Filing your taxes doesn't have to be overwhelming. If you earned interest from bank accounts or dividends from investments in 2012, you may need to complete Schedule B along with your Form 1040 or 1040A. This guide breaks down everything you need to know about this form in plain English.

What the Form Is For

Schedule B (Form 1040A or 1040) is the IRS form used to report your taxable interest income and ordinary dividends for the 2012 tax year. Think of it as a detailed listing of all the places you earned interest or dividend income throughout the year—from savings accounts, CDs, bonds, stocks, mutual funds, and other investments.

The form consists of three parts:

• Part I lists all your interest income
• Part II lists all your ordinary dividends
• Part III asks questions about foreign financial accounts and trusts

Most taxpayers receive Forms 1099-INT (for interest) and 1099-DIV (for dividends) from their banks, brokerages, and other financial institutions. Schedule B is where you consolidate all these forms into one comprehensive report. The totals from Schedule B then transfer to specific lines on your main Form 1040 or 1040A—specifically line 8a for interest and line 9a for dividends.

Beyond just reporting amounts over $1,500, Schedule B is also required if you're claiming exclusions on certain U.S. savings bond interest used for education, if you received interest as a nominee for someone else, or if you have foreign financial accounts that must be disclosed to the IRS.

When You’d Use It (Filing Late or Amended Returns)

For the 2012 tax year, the original deadline was April 15, 2013 (or October 15, 2013, if you filed for an extension). However, life happens, and you might need to file Schedule B after these deadlines have passed.

Filing a Late Original Return

If you're filing your 2012 return late and you meet any of the Schedule B requirements, you must attach Schedule B to your Form 1040 or 1040A, even though the deadline has passed. The IRS generally has three years from the filing deadline to assess additional taxes, so 2012 returns filed years later may still be processed.

Filing an Amended Return (Form 1040X)

You'll need to file an amended return if you discover errors or omissions related to interest or dividend income after filing your original 2012 return. Common scenarios include:

• Receiving a corrected or late-arriving 1099-INT or 1099-DIV
• Discovering you forgot to report an account's interest or dividends
• Realizing you incorrectly calculated excludable savings bond interest
• Needing to add or correct foreign account disclosures

When amending, complete a corrected Schedule B showing the proper amounts and attach it to Form 1040X. You'll explain the changes in Part III of Form 1040X, showing the original amount reported, the corrected amount, and the difference. The IRS generally allows three years from your original filing date or two years from when you paid the tax (whichever is later) to file an amended return for a refund.

Key Rules for 2012

Understanding when Schedule B is required helps you avoid unnecessary paperwork—or worse, penalties for failing to file when needed.

The $1,500 Threshold

You must file Schedule B if your taxable interest OR ordinary dividends exceeded $1,500 during 2012. This is a combined threshold—if you had $800 in interest and $800 in dividends (totaling $1,600), you must file Schedule B. However, if you had only $1,200 in interest and $200 in dividends, you can report these amounts directly on your Form 1040 lines 8a and 9a without filing Schedule B.

Other Mandatory Filing Situations

Even if your interest and dividends were under $1,500, you must file Schedule B if you:

• Received interest from a seller-financed mortgage where the buyer used the property as a personal residence (and you must include the buyer's name, address, and Social Security number)
• Are claiming the education savings bond interest exclusion (using Form 8815)
• Received interest or dividends as a nominee (meaning in your name but belonging to someone else)
• Are reporting original issue discount (OID) differently than shown on Form 1099-OID
• Are reducing bond interest by amortizable bond premium
• Had accrued interest from a bond
• Had a financial interest in or signature authority over foreign financial accounts
• Received a distribution from, or were a grantor or transferor to, a foreign trust

Foreign Account Reporting

Part III of Schedule B contains critical questions about foreign financial accounts. In 2012, if you had a financial interest in or signature authority over a foreign account with an aggregate value exceeding $10,000 at any time during the year, you were required to file Form TD F 90-22.1 (commonly called an FBAR) separately with the Department of Treasury by June 30, 2013. Failure to disclose foreign accounts can result in severe penalties—civil penalties up to $10,000 for non-willful violations, or up to the greater of $100,000 or 50% of the account balance for willful violations.

Step-by-Step (High Level)

Completing Schedule B follows a logical progression from gathering documents to transferring totals to your main tax return.

Step 1: Gather All Your 1099 Forms

Collect every Form 1099-INT and 1099-DIV you received for 2012. These typically arrive in January and early February following the tax year. Don't forget smaller accounts—even that savings account with $50 in interest counts. Check with all your banks, credit unions, brokerages, and investment companies.

Step 2: Complete Part I – Interest

List each payer's name on line 1, along with the corresponding amount of taxable interest. If you received a Form 1099-INT from a brokerage consolidating multiple accounts, you can list the brokerage name once with the total amount. Don't include tax-exempt interest here (that goes on Form 1040 line 8b). Special note: If you received interest from a seller-financed mortgage where the buyer used the property as a personal residence, list this interest first and show the buyer's name, address, and Social Security number. Add up all the interest amounts and enter the total on line 2. If you're claiming the savings bond interest exclusion for education expenses, enter that amount (from Form 8815) on line 3. Subtract line 3 from line 2 and enter the result on line 4, which transfers to Form 1040 or 1040A, line 8a.

Step 3: Complete Part II – Ordinary Dividends

Similar to Part I, list each payer's name on line 5 along with the amount of ordinary dividends from box 1a of Form 1099-DIV. If you received a consolidated statement from a brokerage firm, you can list the firm's name as the payer with the total ordinary dividends shown on that form. Total these amounts and enter on line 6, which transfers to Form 1040 or 1040A, line 9a. Note that qualified dividends (box 1b of Form 1099-DIV) get reported elsewhere—Schedule B only tracks ordinary dividends.

Step 4: Complete Part III – Foreign Accounts and Trusts

Answer the questions about foreign financial accounts honestly and completely. Line 7a asks if you had a financial interest in or signature authority over a financial account in a foreign country at any time during 2012. If yes, you must answer whether you're required to file Form TD F 90-22.1 and list the foreign countries where accounts are located on line 7b. Line 8 asks if you received distributions from or were a grantor or transferor to a foreign trust during 2012. If yes, you may need to file Form 3520 separately.

Step 5: Transfer Totals and Attach

The amounts from Schedule B line 4 and line 6 carry to your Form 1040 or 1040A. Attach Schedule B to your return—it's Attachment Sequence Number 08, meaning it goes near the front of your return package.

Common Mistakes and How to Avoid Them

Even careful taxpayers make errors on Schedule B. Here are the most common pitfalls and how to sidestep them:

Mistake #1: Forgetting Small Accounts

Many people overlook minor savings accounts or investments generating less than $100 in income. Remember, all taxable interest and dividends must be reported, regardless of amount. Create a checklist of all your financial institutions to ensure you don't miss any.

Mistake #2: Confusing Ordinary and Qualified Dividends

Schedule B Part II only reports ordinary dividends (Form 1099-DIV box 1a). Qualified dividends (box 1b) get reported on Form 1040 line 9b, not on Schedule B. Don't add qualified dividends into your Schedule B total—use only the box 1a amount for line 5.

Mistake #3: Including Tax-Exempt Interest

Municipal bond interest and other tax-exempt interest (shown in box 8 of Form 1099-INT) should NOT appear on Schedule B. These amounts go directly on Form 1040 line 8b without passing through Schedule B. Only include taxable interest on Schedule B Part I.

Mistake #4: Incorrect Foreign Account Disclosures

This is perhaps the most serious mistake. If you had foreign accounts, you must answer Part III questions accurately. Failing to check "Yes" when you should have, or not filing the required FBAR separately, can trigger substantial penalties. The definition of a financial account is broad and includes bank accounts, securities accounts, brokerage accounts, and other financial accounts maintained with financial institutions located outside the United States.

Mistake #5: Omitting Nominee Reporting

If you received interest or dividends in your name but the money actually belongs to someone else (such as a joint account where you're listed but the other person is the true owner), you must report the full amount on Schedule B, then subtract the nominee portion below your subtotal. You must also issue a Form 1099 to the actual owner (unless the owner is your spouse) and file it with the IRS—simply omitting the income isn't an option.

Mistake #6: Not Reporting Seller-Financed Mortgage Interest

If you sold property in 2012 or earlier and are receiving payments on a mortgage you hold, that interest is taxable. You must list it first on Schedule B Part I and include the buyer's name, address, and Social Security number. Failure to provide this information can result in a $50 penalty.

Mistake #7: Math Errors

Simple addition mistakes when totaling multiple interest or dividend sources can trigger IRS notices. Double-check your arithmetic before filing, and consider using tax software or a calculator to verify totals.

What Happens After You File

Once you've completed and filed Schedule B with your 2012 tax return, several things occur behind the scenes.

IRS Matching Program

The IRS receives copies of all Forms 1099-INT and 1099-DIV that were sent to you. Their computers match these amounts against what you reported on Schedule B. If there's a discrepancy—you reported $1,200 in interest but the IRS records show you received $1,500—you'll receive a CP2000 notice, typically 12 to 18 months after you filed. This notice proposes additional tax, interest, and sometimes penalties. You have the right to respond and explain any differences (such as nominee situations or errors on the 1099 forms).

Foreign Account Compliance

If you indicated foreign accounts on Schedule B Part III and filed Form TD F 90-22.1 separately, the IRS and Treasury Department cross-reference these filings. They also share information with foreign governments under various tax treaties. Discrepancies or failures to file can trigger audits or penalty assessments.

Refunds or Additional Tax

The interest and dividend income reported on Schedule B affects your total taxable income, which determines your final tax liability. If the additional income means you owe more tax than you paid through withholding and estimated payments, you'll need to pay when you file. If you overpaid, you'll receive a refund, typically within 21 days if you e-filed or 6-8 weeks if you filed by paper.

Audit Potential

While Schedule B itself doesn't dramatically increase audit risk, certain red flags can attract attention: very high interest or dividend income inconsistent with other financial information on your return, checked boxes indicating foreign accounts (especially if FBAR requirements weren't met), or patterns suggesting unreported nominee income. Most Schedule B filers never face audits, but accuracy is essential.

Statute of Limitations

The IRS generally has three years from when you filed your 2012 return to assess additional taxes related to Schedule B. However, this extends to six years if you substantially understated income (by 25% or more), and there's no time limit if you didn't file a return or filed a fraudulent return.

FAQs

What if I only have $1,000 in interest and no dividends—do I still need Schedule B?

No. If your total taxable interest is $1,500 or less AND you don't have any of the other situations requiring Schedule B (like foreign accounts, seller-financed mortgage interest, or nominee situations), you can simply report your interest directly on Form 1040 line 8a without filing Schedule B. The $1,500 threshold is meant to simplify filing for people with modest investment income.

I received a 1099-INT in 2014 for interest I earned in 2012 but didn't receive until the account was closed. What do I do?

You need to file an amended 2012 return (Form 1040X) with a corrected Schedule B. Interest is generally reported in the year it's credited to your account, even if you don't withdraw it. The late 1099 indicates the bank credited the interest in 2012. File Form 1040X showing the additional interest income, along with an explanation. You may owe additional tax plus interest for 2012.

What's the difference between ordinary dividends and qualified dividends, and why does it matter?

Ordinary dividends (reported on Schedule B) are taxed at your regular income tax rates. Qualified dividends meet specific IRS criteria and are taxed at lower capital gains rates. Your Form 1099-DIV shows both amounts—box 1a is total ordinary dividends (which includes qualified dividends), and box 1b is the subset that's qualified. You report box 1a on Schedule B, and box 1b gets reported on Form 1040 line 9b for preferential tax treatment.

I had foreign bank accounts but their total value never exceeded $10,000. Do I need to check "Yes" on line 7a of Part III?

Yes, you must check "Yes" to the first question on line 7a if you had a financial interest in or signature authority over foreign accounts at any time during 2012, regardless of the amount. However, you would check "No" to the second question about filing Form TD F 90-22.1 (FBAR), since that form is only required if the aggregate value of all your foreign accounts exceeded $10,000 at any point during the year. It's crucial to answer both questions accurately.

My brokerage gave me one 1099 with interest from multiple sources. How do I list this on Schedule B?

You can list the brokerage firm's name once on Schedule B with the total interest amount shown on the consolidated 1099-INT. You don't need to break it down further by individual account or security. The Schedule B instructions specifically allow this approach for brokerage consolidations.

I made a mistake on my 2012 Schedule B and the IRS hasn't contacted me. Should I file an amended return?

It depends on the nature of the mistake. If you understated income, you should file Form 1040X with a corrected Schedule B to avoid potential penalties and interest charges. If you overstated income and are due a refund, you can file an amended return to claim it—but you must do so within three years of your original filing date or two years from when you paid the tax, whichever is later.

What penalties can I face for not filing Schedule B when required?

If you should have filed Schedule B but didn't, the penalties vary by situation. For simply failing to file when you earned more than $1,500 in interest or dividends, you may face accuracy-related penalties of 20% of any tax underpayment that results. For foreign account violations, penalties are much more severe: $10,000 for non-willful failure to file FBAR, and up to $100,000 or 50% of the account balance for willful violations. The IRS takes foreign account reporting very seriously.

References & More Information

For More Information: Visit IRS.gov/Form1040 for the latest Schedule B forms and instructions. You can also access the 2012 Schedule B form and instructions at IRS Prior Year Forms.

This guide is based on official IRS sources and is intended for informational purposes. Tax situations vary, and complex matters may require professional tax advice.