How to Fill Out Schedule B: Interest, Dividends, and Foreign Accounts

To fill out Schedule B, list each payer of taxable interest and its amount in Part I, list each payer of ordinary dividends and its amount in Part II, make any required adjustments before you total each part, and answer the foreign account and foreign trust questions in Part III. Most of the numbers come straight off the 1099s your bank or broker already sent you. The places people slip up are the adjustments in Part I and the disclosures in Part III, so those get the most attention below.

Do You Actually Need Schedule B

You attach Schedule B to Form 1040 only if one of these applies:¹

Your total taxable interest or total ordinary dividends for the year is more than $1,500.
You received seller-financed mortgage interest from a buyer who uses the property as a home. Amount doesn’t matter.
You had a financial interest in, or signature authority over, a financial account in a foreign country at any time during the year.
You received a distribution from, or were a grantor or transferor to, a foreign trust.
You are reducing your interest income for amortizable bond premium and want to show the adjustment.

If none of these apply, skip the form. Put your interest and dividend totals directly on Form 1040.

What to Have in Front of You

Financial institutions issue the relevant 1099s by the end of January for the prior tax year. Pull together:

Form 1099-INT. Box 1 is the taxable interest you’ll report.
Form 1099-OID. Original issue discount on bonds bought below face value; this belongs in the interest section too.²
Form 1099-DIV. Box 1a is your total ordinary dividends. Box 1b (qualified dividends) does not go on Schedule B.

Check each form against your own records. The IRS has copies of every 1099 issued to you, and its matching program will flag anything missing. If a form is wrong, ask the payer for a corrected one before you file.

Have a foreign account? Get statements showing the highest balance during the year and the country where each account sits. You’ll need those for Part III, and likely for an FBAR and possibly Form 8938 as well.³

Part I: Interest Income

On Line 1, write the name of each payer and the interest amount next to it. The amount usually comes from Box 1 of Form 1099-INT or the appropriate box of Form 1099-OID. If you run out of lines, list multiple payers on a single entry line or attach a continuation statement with your name and Social Security number at the top.²

Seller-financed mortgage interest gets listed first when the buyer uses the property as a personal residence. Include the buyer’s name, address, and Social Security number alongside the amount.⁴

Add up the entries and enter the total on Line 4. That number flows to Line 2b of your Form 1040.

What Does Not Belong in Part I

Tax-exempt interest from municipal bonds stays off Line 1. It goes on Line 2a of Form 1040 instead. Your 1099-INT shows tax-exempt interest in Box 8, and exempt-interest dividends from a mutual fund appear in Box 12 of Form 1099-DIV. Mixing these into Schedule B inflates your taxable income. One exception: a market discount on a tax-exempt bond is taxable and does belong on Line 1.²

Adjustments Before You Total

Several situations require you to enter the full 1099 amount on Line 1 and then subtract an adjustment before writing the total on Line 4. The mechanic is the same each time: list the amount, write a subtotal, then write a labeled subtraction below it.⁴

Nominee interest. The 1099-INT is in your name, but some of the interest belongs to someone else. Label the subtraction “Nominee Distribution.” You also have to issue that person a 1099-INT and file it with the IRS along with Form 1096.
Accrued interest on bonds. You bought a bond between coupon dates and paid the seller for interest that accrued before you owned it. Label the subtraction “Accrued Interest.”
OID adjustment. You are reporting less original issue discount than what the 1099-OID shows. Label it “OID Adjustment.”²
Amortizable bond premium. You paid more than face value for a bond and are amortizing the premium to reduce reported interest. This adjustment itself requires Schedule B even if your interest total is under $1,500.¹

Savings bond interest used for qualified higher education expenses can also be excluded, but the calculation happens on Form 8815 and the exclusion is subtracted on Form 1040, not on Schedule B. You still report the full interest on Schedule B.⁵

Part II: Ordinary Dividends

Part II works the same way as Part I. On Line 5, list each payer and the ordinary dividend amount from Box 1a of Form 1099-DIV. Total the entries on Line 6, and that figure moves to Line 3b of your Form 1040.⁴

Only ordinary dividends go here. Qualified dividends, which are taxed at capital gains rates, come from Box 1b and are reported separately on Line 3a of Form 1040. If a dividend payment belongs to someone else, use the same subtotal-and-subtract method used for nominee interest, and issue the actual owner a 1099-DIV.²

Part III: Foreign Accounts and Foreign Trusts

Part III is yes-or-no questions, no dollar amounts. The stakes are high enough that a wrong answer here can cost more than the tax on everything else on the return.

Line 7a asks whether, at any time during the year, you had a financial interest in or signature authority over a financial account located in a foreign country. Answer “yes” and Line 7b asks you to name the country or countries. Line 8 asks whether you received a distribution from, or were a grantor or transferor to, a foreign trust. A “yes” on Line 8 generally triggers a separate Form 3520.¹

The FBAR Is Separate

Answering “yes” on Line 7a does not satisfy your foreign account reporting. If the combined value of all your foreign financial accounts exceeded $10,000 at any point during the year, you also have to file an FBAR (FinCEN Form 114) through FinCEN’s BSA E-Filing System, not with the IRS.⁶ Whether the accounts produced income is irrelevant to the FBAR requirement.³ The FBAR is due April 15, with an automatic extension to October 15 if you miss it.

Form 8938 May Also Apply

Form 8938 covers a broader set of foreign financial assets than the FBAR, and its thresholds depend on filing status and whether you live in the U.S. Single filers in the U.S. cross the threshold at more than $50,000 on the last day of the year or more than $75,000 at any point during the year; joint filers in the U.S. at more than $100,000 or $150,000 respectively. Thresholds are higher for filers living abroad.⁷ Form 8938 attaches to your tax return. It does not replace the FBAR; you may owe both.

What Happens If You Get It Wrong

Missing interest or dividend income is one of the easier errors for the IRS to catch, because it already has your 1099s. The standard accuracy-related penalty is 20% of the additional tax owed when the understatement comes from negligence or is substantial.⁸ Interest accrues from the original due date. If you keep ignoring notices, payers can be directed to begin backup withholding on your future interest and dividends.⁹

Foreign account penalties are much larger. When an understatement is tied to an undisclosed foreign financial asset, the accuracy penalty rises to 40%.⁸ Failing to file Form 8938 carries an initial $10,000 penalty, with more piling on if you ignore IRS notices.¹⁰ The Form 3520 penalty can be the greater of $10,000 or 35% of the unreported distribution, with additional $10,000 penalties stacking every 30 days after a 90-day notice period.¹¹ FBAR penalties for non-willful violations can run into tens of thousands of dollars per account per year; willful violations reach 50% of the account balance.

After You File

If you e-file, your software attaches Schedule B automatically. Filing on paper? Put Schedule B directly behind Form 1040 and send it with proof of mailing.

Keep your completed Schedule B and every supporting 1099 for at least three years from the filing date, or two years from the date you paid the tax, whichever is later.¹² If you reported foreign accounts, hold onto those records for six years, because the FBAR has a longer enforcement window than a standard domestic return.

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Internal Revenue Service. About Schedule B (Form 1040), Interest and Ordinary Dividends
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Internal Revenue Service. Instructions for Schedule B (Form 1040)
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Internal Revenue Service. Report of Foreign Bank and Financial Accounts (FBAR)
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Internal Revenue Service. 2025 Instructions for Schedule B (Form 1040)
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Internal Revenue Service. Exclusion of Interest From Series EE and I U.S. Savings Bonds Issued After 1989
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Financial Crimes Enforcement Network. Report Foreign Bank and Financial Accounts
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Internal Revenue Service. Do I Need to File Form 8938, Statement of Specified Foreign Financial Assets
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