What Is Schedule B: Interest and Ordinary Dividends?
Schedule B is a tax schedule provided by the Internal Revenue Service (IRS) that helps taxpayers compute income tax due on interest paid from a bond and dividends earned. Individuals must complete this form and attach it to their annual tax returns if they received more than $1,500 in qualified interest or dividends. This schedule uses information from Forms 1099-INT and 1099-DIV to populate the correct figures into your 1040 tax return.
Key Takeaways
Schedule B is an IRS tax form that must be completed if a taxpayer receives interest income and/or ordinary dividends over the course of the year of more than $1,500.
The schedule must accompany a taxpayer's Form 1040.
Taxpayers use information from Forms 1099-INT and 1099-DIV to complete Schedule B.
Schedule B can be used to report less common forms of interest or corporate distributions to individuals.
The form is also used to report any foreign account holdings.
Who Must File Schedule B?
As noted above, taxpayers who are required to file taxes in the United States and receive more than $1,500 in taxable interest and/orordinary dividendsduring the year must fill out Schedule B. Schedule B requires the taxpayer to provide the name of each payer, such as an investment firm or bank, along with the amount of interest or dividends received from each payer.
The information that needs to be inputted on Schedule B can be found on the corresponding 1099 forms received from the issuers: a 1099-INT for interest and/or a 1099-DIV for dividends. These 1099 forms are sent to both the taxpayer and the IRS by the issuer.
Schedule B must accompany Form 1040 when taxpayers file their annual tax returns.
Taxpayers must report the interest and dividends they receive to the IRS because these sources of income are taxable.
When to File Schedule B
The main reason to file Schedule B is to report any interest income and ordinary dividends received from investments that exceed $1,500. But there are other, less common reasons why taxpayers might need to fill out a Schedule B. They include:
To report interest income received from a seller-financed mortgage where the borrower uses the property as their personal residence.
To report accrued bond interest.
To report a bond’s original issue discount in an amount less than what is reported on Form1099-OID.
To reduce interest income on a bond by the amount of the bond’s amortizable premium.
To claim an exclusion of interest from series EE or series I U.S. savings bonds issued after 1989.
To report interest or ordinary dividends received as a nominee (on behalf of someone else).
To report a financial interest in, or signature authority over, a foreign account.
To report a distribution from, being grantor of, or transferor to, a foreign trust.
Schedule B should not be used to report any tax-exempt interest shown on Form 1099-INT. This information should be reported directly on Form 1040.
Taxpayers with foreign accounts or trusts may be required to submit Form 8938: Statement of Specified Foreign Financial Assets.
Where Can You Get Schedule B?
You can download a copy of Schedule B directly from the IRS website.
When Do You Have to File a Schedule B?
Schedule B is required any time you receive interest or ordinary dividends from investments that exceed $1,500. The information reported on the form is taken directly from Form 1099-INT and 1099-DIV, which are sent directly to you and the IRS by the issuers. Some of the other reasons why you need to file this schedule include any time you receive interest from a seller-financed mortgage and to report a financial interest in a foreign account, among others. The IRS website has a full list of reasons to file Schedule B. Be sure to include the schedule with Form 1040 or 1040-SR.
Where Do You Get the Information to Report on a Schedule B Form?
You must complete Schedule B if you receive interest or dividend income. Form 1099-INT and 1099-DIV. These forms are sent directly to you and the IRS by the issuers, such as banks, brokerage houses, and investment firms. You are also required to file Schedule B to inform the IRS that you have foreign account holdings.
Where Can I Find Schedule B?
You can download a copy of Schedule B directly from the IRS website. If you file using special tax software, the program will provide it for you. You'll have to input the information from your 1099 forms into the software and it will generate a Schedule B for you.
The Bottom Line
Many taxpayers need a schedule B simply from keeping a bank account that credits interest on deposits over the course of a year. Investors may also receive dividends from time to time. Tax software can simplify the process of determining whether Schedule B is required and completing the form correctly if it is required. The totals from Schedule B are transferred to form 1040, where they are included in the computation of taxable income.
Schedule B is an IRS tax form that must be completed if a taxpayer receives interest income and/or ordinary dividends over the course of the year of more than $1,500.
Schedule B reports the interest and dividend income you receive during the tax year. However, you don't need to attach a Schedule B every year you earn interest or dividends. It is only required when the total exceeds certain thresholds.
Use Schedule B (Form 1040) if any of the following applies: You had over $1,500 of taxable interest or ordinary dividends. You received interest from a seller-financed mortgage and the buyer used the property as a personal residence. You have accrued interest from a bond.
If your interest and dividend income are less than $1,500 for the tax year, you can typically report the income directly on Form 1040, lines 2 and 3, without using Schedule B. However, there are some circ*mstances where you must file Schedule B, regardless of the total amounts.
Interest on deposit accounts, such as checking and savings accounts. Interest on the value of gifts given for opening an account. Distributions commonly known as “dividends” on deposit or share accounts in credit unions, cooperative banks, and other banking associations.
Whereas ordinary dividends are taxable as ordinary income, qualified dividends that meet certain requirements are taxed at lower capital gain rates. The payer of the dividend is required to correctly identify each type and amount of dividend for you when reporting them on your Form 1099-DIV for tax purposes.
Answer: Enter the ordinary dividends from box 1a on Form 1099-DIV, Dividends and Distributions on line 3b of Form 1040, U.S. Individual Income Tax Return, Form 1040-SR, U.S. Tax Return for Seniors or Form 1040-NR, U.S. Nonresident Alien Income Tax Return.
Go to www.irs.gov/ScheduleB for instructions and the latest information. (See instructions and the Instructions for Form 1040, line 2b.) Note: If you received a Form 1099-INT, Form 1099-OID, or substitute statement from a brokerage firm, list the firm's name as the payer and enter the total interest shown on that form.
Ordinary, or non-qualified, dividends are paid by corporations to shareholders of record. Dividends are considered ordinary by default unless they meet special requirements put in place by the IRS. Ordinary dividends are taxed as ordinary income, while qualified dividends are taxed at the lower capital gains rate.
Interest from money markets, bank CDs, and bonds is taxed at ordinary tax rates. That means a person in the top tax bracket pays taxes on interest payments up to 37%. If you compare that to the maximum 23.8 % tax on qualified dividends, the "after-tax" returns are significantly better with dividends.
If you receive a Form 1099-INT and do not report the interest on your tax return, the IRS will likely send you a CP2000, Underreported Income notice. This IRS notice will propose additional tax, penalties and interest on your interest payments and any other unreported income.
Interest income is typically reported to you on Form 1099-INT (Interest) or Form 1099-OID (Original Issue Discount). Dividend income is typically reported on Form 1099-DIV (Dividend).
Qualified and ordinary dividends have different tax implications that impact a return.4 The tax rate is 0% on qualified dividends if taxable income is less than $44,625 for singles and $89,250 for joint-married filers in the tax year 2023.
The interest you earn on your savings account is an example of what type of income? Unearned income Interest and dividends are examples of income that is not earned.
Answer: Certain payments commonly referred to as dividends actually should be reported as interest, including dividends on deposits or share accounts in cooperative banks, credit unions, domestic savings and loan associations, and mutual savings banks.
Ordinary, or non-qualified, dividends are paid by corporations to shareholders of record. Dividends are considered ordinary by default unless they meet special requirements put in place by the IRS. Ordinary dividends are taxed as ordinary income, while qualified dividends are taxed at the lower capital gains rate.
You might see terms like "ordinary," "qualified," and "nonqualified" on your 1099-DIV form, depending on the dividend issuer's designation. These terms are there for a reason. Nonqualified dividends are considered ordinary dividends, meaning they're taxable as ordinary income.
Ordinary dividends are the total of all the dividends reported on a 1099-DIV form. Qualified dividends are all or a portion of the total ordinary dividends.
Introduction: My name is Merrill Bechtelar CPA, I am a clean, agreeable, glorious, magnificent, witty, enchanting, comfortable person who loves writing and wants to share my knowledge and understanding with you.
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