Schedule B (Form 1040) 2023 Tax Year Checklist
Purpose
Schedule B (Form 1040) reports taxable interest and ordinary dividends for the 2023 tax year. This form is required when specific conditions are met, including interest or dividend income thresholds, or when you have foreign financial account interests during the tax year.
You must file Schedule B if any of the following applies:
- You received more than $1,500 of taxable interest or ordinary dividends during 2023
- 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 2023
- You received a distribution from, or were a grantor of, or transferor to, a foreign trust during 2023
Part III of Schedule B addresses foreign financial accounts and trusts. This section has independent completion requirements that extend beyond simple income thresholds. Understanding these requirements ensures proper compliance with both IRS reporting obligations and FinCEN Form 114 filing requirements.
Filing Steps
Step 1: Identify and List All 2023 Interest Sources
Report all payers of taxable interest on Part I, line 1. List each payer's name as it appears on Form 1099-INT, Form 1099-OID, or substitute statements from brokerage firms. Include interest from checking and savings accounts, certificates of deposit, bonds (including Series EE, H, HH, and I U.S. savings bonds), accrued market discount income (includible in income), and gains on contingent payment debt instruments reported as interest income.
Do not include tax-exempt interest on line 1. Tax-exempt interest from municipal bonds and other sources should be reported on line 2a of Form 1040 or 1040-SR, not on Schedule B.
Step 2: Report Seller-Financed Mortgage Interest First
If you sold property and the buyer used it as a personal residence, and you received interest payments on seller financing, list this interest first on line 1. The 2023 instructions explicitly require this ordering. Include the buyer's name, address, and Social Security number. You must also provide your SSN to the buyer. If you or the buyer does not have an SSN, use the appropriate taxpayer identification number (TIN) for the filer or recipient of Form 1098. Failure to provide this information may result in a $50 penalty.
If you have no seller-financed mortgage interest, begin listing all other interest payers in any order. Each payer's name must correspond to the documentation you received for 2023.
Step 3: Calculate Total Interest on Line 2
Add all interest amounts listed on line 1 and enter the aggregate total on line 2. This represents your gross taxable interest before any exclusions. You may list more than one payer on each entry space, but clearly show the amount paid next to each payer's name. If you need additional space, attach separate statements using the same format, showing your totals on Schedule B.
Step 4: Apply Savings Bond Exclusion on Line 3
If during 2023 you cashed Series EE or I U.S. savings bonds issued after 1989 and paid qualified higher education expenses for yourself, your spouse, or your dependents, you may be eligible to exclude part or all of the interest. To claim this exclusion, you must complete and attach Form 8815. Form 8815 as an attachment. There is no alternative method to claim this exclusion.
Enter the excludable amount from Form 8815 on Schedule B, line 3. If you are not claiming the savings bond exclusion, leave line 3 blank or enter zero.
Step 5: Calculate Net Taxable Interest on Line 4
Subtract line 3 from line 2 and enter the result on line 4. This is your net taxable interest for 2023. Transfer this amount to Form 1040 or Form 1040-SR, line 2b.
Note the critical requirement: If line 4 exceeds $1,500, you must complete Part III of Schedule B.
Step 6: List All 2023 Ordinary Dividend Payers
Report all payers of ordinary dividends on Part II, line 5. Use the payer names exactly as they appear on Form 1099-DIV or substitute brokerage statements. Report only ordinary dividends—the amount shown in box 1a of Form 1099-DIV. Do not include capital gain distributions on Schedule B; those belong on Schedule D if you need to file that form.
If you received a Form 1099-DIV from a brokerage firm that consolidates dividends from multiple sources, list the brokerage firm's name as the payer and enter the total ordinary dividends shown on that statement.
Step 7: Calculate Total Ordinary Dividends on Line 6
Add all ordinary dividend 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 the completion requirement: If line 6 exceeds $1,500, you must complete Part III of Schedule B.
Step 8: Understand Part III Completion Requirements
Part III must be completed if ANY of the following independent conditions apply. These triggers are separate—meeting even one condition requires Part III completion:
(a) You had over $1,500 of taxable interest OR ordinary dividends. This refers to the combined concept, though the form notes after lines 4 and 6 indicate that if either individual line exceeds $1,500, Part III must be completed.
(b) You had a financial interest in or signature authority over a financial account located in a foreign country at any time during 2023, regardless of the dollar amounts involved.
(c) You received a distribution from, or were a grantor of, or a transferor to, a foreign trust during 2023.
Foreign account holders must still complete Part III, even if their interest and dividend income totaled zero dollars. The foreign account disclosure requirement operates independently of income thresholds.
Step 9: Answer Question 7a Regarding Foreign Accounts
Question 7a asks whether, at any time during 2023, you had a financial interest in or signature authority over a financial account located in a foreign country. Answer "Yes" or "No" based on your circumstances.
A financial account includes securities accounts, brokerage accounts, savings accounts, demand accounts, checking accounts, deposit accounts, time deposit accounts, commodity futures or options accounts, insurance policies with cash value, annuity policies with cash value, and shares in mutual funds or similar pooled funds. A financial account is considered to be located in a foreign country if it is physically situated 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.
Step 10: Determine FinCEN Form 114 Filing Requirement
If you answered "Yes" to having a foreign account, determine whether you are required to file FinCEN Form 114. Refer to the FinCEN Form 114 instructions available at FINCEN.gov for comprehensive guidance.
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 2023. This $10,000 threshold is separate from and unrelated to the $1,500 threshold for Schedule B filings. The $10,000 test is cumulative—if multiple accounts have a combined balance exceeding $10,000 at any point during the year, all accounts must be reported on FinCEN Form 114.
Answer the second part of Question 7a: check "Yes" if you are required to file FinCEN Form 114, or "No" if you are not required to file.
The 2023 instructions emphasize that failure to file FinCEN Form 114 when required can result in penalties for non-willful violations of up to $10,000. 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 11: List Foreign Country Names on Line 7b
If you are required to file FinCEN Form 114, list the name(s) of the foreign country(ies) where your financial accounts are located in the space provided on line 7b. If you require more space than the form allows, please attach a separate statement with additional country names.
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. File it separately according to the instructions available at FINCEN.gov.
Step 12: Answer Question 8 Regarding Foreign Trusts
Question 8 asks whether, during 2023, you received a distribution from a foreign trust or whether you were the grantor of, or transferor to, a foreign trust. Answer "Yes" or "No" as appropriate.
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. The 2023 instructions direct you to Form 3520 and its separate guidance for complete details.
Foreign trust status is tested during the entire 2023 calendar year, not just at year-end. Grantor and transferor determinations are fact-based and may require professional analysis to correctly classify your relationship to the foreign trust that existed during 2023. If you have a foreign trust that existed during 2023, you may have to file Form 3520. Do not attach Form 3520 to Form 1040 or Form 1040-SR. File it separately 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. For a calendar year trust, Form 3520-A is due on March 15, 2024.
Step 13: Verify All Forms 1099-INT and 1099-DIV
Reconcile all Forms 1099-INT and 1099-DIV you received against your Schedule B entries. Verify payer names, amounts, and account descriptions match. Form 1099-DIV ordinary dividend amounts and Form 1099-INT total interest amounts are the authoritative sources for Schedule B entries.
If discrepancies exist between your records and the Forms 1099 you received, contact the payer for corrected Forms 1099 before filing your return. Broker statement substitutes must match IRS-reported amounts to avoid IRS matching errors and potential correspondence.
Step 14: Attach Required Forms
Attach Form 8815 if you are claiming the Series EE or I U.S. savings bond interest exclusion on line 3. Form 8815 is a required attachment—do not file Schedule B with a line 3 entry without accompanying Form 8815 documentation.
Attach the completed Schedule B to Form 1040 or Form 1040-SR following Attachment Sequence No. 08. Schedule B is designed primarily for attachment to these forms. Ensure all line entries are complete. Blank lines or partial entries may cause delays in IRS processing.
2023 Tax Year Considerations
Form 8938 Complementary Requirement
Regardless of whether you are required to file FinCEN Form 114, you may also be required to file Form 8938, Statement of Specified Foreign Financial Assets, with your income tax return. Form 8938 is a complementary filing requirement with different thresholds and purposes than Schedule B Part III or FinCEN Form 114.
The 2023 instructions include a TIP noting that failure to file Form 8938 may result in penalties and extension of the statute of limitations. No exemption or safe harbor exists based solely on Schedule B filing status—the forms serve solely to differentiate compliance purposes.
Penalty Emphasis
The 2023 instructions continue to emphasize substantial penalties for failure to file FinCEN Form 114 when required. This cautionary language reflects the ongoing IRS enforcement focus on compliance with foreign account reporting.
Seller-Financed Mortgage Requirements
The 2023 instructions specify that seller-financed mortgage interest entries must include the buyer's SSN and address. This requirement is enforced uniformly. If you or the buyer does not have an SSN, use the appropriate TIN for the filer or recipient of Form 1098.
Thresholds and Structure
The $1,500 threshold for triggering Part III completion based on interest or dividend income remained unchanged for 2023. However, this is only one of three independent triggers for Part III. Foreign account holders must complete Part III regardless of income levels. The schedule B attachment sequence number remains No. 08 for 2023, and the line numbering and part structure remain consistent with those of prior years.
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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.
