U.S. expats with foreign accounts may be required to file Schedule B with their income tax return. This tax form is used to report interest or dividends and determine whether a taxpayer has financial interest in foreign accounts. Additionally, Part III of Schedule B asks whether a taxpayer must file an FBAR (Report of Foreign Bank and Financial Accounts).
Failure to file Schedule B when required can result in penalties. Understanding the filing requirements is crucial for taxpayers with foreign financial accounts.
What Is Schedule B?
Schedule B is a tax form attached to Form 1040 to report interest and ordinary dividends received during the tax year. It applies to taxpayers who have:
- Taxable interest or dividend income
- A foreign bank account or other financial accounts in a foreign country
- Financial interest or signature authority over a foreign bank and financial account
- A foreign trust
If any of these apply, taxpayers are required to file Schedule B with their income tax return.
When Must Schedule B Part III Be Completed?
Schedule B Part III asks about foreign bank accounts and trusts. Taxpayers must complete Part III if they:
- Have a foreign bank account or other financial accounts in a foreign country.
- Have signature authority or financial interest over foreign bank accounts.
- Are required to file an FBAR (Financial Crimes Enforcement Network (FinCEN Form 114).
- Hold an interest in a foreign trust.
If any of these apply, the taxpayer must report foreign accounts on Schedule B and indicate whether they are required to file an FBAR. If the aggregate value of all foreign financial accounts exceeds $10,000 at any time during the calendar year, the taxpayer must also file an FBAR (FinCEN Form 114).
How to Determine the Maximum Value of an Account for FBAR
To better understand FBAR filing requirements, including who must file, penalties, and submission details, check out our in-depth guide: FBAR: Requirements and How to File.
How Do I Know If Schedule B Is Required?
You must file Schedule B if:
✅ Your taxable interest or dividend income.
✅ You have a foreign bank account, brokerage account, or securities account.
✅ You have financial interest in or signature authority over foreign accounts.
✅ You hold foreign financial assets in a foreign bank or other financial institution.
✅ You have interest in a foreign trust.
If you answer “Yes” to any of these, you are required to file Schedule B with your tax return.
The Schedule B compliance requirement for foreign accounts ensures that U.S. taxpayers properly report interest or dividends and disclose foreign bank accounts. Failing to file Schedule B or report foreign accounts can lead to IRS scrutiny and penalties.
To avoid costly mistakes, taxpayers should review filing requirements, ensure they file an FBAR if required, and consult a tax professional if unsure. Complete Schedule B correctly to remain in compliance with U.S. tax laws.
At 1040 Abroad, we offer free tax consultations to help U.S. expats navigate their tax obligations with confidence. Don’t hesitate to reach out to our team for expert guidance and assistance with Schedule B, FBAR, and other expat tax concerns.
