Schedule B (Form 1040), 2020 Tax Year Checklist
Purpose
Schedule B reports taxable interest and ordinary dividends for 2020 tax year filers. This form is required when specific thresholds or conditions are met. It includes mandatory foreign account and foreign trust reporting inquiries that align with separate filing requirements for FinCEN Form 114 (FBAR) and Form 3520.
Filing Requirements:
You must file Schedule B (Form 1040) for the 2020 tax year if any of the following conditions apply:
- You received over $1,500 of taxable interest or ordinary dividends during 2020
- You received interest from a seller-financed mortgage where the buyer used the property as a personal residence
- You have accrued interest from a bond that requires reporting
- You are reporting original issue discount (OID) in an amount less than shown on Form 1099-OID
- You are reducing interest income by the amortizable bond premium
- You are claiming the exclusion of interest from Series EE or I U.S. savings bonds issued after December 31, 1989
- You received interest or ordinary dividends as a nominee for another person
- You had a financial interest in, or signature authority over, a financial account in a foreign country at any time during 2020
- You received a distribution from, or were a grantor of, or transferor to, a foreign trust during 2020
Preparation Steps
Part I: Interest Income Reporting
Step 1: Gather Interest Documentation
Collect all Forms 1099-INT and 1099-OID received for the 2020 tax year. These forms document interest income from banks, brokerages, bonds, and other sources. Organize these documents before beginning your Schedule B preparation.
Step 2: List Seller-Financed Mortgage Interest First
If you sold property and the buyer used it as a personal residence, any interest the buyer paid you on seller financing must be listed first on Part I, line 1. You must include the buyer's name, complete address, and Social Security Number (SSN). Additionally, provide your SSN to the buyer. Failure to include the buyer's full information may result in a $50 penalty.
Step 3: List All Interest Payees
On Part I, line 1, list each payer's name and the corresponding interest amount received during 2020. You may list multiple payers in each entry space, but clearly show the amount paid next to each payer's name. If you received a consolidated statement from a brokerage firm showing combined interest, you may list the firm's name as the payer and enter the total interest amount shown on that statement. This eliminates the need to itemize each security if a consolidated statement is provided.
Step 4: Calculate Total Interest
Add all amounts listed on line 1 and enter the total on line 2. This represents your total interest income before any exclusions.
Step 5: Subtract Excludable Interest
On line 3, subtract any excludable interest from Series EE or I U.S. savings bonds issued after December 31, 1989. To claim this exclusion, you must attach Form 8815 to your return. This exclusion applies only when bonds are used for qualified higher education expenses and specific income limitations are met.
Step 6: Report Taxable Interest
Subtract line 3 from line 2 and enter the result on line 4. This is your taxable interest. Transfer this amount to Form 1040 or Form 1040-SR, line 2b. Verify this figure matches your Form 1040 entry before filing.
Part II: Ordinary Dividends Reporting
Step 7: Gather Dividend Documentation
Collect all Forms 1099-DIV received for the 2020 tax year. These forms report ordinary dividends, qualified dividends, and capital gain distributions from investments.
Step 8: List Ordinary Dividends
On Part II, line 5, list each payer's name and the amount of ordinary dividends received. Report only the ordinary dividends shown in box 1a of Form 1099-DIV. Do not include capital gain distributions (box 2a) or nontaxable distributions (box 3), as these are reported elsewhere on your tax return. Similar to interest reporting, you may list a brokerage firm's name and total ordinary dividends if you received a consolidated statement.
Step 9: Calculate Total Ordinary Dividends
Add all amounts on line 5 and enter the total on line 6. Transfer this amount to Form 1040 or Form 1040-SR, line 3b.
Part III: Foreign Accounts and Trusts
Step 10: Understanding Part III Requirements
Part III of Schedule B must be completed if any of the following conditions apply to you for the 2020 tax year:
- You had over $1,500 of taxable interest or ordinary dividends (from line 4 or line 6)
- You had a financial interest in or signature authority over a foreign financial account at any time during 2020, regardless of the account balance.
- You received a distribution from, or were a grantor of, or transferor to, a foreign trust during 2020
Note that Part III completion is triggered by any one of these three separate conditions. You must complete Part III even if your interest and dividends are below $1,500, as long as you had a foreign account or foreign trust involvement.
Step 11: Answer Question 7a (Foreign Financial Accounts)
Question 7a has two parts that must be answered:
Question 1: Check "Yes" if at any time during 2020 you had a financial interest in or signature authority over a financial account (such as a bank account, securities account, or brokerage account) located in a foreign country. Check "Yes" even if you are not required to file FinCEN Form 114 (FBAR). This disclosure requirement applies to accounts opened and closed within the same calendar year. Signature authority means the authority to control the disposition of assets in the account, regardless of whether you own the account.
Question 2: Indicate whether you are required to file FinCEN Form 114 (FBAR). Generally, you must file FBAR if the aggregate maximum value of your foreign financial accounts exceeded $10,000 at any time during 2020.
Step 12: Report Foreign Country Location
If you answered "Yes" to Question 2 on line 7a (indicating FBAR filing is required), enter the name of the foreign country or countries where your financial accounts are located on line 7b. Please use the space provided, or attach a separate statement if additional space is required.
Step 13: Answer Question 8 (Foreign Trusts)
Answer "Yes" to line 8 if, during 2020, you received a distribution from a foreign trust, or if you were the grantor of, or transferor to, a foreign trust. For this purpose, a loan of cash or marketable securities from a foreign trust is generally considered a distribution. If you answer "Yes," you may be required to file Form 3520. Consult the Instructions for Form 3520 for complete filing requirements.
Final Assembly and Filing
Step 14: Attach Required Forms
Attach Form 8815 to your tax return if you are claiming the exclusion for Series EE or I bond interest used for education expenses.
Important: FinCEN Form 114 (FBAR) is filed separately and electronically through FinCEN's BSA E-Filing System. Do not attach FinCEN Form 114 to your tax return. Similarly, Form 3520 is filed separately with the IRS at a different address (P.O. Box 409101, Ogden, UT 84409) and should not be attached to Form 1040 or Form 1040-SR.
Step 15: Verify Attachment Sequence
Schedule B carries Attachment Sequence No. 08. Ensure Schedule B is correctly attached to your Form 1040 or Form 1040-SR when filing your 2020 return. Schedule B does not require a separate signature; the signature on your Form 1040 or Form 1040-SR covers all attached schedules.
Step 16: Review All Entries
Before filing, verify that all amounts transferred from Schedule B to Form 1040 or Form 1040-SR are accurate. Confirm that line 4 (taxable interest) matches line 2b on Form 1040, and line 6 (ordinary dividends) matches line 3b on Form 1040.
2020 YEAR-SPECIFIC NOTES
Foreign Account Reporting: The instructions for Part III, question 7a, emphasize that "at any time during 2020" includes accounts that were opened and closed within the same calendar year. Signature authority explicitly consists of the authority to control account disposition, regardless of the account's ownership status.
FBAR Filing Deadline: FinCEN Form 114 is due April 15, 2021 (for calendar year 2020), with an automatic extension to October 15, 2021, if you fail to meet the April deadline. No extension request is necessary. The FBAR deadline is separate from your tax return deadline. Substantial penalties may apply for failure to file FBAR, even if no tax is owed.
Foreign Trust Reporting: Question 8 regarding foreign trust distributions, grantor status, or transferor status connects Schedule B filers to potential Form 3520 filing obligations. Form 3520 has its own separate due date and filing location.
Education Savings Bond Exclusion: Form 8815 must be attached when claiming the exclusion for interest on Series EE or I bonds issued after December 31, 1989. The exclusion applies only when bonds are redeemed to pay qualified higher education expenses and income limitations are met.
Nominee Reporting: If you received interest or dividends as a nominee (in your name but belonging to another person), special reporting rules apply. Report the total amount received on Schedule B, then subtract the nominee portion with proper documentation. You must provide Form 1099-INT or Form 1099-DIV to the actual owner and file these forms with the IRS.
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This checklist is for educational purposes only and does not constitute tax or legal advice. Always review official IRS instructions and consult a qualified professional for guidance.
