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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