Simple enough. Schedule B is used to report interest, mortgage interest you receive, ordinary dividends on Schedule B. There are three parts to Schedule B. The first part of the form is the Interest, the second part is the ordinary dividends, and the third part is three questions dealing with trusts, and foreign accounts. The are five things to know about schedule B.
1. Schedule B is unique.
Schedule B is unique in that both interest and dividends is reported on Schedule B if the amount for interest or ordinary dividends is over $1,500. Otherwise, the interest or dividends is reported directly on the Form 1040 or 1040A.
2. Seller Finance Mortgage interest is reported on Schedule B
If the personal residential property is sold by an individual and owner-financed, then the amount is reported on Schedule B. To report the seller finance mortgage interest, you need the purchaser’s information including the social security number and address. For an installment sale of personal residence, the Form 6252 will be used to report the interest portion of the installment sale.
3. Part III Questions
Part III three questions must be answered if the amount for interest or ordinary bonds is over $1,500, you had a foreign bank account, and received or were a grantor or transferor of a foreign trust. The three questions are related to foreign accounts and trusts. For the majority people, the anser to the first question is NO. However, if you had a foreign bank account or you had a signature authority over a foreign bank account, you will to complete Form TD F 90.22-1 which is due on June 30th. Form TD F 90.22-1 is a unique form since it can not be extended.
4. Ordinary dividends are not qualified dividends
There are two types of dividends. You have qualified and ordinary dividends. Ordinary dividends are reported on Schedule B while qualified dividends are reported on Form 1040 or 1040A. Qualified dividends are taxed at a lower rate than ordinary dividends. However, the distinction between ordinary and qualified dividends will disappear under the Bush Tax Cuts on December 31, 2012 unless extended.
Schedule B is a unique form. Interest and dividends are reported on the Form 1040 or 1040A. However, when the interest or dividends are greater than $1,500 then Schedule B will need to be prepared. If you have interest or dividends over $1,500, then Part III must be completed which are questions regarding foreign accounts.
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