Schedule B - Interest and Ordinary Dividends

            Interest and ordinary dividends must be included in your taxable income when completing your income tax return.  If the total amount of your interest and dividends is $1,500 or less, you would simply report the total on line 8a of your Form 1040.  However, if you have more than $,1500 of taxable interest and/or ordinary dividend income for the year, you are required to file Schedule B with your return.

           Other circumstances that would require you to complete and file Schedule B are if any of the Special Rules listed in the instructions for Line 1 of Schedule B apply to you, you plan to claim the exclusion of interest from Series I or EE U.S. savings bonds issued after 1989, you received ordinary dividends acting as a nominee, or you had a foreign account or received a distribution from or were a grantor of a foreign trust.  If you had any dealings with foreign trusts, you would complete the questions in Part III of Schedule B.  The total is carried over to the Form 1040.

          Part I of Schedule B is for interest.  The interest income usually has been reported to you on Forms 1099-INT, 1099-OID, or substitute statements.  Interest from Series EE or I bonds would be included.  Each payer’s name must be listed, along with the amount of interest.  Line 3 in Part I is for excludable interest on Series EE and I U.S. savings bonds issued after 1989.  Part or all of the interest from these bonds may be excluded if they were cashed in for the purpose of paying for qualified higher education expenses for the taxpayer, spouse, or dependents.  The total for ordinary dividends is then brought over to the Form 1040.

      Part II of Schedule B is used for dividends.  Line 5 is used to report ordinary dividends.  These are normally reported to you on Form 1099-DIV in box A, or on a substitute statement.  As with the interest section, the name of each payer needs to be listed, and each amount shown.  Any ordinary dividends on stock held as a nominee for another person needs to be recorded on Schedule B, but then the nominee dividends are subtracted off of Schedule B.  Dividends are normally reported on the tax return for the year the dividend is received.  However, a dividend declared and made payable in the last three months of the year by a mutual fund or REIT is taxable for the year it is declared, even if it is not actually paid until the next year.

            Part III of Schedule B is for foreign accounts and trusts.  This section has a few questions for the taxpayer to answer to determine if any other schedules or forms are required to be filed in relation to interest and dividends.

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