When Do You Need to File a Schedule B?

February 28, 2012 | By: Charles P. Corsello, EA

When to File a Schedule BAs you prepare your taxes, it becomes fairly evident that there are many different forms and schedules to fill out. Which forms you fill out depends on your financial situation, especially where you are getting your money.

Most people are familiar with filling out a Schedule A, which helps you itemize your tax deductions. Several people are even aware of the Schedule C, which is filled out to help you determine profits or losses from a business. But what about the schedule “between” A and C? If you meet certain conditions, you will need to file a Schedule B.

Dividend and Interest Income and Schedule B

If you make money from dividends and interest, you will be issued 1099 forms that report how much you made. You will receive a 1099-INT for interest, showing what you earned from savings deposits and other interest-bearing accounts. Some banks pay interest during the year, but automatically add the earnings back into the CD, or deposit it your bank account. Even though a check wasn’t sent to you, the money is still considered paid in that year – even if it is put into the CD – and you owe taxes on it. The only exception is if the bank doesn’t pay interest as you go, and only pays once the CD matures. Then you will wait to pay taxes until the interest is paid.

If you were paid dividends, you will receive a 1099-DIV. It’s important to realize that, even if your dividends were reinvested, they will be considered income, and you will have to pay taxes on them. The exception is if the dividend investment is held in a tax-advantaged account. If you hold the investment in a tax-deferred account (a retirement account is a good example), the reinvested dividends aren’t taxed until you take distributions from your account.

Look at your 1099s to determine whether or not you need to file a Schedule B along with your tax return. If the income from either dividends or interest exceeds $1,500, you will need to file a Schedule B. Understand, though, that you don’t add these amounts together. If you have earned $1,400 in interest, and if you have earned $1,450 in dividends, you don’t need to file a Schedule B. It’s only when one of these types of income exceeds $1,500 in one year that you are required to file the Schedule B form.

The Schedule B form prevents you from filing a 1040-EZ. Once you reach the point where a Schedule B is required, you are no longer eligible for the EZ version of the basic tax form.

Realize, too, that it is a good idea to keep good records. Some financial institutions might not issue a 1099 form unless you earn a certain amount of interest. It is also important to consider that the reporting institution might have made a mistake. If your 1099 is inaccurate, let your bank or broker know so that a corrected 1099 form can be issued. Also, remember that sometimes you might not get a copy of the 1099 form, but that doesn’t mean that the IRS didn’t get a copy.