What the Form Is For

Schedule B (Form 1040) is an attachment to your main tax return (Form 1040 or Form 1040A) used to report detailed information about interest and dividend income you received during the tax year. Think of it as the "backup paperwork" that shows the IRS exactly where your investment income came from.

While most taxpayers can simply report their total interest and dividends directly on Form 1040, Schedule B is required when your investment income exceeds certain thresholds or involves specific situations. The form has three main sections: Part I for listing interest income, Part II for listing ordinary dividends, and Part III for disclosing foreign accounts and trusts—an important compliance requirement that helps the IRS track offshore financial activities.

For the 2016 tax year, Schedule B serves as your detailed record of all taxable interest and ordinary dividends, broken down by payer. This level of detail helps prevent errors and ensures you're reporting all taxable investment income correctly. IRS

When You'd Use This Form (Including Late and Amended Returns)

You must file Schedule B for 2016 if any of these situations apply to you:

• You received more than $1,500 in taxable interest or ordinary dividends during 2016
• 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 needs to be reported
• You're reporting original issue discount (OID) in an amount less than shown on Form 1099-OID
• You're reducing interest income by amortizable bond premium
• You're claiming the exclusion of interest from series EE or I U.S. savings bonds issued after 1989
• You received interest or dividends as a nominee (on behalf of someone else)
• You had a financial interest in or signature authority over a foreign financial account
• You received a distribution from, or were a grantor of or transferor to, a foreign trust

Filing Deadlines: For the 2016 tax year, Schedule B was due with your Form 1040, which had a standard filing deadline of April 18, 2017 (adjusted from April 15 due to weekends and the Emancipation Day holiday in Washington, D.C.).

Late or Amended Returns: If you realized you should have filed Schedule B with your 2016 return but didn't, you can file an amended return using Form 1040-X. According to IRS rules, you generally have three years from the date you filed your original return (or two years from the date you paid the tax, whichever is later) to amend and claim a refund. However, you can still file late amended returns to correct errors even after the refund window closes—you just won't be eligible for a refund. IRS

Key Rules and Requirements for 2016

The $1,500 Threshold Rule

This is the most important threshold to remember. If your combined taxable interest and ordinary dividends totaled $1,500 or less, you could skip Schedule B and report these amounts directly on Form 1040, lines 8a and 9a.

Reporting Foreign Accounts

One critical 2016 requirement involved Part III of Schedule B. If you had a financial interest in or signature authority over any foreign financial account—regardless of the amount—you had to complete Part III. This includes foreign bank accounts, brokerage accounts, mutual funds, and even certain insurance policies with cash value held abroad. According to the Schedule B instructions, a financial account includes securities, brokerage, savings, demand, checking, deposit accounts, and more maintained with financial institutions. This requirement applies even if your total interest and dividends were under $1,500.

FinCEN Form 114 (FBAR) Connection

For 2016, if your foreign accounts exceeded $10,000 in aggregate value at any time during the year, you had to file FinCEN Form 114 (Report of Foreign Bank and Financial Accounts, or FBAR) electronically. The 2016 FBAR was generally due April 18, 2017, but FinCEN provided an automatic extension until October 16, 2017. Importantly, failure to properly report foreign accounts could result in civil penalties up to $10,000 for non-willful violations. Willful failures may be subject to civil penalties equal to the greater of $100,000 or 50% of the account balance, and may also face criminal penalties.

Nominee Reporting

If you received a Form 1099-INT or 1099-DIV in your name but the income actually belonged to someone else (called "nominee" income), you still had to report the full amount on Schedule B, then subtract it with the notation "Nominee Distribution." You also had obligations to provide the actual owner with a Form 1099-INT or 1099-DIV (unless the owner is your spouse) and file Forms 1096 and 1099 with the IRS. IRS

Step-by-Step (High Level)

Step 1: Gather Your Documents

Collect all Forms 1099-INT (interest income) and 1099-DIV (dividend income) you received for 2016. These forms should arrive from banks, brokerages, and other financial institutions by January 31, 2017.

Step 2: Complete Part I – Interest

List each payer's name in the first column. If you received a Form 1099-INT from a brokerage firm, list the firm's name as the payer and enter the total interest shown on that form. 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 Social Security number and address. Enter the amount of interest for each payer. Add up all interest amounts and enter the total on line 2. If you're claiming the exclusion of interest from series EE or I U.S. savings bonds issued after 1989, complete Form 8815 and enter the excludable amount on line 3. Subtract line 3 from line 2 and enter the result on line 4—this amount also goes on Form 1040, line 8a.

Step 3: Complete Part II – Ordinary Dividends

List each payer's name. If you received a Form 1099-DIV from a brokerage firm, list the firm's name as the payer and enter the ordinary dividends shown on that form. Enter the amounts in the second column. Add these amounts and enter the total on line 6, which also transfers to Form 1040, line 9a.

Step 4: Complete Part III – Foreign Accounts and Trusts (if applicable)

You must complete this part if you (a) had over $1,500 of taxable interest or ordinary dividends; (b) had a foreign account; or (c) received a distribution from, or were a grantor of, or a transferor to, a foreign trust. Answer question 7a about whether you had a financial interest in or signature authority over a financial account located in a foreign country during 2016. If yes, answer question 7b about whether you're required to file FinCEN Form 114, and enter the name of the foreign country where the financial account is located. Answer question 8 about whether you received a distribution from, or were the grantor of, or transferor to, a foreign trust.

Step 5: Attach to Form 1040

Attach the completed Schedule B to your Form 1040 or 1040A in the order indicated by the attachment sequence number (08 for Schedule B). IRS

Common Mistakes and How to Avoid Them

Mistake #1: Forgetting to File Schedule B When Required

Many taxpayers report interest and dividends on Form 1040 without realizing they exceeded the $1,500 threshold or had other triggering conditions. Solution: Before filing, add up all your 1099-INT and 1099-DIV amounts. If the total exceeds $1,500, you must file Schedule B. Also review all the other conditions in the "Purpose of Form" section of the instructions.

Mistake #2: Failing to Report Foreign Accounts

Some taxpayers don't realize that having signature authority over a foreign account (like a business account) triggers reporting requirements, even if they don't own the money. Solution: Carefully read Part III instructions. The definition of "signature authority" means the authority to control the disposition of assets in a foreign financial account by direct communication to the financial institution. When in doubt about whether an account qualifies, report it—the penalties for non-reporting are severe.

Mistake #3: Incorrectly Reporting Nominee Income

If you receive a 1099 for income that belongs to someone else, simply forwarding the money without proper reporting creates problems. Solution: Report the full amount on Schedule B. Under your last entry, put a subtotal of all income listed. Below this subtotal, enter "Nominee Distribution" and show the total income you received as a nominee. Subtract this amount from the subtotal. Also fulfill your obligation to issue a Form 1099 to the actual owner and file with the IRS.

Mistake #4: Omitting Accrued Interest on Bond Purchases

When you buy bonds between interest payment dates, you pay the seller for accrued interest, but the 1099-INT may come in your name for the full year's interest. Solution: If you are reporting accrued interest as a purchaser of a bond, follow the nominee rules to see how to report it, but identify the amount to be subtracted as "Accrued Interest."

Mistake #5: Not Listing Individual Payers

Some taxpayers just enter totals without listing each payer's name. Solution: The instructions allow you to list more than one payer on each entry space, but be sure to clearly show the amount paid next to the payer's name. If you need more space, attach separate statements using the same format, but show your totals on Schedule B itself.

Mistake #6: Confusing Schedule B Part III with the Actual FBAR Filing

Part III only asks questions about foreign accounts—it doesn't replace the separate FBAR filing requirement. Solution: If you are required to file FinCEN Form 114, you must electronically file it with Treasury's Financial Crimes Enforcement Network at www.fincen.gov/fbar. Do not attach FinCEN Form 114 to your tax return. IRS

What Happens After You File

IRS Processing

After you file your 2016 return with Schedule B attached, the IRS will process it and match the amounts you reported against the 1099 forms submitted by banks and brokerages. This matching process typically occurs several months after filing.

If Everything Matches

Your return will be accepted and processed. If you're due a refund, you'll receive it according to the normal IRS processing timeline.

If Discrepancies Are Found

The IRS may send you a notice if the 1099 information they have on file doesn't match what you reported on Schedule B. You'll have the opportunity to explain the difference or agree to any proposed adjustment. Common reasons for discrepancies include nominee situations, accrued interest adjustments, or missing 1099 forms that arrived late.

Foreign Account Compliance

If you properly completed Part III and filed any required FinCEN Form 114, your foreign account reporting is on record. The IRS and FinCEN maintain databases of this information for compliance purposes.

Record Retention

Keep your 2016 Schedule B and all supporting documents (Forms 1099-INT, 1099-DIV, and account statements) for at least three years from the filing date. The IRS recommends keeping records longer in certain circumstances, such as if you filed a claim for a refund after filing your return, or if you have issues related to unreported income or foreign accounts. IRS

FAQs

Q1: I received exactly $1,500 in interest. Do I need to file Schedule B?

A: No. The requirement is for over $1,500. If you received exactly $1,500, you can report it directly on Form 1040 without Schedule B. However, if you have foreign accounts or any of the other special situations mentioned in the "Purpose of Form" section, you still need Schedule B regardless of the amount.

Q2: My brokerage sent me one Form 1099 with multiple types of income. How do I list this on Schedule B?

A: According to the instructions, if you received a Form 1099-INT or Form 1099-DIV from a brokerage firm, list the firm's name as the payer and enter the total interest or dividends shown on that form. You don't need to break down the individual securities within your brokerage account separately on Schedule B.

Q3: I had $800 in a foreign bank account that earned $5 in interest. Do I need to file Schedule B?

A: Yes, you must complete Part III to disclose the foreign account, even though your total interest is well below $1,500. However, you wouldn't need to file FinCEN Form 114 because your account balance never exceeded $10,000.

Q4: What's the difference between ordinary dividends and qualified dividends?

A: Ordinary dividends (reported on Schedule B, line 5) include all dividends shown in box 1a of Form 1099-DIV. These are taxed at your regular income tax rate. Qualified dividends are a subset that may be taxed at lower capital gains rates, but they're still included in the ordinary dividend total on Schedule B. Schedule B only reports ordinary dividends—you don't list qualified dividends separately on this form.

Q5: Can I amend my 2016 return now if I forgot to file Schedule B?

A: Yes, you can still file an amended return using Form 1040-X to correct the record. However, the three-year statute of limitations for claiming a refund has passed for 2016 returns. You should still file the amendment to correct your tax record and potentially avoid penalties if the IRS discovers the error later.

Q6: I received tax-exempt interest from municipal bonds. Does this go on Schedule B?

A: No. Tax-exempt interest from municipal bonds is reported on Form 1040, line 8b, but does not appear on Schedule B. The Schedule B instructions specifically state not to report tax-exempt interest from box 8 of Form 1099-INT on Schedule B—instead, report it on line 8b of Form 1040.

Q7: What if I forgot to report my foreign account on Schedule B but I did file the FBAR?

A: You should file an amended return (Form 1040-X) with a complete Schedule B showing your foreign account disclosure in Part III. While you filed the FBAR, Schedule B's Part III questions are a separate requirement on your tax return itself. The instructions make clear that you must complete Part III if you had a foreign account, regardless of whether other forms were filed. IRS

For More Information

Note: This guide provides general information about Schedule B for the 2016 tax year based on IRS publications available at IRS.gov. Tax situations vary widely, and this should not be considered personal tax advice. For specific questions about your situation, consult the official IRS instructions or contact the IRS directly.