Schedule B (Form 1040) 2021 Tax Year Checklist
Purpose
Schedule B (Form 1040) is used to report interest and ordinary dividend income for the 2021 tax year. This schedule must be completed under specific circumstances, which extend beyond simple dollar thresholds. Understanding when Schedule B is required ensures proper compliance with IRS reporting obligations.
You must use Schedule B if any of the following conditions apply:
- You received more than $1,500 of taxable interest or ordinary dividends during 2021
- 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
- You are reporting original issue discount (OID) in an amount less than shown on Form 1099-OID
- You are reducing interest income due to the amortizable bond premium
- You are claiming the exclusion of interest from Series EE or I U.S. savings bonds issued after 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 2021, OR you received a distribution from, or were a grantor of, or transferor to, a foreign trust.
Part III of Schedule B addresses foreign financial accounts and trusts, incorporating disclosure requirements that align with FinCEN Form 114 (Report of Foreign Bank and Financial Accounts, or FBAR) filing obligations for the 2021 reporting cycle.
Checklist Steps
Part I: Interest Income
Step 1: List All Interest Payees
Report all sources of taxable interest received during 2021 on line 1 of Schedule B. Taxable interest should generally be documented on Forms 1099-INT, Forms 1099-OID, or substitute statements from financial institutions.
Special attention is required for seller-financed mortgage interest. If you received interest payments from a buyer who purchased property from you and used that property as a personal residence, list this interest separately and first. You must include the buyer's name, Social Security number (SSN), and address. Failure to provide this information may result in a $50 penalty. Additionally, you must provide your SSN to the buyer.
Include all forms of taxable interest: interest from savings and checking accounts, certificates of deposit, bonds (including Series EE, H, HH, and I U.S. savings bonds), accrued market discount includible in income, and gains on contingent payment debt instruments reported as interest income.
If you received a Form 1099-INT or Form 1099-OID from a brokerage firm, list the brokerage firm's name as the payer and enter the total interest shown on that form.
Step 2: Calculate Total Interest
Add all amounts listed on line 1 and enter the total on line 2. This represents your gross taxable interest before any exclusions.
Step 3: Apply Savings Bond Exclusion (If Applicable)
If you cashed Series EE or I U.S. savings bonds issued after 1989 during 2021 and paid qualified higher education expenses for yourself, your spouse, or your dependents, you may exclude part or all of the interest. To claim this exclusion, you must complete and attach Form 8815. Enter the excludable amount on line 3. There is no alternative method to claim this exclusion; the Form 8815 attachment is mandatory.
Step 4: Determine Net Taxable Interest
Subtract line 3 from line 2 and enter the result on line 4. This is your net taxable interest. Transfer this amount to Form 1040 or Form 1040-SR, line 2b.
Note: If line 4 exceeds $1,500, you are required to complete Part III of Schedule B.
Part II: Ordinary Dividends
Step 5: List All Dividend Payers
Report all sources of ordinary dividends on line 5. Ordinary dividend amounts should be shown in box 1a of your Forms 1099-DIV or substitute statements from brokerage firms.
If you received dividends through a brokerage account, list the brokerage firm's name as the payer and enter the total ordinary dividends shown on your Form 1099-DIV.
Step 6: Calculate Total Dividends and Transfer to Form 1040
Add all amounts listed on line 5 and enter the total on line 6. Transfer this amount to Form 1040 or Form 1040-SR, line 3b.
Note: If line 6 exceeds $1,500, you are required to complete Part III of Schedule B.
Part III: Foreign Accounts and Trusts
Part III must be completed if ANY of the following conditions apply. These are independent triggers—you must complete Part III even if only one condition is met:
(a) You had over $1,500 of taxable interest OR ordinary dividends (the combined total from lines 4 and 6), OR
(b) You had a financial interest in or signature authority over a financial account located in a foreign country at any time during 2021, OR
(c) You received a distribution from, or were a grantor of, or a transferor to, a foreign trust during 2021
It is crucial to understand that the $1,500 threshold determines whether Schedule B must be filed initially. However, foreign account and foreign trust questions in Part III must be answered if you had such accounts or transactions, regardless of whether your interest or dividend income reached $1,500.
Step 7: Answer Foreign Account Questions
Question 7a: Check "Yes" if at any time during 2021 you had a financial interest in or signature authority over a financial account located in a foreign country. This includes bank accounts, securities accounts, brokerage accounts, and other financial accounts maintained with institutions physically located outside the United States.
Check "Yes" even if you are not required to file FinCEN Form 114 (FBAR). The disclosure requirement on Schedule B applies regardless of whether FBAR filing obligations are met.
Question 7a (continued): Determine whether you must file FinCEN Form 114. A U.S. person who has a financial interest in or signature authority over foreign financial accounts must file FinCEN Form 114 if the aggregate value of all foreign financial accounts exceeded $10,000 at any time during 2021. Note that the FBAR threshold is $10,000 aggregate value across all foreign accounts, not $1,500.
If you are required to file FinCEN Form 114, check "Yes" to the second part of Question 7a. If not required to file, check "No."
Step 8: Enter Foreign Country Names (Line 7b)
If you answered "Yes" indicating that you must file FinCEN Form 114, enter the name of the foreign country or countries where your financial accounts are located in the space provided on line 7b. If you require additional space, please attach a separate statement.
Important: FinCEN Form 114 must be filed electronically with the Treasury's Financial Crimes Enforcement Network. Do not attach FinCEN Form 114 to your tax return. The due date for FinCEN Form 114 is April 15, 2022 (for calendar year 2021), with an automatic extension to October 15, 2022.
Failure to properly file FinCEN Form 114 when required may result in substantial penalties, including civil penalties up to $10,000 for non-willful violations. Willful violations may result in civil penalties equal to the greater of $100,000 or 50% of the account balance at the time of the breach, and may also be subject to criminal penalties.
Step 9: Answer Foreign Trust Question (Line 8)
Answer "Yes" on line 8 if, during 2021, 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, Annual Return to Report Transactions with Foreign Trusts and Receipt of Certain Foreign Gifts. Form 3520 is filed separately and should not be attached to Form 1040 or Form 1040-SR. File it at the address shown in the Form 3520 instructions.
If you were treated as the owner of a foreign trust under the grantor trust rules, you are also responsible for ensuring that the foreign trust files Form 3520-A, which is due March 15, 2022, for a calendar year trust.
Additionally, you may be required to file Form 8938, Statement of Specified Foreign Financial Assets, with your income tax return. Failure to file Form 8938 may result in penalties and extension of the statute of limitations, even if you properly filed FinCEN Form 114.
2021 Tax Year Specifics
Form Selection
For 2021, taxpayers will use Form 1040. Taxpayers born before January 2, 1957 (meaning they were age 65 or older at the end of 2021) have the option to use Form 1040-SR instead. Form 1040-SR features larger print and standard deduction tables for convenience but uses the exact schedules and instructions as Form 1040.
Schedule B can be attached to either Form 1040 or Form 1040-SR, depending on which main form you file.
Assembly Sequence
Schedule B has Sequence Number 08. When assembling your tax return, attach Schedule B directly to your Form 1040 or Form 1040-SR following the sequence number order provided in the form instructions.
Series EE/I Savings Bond Exclusion
The Series EE/I savings bond interest exclusion claimed on line 3 requires the attachment of Form 8815. The 2021 instructions contain no modifications to income limits or exclusion calculation methodology from prior years.
Foreign Account and Trust Reporting Cross-References
The 2021 instructions emphasize proper completion of Part III and include explicit cautionary language regarding "substantial penalties" for failure to file FinCEN Form 114 when required. Instructions also provide updated guidance emphasizing grantor and transferor classification requirements for foreign trusts during calendar year 2021, with cross-references to Form 3520 and Form 3520-A filing obligations.
Understanding these interconnected reporting requirements ensures complete compliance with both tax return filing and separate foreign account reporting obligations for the 2021 tax year.
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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.
