Having an additional source of income is a fairly common practice for taxpayers. Often, it may be income earned from interest accrued on savings accounts or dividends paid out from owning stocks or mutual funds. As you may expect, it needs to be reported on your annual income tax filing as well. Depending on certain conditions, that means filing the Schedule B in addition to your regular Form 1040.
Do I need to file the Schedule B?
Individuals will be required to file Schedule B if they meet certain conditions. Some common ones include:
- Having more than $1,500 in taxable interest or ordinary dividends.
- Accruing interest from a bond.
- Claiming the exclusion of interest from series EE or I US savings bonds after 1989.
- Financial interest in a financial account in a foreign country or receiving distributions from a foreign trust.
Schedule B in Part
There are three major parts to the form: Interests, Dividends, and “Foreign Accounts & Trusts.”
- Part I – Interest – Report all taxable interest income in this section, such as interest income from savings accounts, bonds, and certificates of deposits (CDs).
- Part II – Ordinary Dividends – Put all income from ordinary dividends and securities in this section. Examples include stock dividends, employee stock purchasing plans, and mutual funds.
- Part III – Foreign Account Reporting – This section is a bit unique. Indicate yes or no if the questions asked in regards to foreign accounts and trusts apply to you. You may need to file additional forms such as FBAR (for FinCEN), Form 8938, and Form 3520 if these questions apply to you.
For more information about FBAR, check our article here. Schedule B is important for taxpayers with interest income, but it can potentially get complicated for those with complex sources of interest income. Sometimes business owners may not have the time to gather the needed documents to report interest income, because their main priority is growing their business. We at MiklosCPA understand that need and are here to help. We have helped various small to medium-sized businesses of assorted industries with their tax and accounting needs. Let us know how we can help out by reaching out. Please also check out our social media pages for future tax blog articles like this one and other “good-to-know” tax tidbits we share regularly.