Schedule B - 1099 Transactions

1099 Transactions In Schedule B 

Interests and/or dividends are reported on Schedule B. Schedule B is used when the taxpayer: 

• Had interest or dividends in excess of $1,500 
• Got interest from a seller-financed mortgage and the buyer decided to use the property for personal residence 
• Accrued interest from a bond
• Reports Original Issue Discount amount that is lower than that on Form 1099-OID 
• Uses the amortizable bond premium amount to reduce their interest income on a bond 
• Claims an interest inclusion from series EE or I U.S savings bonds granted post 1989 
• As a nominee, received interest or ordinary dividends
• Possessed either financial interest or is a signatory of a financial account from another country
• Received a distribution that was from a foreign trust 

Regular Interest 

Interest Amount - Displays the taxable interest that has been paid. Box 3 interest is not included. Enter the required information that may be on the Form 1099-INT statement after reporting the interest. 

Early Withdrawal Penalty - Interest or principal that has been forfeited due to the early withdrawal of time savings are shown in Box 2. On this line, enter the Box 2 of Form 1099-INT amount. This amount flows to Form 1040, Penalty on Early Withdrawals of Savings as an adjustment. 

Taxable US Savings Bond Interest - Interests on the US Savings Bonds, Treasury Bonds, Treasury bills and Treasury notes are displayed in Box 3. This amount may either be entirely or partly taxed. The taxable amounts are the ones to be reported here. 

Federal Income Tax Withheld - Backup withholding is shown in Box 4. Enter the federal tax withheld here. This amount flows to the payments section of Form 1040. 

State Exempt Interest - In the event that the interest is exempted from state taxes, include it (the interest amount exempted) as well as the code of the state. Check out the tax instructions for the state to determine whether the interest is to be exempted or not. 

Nominee Interest 

1. Form 1099-INT is to be reported on Schedule B 
2. After the final entry of line 1, key in the subtotal of all of the interest. Enter ‘Nominee Distribution’ below the subtotal then list the total interest that was received as a nominee. The amounts should be written in negative figures. 
3. Enter the result of the difference between the nominee interest and the subtotal then on line 2. 
4. Form 1099-INT must be issued by the taxpayer for the nominee amount. The only exception to this is when the income is  of the taxpayer’s spouse. The owner is listed as the recipient while the taxpayer is listed as the payer. File Form 1099-INT as well as Form 1096 with the IRS. 

Original Issue Discount (OID) Adjustment - OID is a type of interest. It is the difference between the issue price (buying price of a stripped bond or coupon.) of a debt instrument and the stated redemption price at maturity. Normally, OID is included in income. This is because it accrues throughout the debt instrument’s period regardless of whether you receive interest payments from the issuer. Debt instruments such as bonds, notes, debentures as well as any other evidence of indebtedness that runs for a period of more than a year may have OID. Report Box 1 and 2 amounts of Form-OID as interest income. Check out Publication 1212 for more information on OID 

Accrued Interest 

• Seller - In the event that a bond is sold between the interest payment dates, a portion of the sales price is regarded as interest accrued to the sale date. Accrued interest must be reported as interest income in the year of its sale. 
• Buyer - in the event that a bond is bought between the interest payment dates, a portion of the sales price will be regarded as interest accrued prior to the date of purchase. A buyer treats the accrued interest part of the buying price as a return of capital by lowering the basis in the bond. Interests that are reported on Form 1099-INT ought to be listed in full on Schedule B. deduct the Accrued Interest amount from that of the subtotal of all the received Interest income. 

Amortizable Bond Premium (ABP) Adjustment - If the taxpayer buys a bond by paying a premium, that premium becomes part of the basis of the taxpayer in the bond. An election can be made to amortize the premium in the event that the bond yields taxable interest. Due to this, part of the premium is used to lower the interest amount  includible in your income. In case this is your choice, you will be forced to reduce your basis in the bond using the amortization for the year. Check out Publication 550. If tax exempt interest result from the bond, the premium must be amortized by the taxpayer. The amount is used in the reduction of the tax exempt interest that is reported on Form 1040, Line 8b and also lowers the basis of the taxpayer in the bond. 

Accrued Market Discount 

• Ratable accrual method - Regard the market discount as accruing daily, in equal amounts during the period in which you hold the bond.  To know the daily installments, divide the market discount by the number of days the installments were paid (days after the date of acquiring the bond through to the maturity date). To get the accrued market discount, multiply the daily installments by the number of days in which you had the bond. 
• Constant yield method - you can choose to use this method instead of the ratable accrual method by attaching a statement that identifies the bond to your return and state your intention for the constant interest rate election. This choice is effective of the date of acquiring the bond. In the event that you use this method for any bond, you will be unable to change your choice for the said bond. 

Tax Exempt Interest - It is to be reported on the tax return but is not subject to tax. This amount is included in Total Income and is reported on Form 1040. 

Regular Dividend 

Form 1099-DIV statement is used to report Regular Dividends. Form 1099-DIV shows two types of dividends; Ordinary and Qualified dividends. Unlike Qualified dividends, Ordinary dividends are taxable. Qualified dividends are included in the Total Income and are reported on Form 1040, line 9b. Enter the dividend amount(s) followed by the relative information to the Form 1099-DIV statement. 

When you receive a dividend for another person, such a dividend will be referred to as Nominee Dividends. It is mandatory that you file a Form 1099-DIV in the event that your name as well as the ID number are on a brokerage account but either the entire or part of the Stock belongs to a different person. The other person will also be forced to report the dividends on their return. To reduce your taxable dividends, report a nominee dividend adjustment. 

• Exempt-interest dividends may be subject to state income tax or the Alternative Minimum Tax. Income from dividends must be reported on the income tax return and the same is done by mutual funds on Form 1099-INT. 

Seller Financed Interest - Interest that is received from a seller-financed mortgage ought to be listed on Schedule B. Report the name, address and SSN of the buyer. 

Part III - In the event that the interest on series EE and I U.S savings bonds issued post 1989 are subtracted from the total interest and the amount is more than $1,500 or, in the event that the dividends is more than $1,500, Part III of Schedule B must be completed.