

How to avoid it: Report the full amount you received, then create a subtotal and subtract "Nominee Distribution" as shown in the Schedule B instructions. You must also provide the actual owner with a Form 1099-INT or 1099-DIV.

Mistake #5: Missing the $1,500 threshold calculation

Some taxpayers calculate interest and dividends separately and file Schedule B if either category exceeds $1,500. The rule actually combines both—if your interest and dividends together total more than $1,500, you must file Schedule B even if each category individually is below that amount.

How to avoid it: Add your total interest and total dividends together first. If the combined amount is over $1,500, prepare Schedule B with both parts completed.

What Happens After You File

IRS Matching Process

The IRS receives copies of all Forms 1099-INT and 1099-DIV that were sent to you. Their computer systems automatically match the amounts you reported on Schedule B against these third-party reports. If the numbers match, your return moves through processing smoothly. This matching usually happens within several months of filing, though you typically won't hear anything unless there's a problem.

If There's a Discrepancy

If the IRS finds that payers reported more interest or dividends to them than you reported on Schedule B, you'll likely receive a CP2000 notice (also called an "underreporter inquiry"). This isn't technically an audit, but it proposes changes to your return and additional tax, interest, and possibly penalties. You'll have an opportunity to respond, either agreeing with the changes or explaining why your original reporting was correct (perhaps you received a corrected 1099 after filing).

Foreign Account Compliance

If you indicated foreign account ownership but the IRS doesn't receive your required FinCEN Form 114 by the deadline, you may receive inquiries from the IRS or from FinCEN. These inquiries can become serious quickly because foreign account penalties are substantial. Make sure both your tax return (with Schedule B) and any required FinCEN Form 114 are filed properly.

Refunds and Payments

The interest and dividend income reported on Schedule B increases your taxable income, which affects your final tax liability. If this income results in additional tax owed beyond what you already paid through withholding or estimated taxes, you'll need to pay the difference by the filing deadline to avoid interest and penalties. Conversely, if you overpaid through withholding, your refund will be calculated after including this investment income.

Audit Selection

Having investment income and filing Schedule B doesn't automatically increase your audit risk. However, large foreign account balances or complex investment situations might warrant additional IRS scrutiny. Keep all your 1099 forms, brokerage statements, and account records for at least three years (and longer for foreign accounts—typically six years) in case the IRS has questions.

Frequently Asked Questions

1. I received a 1099-INT showing $45 in interest, and that's my only investment income. Do I still need Schedule B?

No. Since your interest income is well below the $1,500 threshold and you have no other complications (foreign accounts, nominee situations, etc.), you simply report the $45 directly on Form 1040 line 8a or Form 1040A line 8a without filing Schedule B.

2. My brokerage sent me one 1099 form showing interest and dividends from multiple sources. How do I list these on Schedule B?

You can list the brokerage firm's name once and enter the total interest amount from that form on line 1 of Part I, then list the same brokerage name on line 5 of Part II with the total ordinary dividends from that form. You don't need to break down every individual stock or bond—the brokerage name as the payer is sufficient.

3. I discovered after filing that I forgot to include a 1099-DIV showing $300 in dividends. My total investment income was $2,100, so I should have filed Schedule B but didn't. What should I do?

File Form 1040X (Amended U.S. Individual Income Tax Return) for 2015. Complete a Schedule B showing all your investment income (including the $300 you missed), attach it to Form 1040X, and explain the error in Part III of Form 1040X. You'll need to recalculate your tax liability with the additional income and pay any difference plus interest. The sooner you amend, the less interest you'll owe.

4. What's the difference between ordinary dividends and qualified dividends, and why do I only report one type on Schedule B?

Ordinary dividends (reported on Schedule B line 5) represent the total dividend income you must include in your taxable income. Qualified dividends are a subset of ordinary dividends that qualify for special lower tax rates (similar to long-term capital gains rates). You report ordinary dividends on Schedule B and Form 1040 line 9a, then report the qualified portion separately on Form 1040 line 9b. Both amounts are taxable but may be taxed at different rates.

5. I have a joint savings account with my sister, and we each received a 1099-INT showing the full $2,000 interest earned. Do we both report $2,000 on our Schedule B forms?

No. Assuming you each actually own half the account, one of you should report the full $2,000 on Schedule B, then create a nominee subtraction for $1,000 (the amount belonging to your sister). You must also provide your sister with a Form 1099-INT showing her $1,000 share. Your sister would report $1,000 on her tax return. Coordinate with your sister to decide who reports as the nominee to avoid both of you reporting the full amount.

6. I had $8,000 in a bank account in Canada for two months in 2015, then closed it. The account earned $15 in interest. Do I need to report this on Schedule B Part III?

Yes. You must check "Yes" to question 7a because you had a financial interest in a foreign account during 2015. However, since your account never exceeded $10,000, you likely don't need to file FinCEN Form 114 (check "No" to question 7b if this was your only foreign account). Still, you must report the $15 in interest income on Schedule B Part I and answer the foreign account questions truthfully.

7. My tax software says I don't need Schedule B even though I have $1,800 in interest. Should I trust the software?

Review carefully. The software might be right if there's a special situation (such as tax-exempt interest or certain U.S. savings bond interest exclusions), but generally, $1,800 in taxable interest requires Schedule B. Check your entries to ensure you've correctly identified the type of interest and that it's taxable. If the interest is taxable and exceeds $1,500, you need Schedule B regardless of what the software suggests—you may need to override the software or contact their support.

Sources

Source: All information in this guide is based on the official IRS Schedule B (Form 1040) for 2015 and instructions published by the Internal Revenue Service.