Question

IRS Form 1040 Schedule B is where you enter your information concerning Interest and Dividends on your tax return. IRS Instructions for Schedule B contains information on what should be included and where they should be included on the Schedule. Please review these instructions and answer the following items: 1. The interest income from several different forms could be included in line 1. According to the instructions, which forms could have information with income to include here? 2. What does the IRS consider to be seller-financed mortgage interest? 3. What does the IRS consider to be accrued interest? 4. What are some examples of tax-exempt interest and how should they be treated? 5. Where should you report your Ordinary Dividends and how should ordinary dividends received as a nominee be treated?

Answer 1

Use Schedule B (Form 1040 or 1040-SR) 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.
• You are reporting original issue discount (OID) in an amount less than the amount shown on Form 1099-OID.
• You are reducing your interest income on a bond by the amount of amortizable bond premium.
• You are claiming the exclusion of interest from series EE or I U.S. savings bonds issued after 1989.
• You received interest or ordinary dividends as a nominee.
• You had a financial interest in, or signature authority over, a financial account in a foreign country or you received a distribution from, or were a grantor of, or transferor to, a foreign trust. Part III of the schedule has questions about foreign accounts and trusts

Part I. Interest

Line 1.

Report on line 1 all of your taxable interest. Taxable interest generally should be shown on your Forms 1099-INT, Forms 1099-OID, or substitute statements. Include interest from series EE, H, HH, and I U.S. savings bonds. Also include any accrued market discount that is includible in income and any gain on a contingent payment debt instrument that is includible in income as interest income. List each payer’s name and the amount. Don't report on line 1 any tax-exempt interest.

Seller-financed mortgages.

If you sold your home or other property and the buyer used the property as a personal residence, list first any interest the buyer paid you on a mortgage or other form of seller financing. Be sure to show the buyer’s name, address, and SSN. You also must let the buyer know your SSN. If you don't show the buyer’s name, address, and SSN, or let the buyer know your SSN, you may have to pay a $50 penalty.

Nominees.

If you received a Form 1099-INT that includes interest you received as a nominee (that is, in your name, but the interest actually belongs to someone else), report the total on line 1. Do this even if you later distributed some or all of this income to others. Under your last entry on line 1, put a subtotal of all interest listed on line 1. Below this subtotal, enter "Nominee Distribution" and show the total interest you received as a nominee. Subtract this amount from the subtotal and enter the result on line 2.If you received interest as a nominee, you must give the actual owner a Form 1099-INT (unless the owner is your spouse) and file Forms 1096 and 1099-INT with the IRS.

Accrued interest.

When you buy bonds between interest payment dates and pay accrued interest to the seller, this interest is taxable to the seller. If you received a Form 1099 for interest as a purchaser of a bond with accrued interest, follow the rules earlier under Nominees to see how to report the accrued interest. But identify the amount to be subtracted as Accrued Interest.

Examples of Tax-exempt Interest:

1.Interest Income from Muncipal Bonds

2.Interest on Insurance dividend left with department of Veterean Affairs

3. Savings Bonds

4.Tax-free mutual funds

If you received any tax-exempt interest (including any tax-exempt OID), such as from municipal bonds, each payer should send you a Form 1099-INT or a Form 1099-OID. In general, your tax-exempt stated interest should be shown in box 8 of Form 1099-INT or, for a tax-exempt OID bond, in box 2 of Form 1099-OID, and your tax-exempt OID should be shown in box 11 of Form 1099-OID. Enter the total on line 2a of your Form 1040 or 1040-SR. However, if you acquired a tax-exempt bond at a premium, only report the net amount of tax-exempt interest on line 2a of your Form 1040 or 1040-SR (that is, the excess of the tax-exempt interest received during the year over the amortized bond premium for the year). Also, if you acquired a tax-exempt OID bond at an acquisition premium, only report the net amount of tax-exempt OID on line 2a of your Form 1040 or 1040-SR (that is, the excess of the tax-exempt OID for the year over the amortized acquisition premium for the year).

Also include on line 2a of your Form 1040 or 1040-SR, any exempt-interest dividends from a mutual fund or other regulated investment company. This amount should be shown in box 11 of Form 1099-DIV.

Yo must report all tax-exempt interest even if you don't receive Form 1099-INT or Form-OID

You should receive a Form 1099-DIV, Dividends and Distributions (PDF). from each payer for distributions of at least $10. If you're a partner in a partnership or a beneficiary of an estate or trust, you may be required to report your share of any dividends received by the entity, whether or not the dividend is paid out to you. Your share of the entity's dividends is generally reported to you on a Schedule K-1.

Divend received as nominee should be treated as own income and should be dislcosed in line 5 of Schedule B ( Form 1040)