Again, a question on lists prompts a blog post from me. If one person asks, more need to know. So, here's the scoop, as best as I can give it. Grinning...
There are several generally-accepted rules about dialog.
One is that you should not mix the thoughts, movements or speech of character A with the speech of character B or vice versa. Character A sees, thinks, says is fine. If at any point character B comes into it, you probably need to switch paragraphs. The one exception to this is when character A sees, thinks/speaks, acts...to which character B reacts. In that case, you MIGHT get away with leaving character B there, IF the sentence where B reacts is a compound sentence that starts with A's action AND it fits with the flow of the paragraph.
In addition, you should split the paragraphs of even a single character, when the focus/subject switches. You do know the rule about leaving the end of a quote without a mark and starting anew, when you switch paragraphs in speech?
Josie moved as if to smack me upside the head, pulling up short but not before I'd ducked it.
"Honestly, John," she grumbled. "Where was your mind? You didn't really think that would work, did you? Now what are we going to do?
"Oh, crap. And here comes more trouble."
I looked around, following Josie's line of sight, wincing at the vision of Allison marching toward us. She was on the warpath all right. *What now, indeed?*
It doesn't go far enough to just shift the tags around: beginning, middle, end.
First of all, you don't use tags on every line. That is newbie error number 1,210...more or less. If you only have two people talking, you shouldn't need tags that often for a back and forth exchange. You KNOW that you're moving back and forth. Even with more than two, you can leave off some tags, simply because the characters should have unique enough voices to do so. Whether you have two or more than two, you can--and in the case of a rapid-fire exchange, you want to--leave some without tags.
In addition, you shouldn't rely too heavily on tags. You should intersperse as much movement, expression, and/or scene setting as the pace allows for. This allows you to IDENTIFY the speaker without using a tag. Tags get old really quickly. For instance, showing that character A is upset by showing her shoving books in her backpack while blinking back tears...then saying something takes the guesswork out of WHO is speaking while giving information that adds to the scene. After all, you don't want your characters talking in a vacuum.
Always keep your pace in mind. If the scene is an ambling sort of discussion, you can add in more around the dialog. If it's rapid fire, you want to keep it as sparing as you can...even foregoing tags. HOWEVER, like fight scenes, a rapid-fire exchange of words rarely lasts long. You have a spate of he yells, she yells, he yells, she yells...between one and six passes each, most likely. Then there is a break, a mental circling of each other, during which you have time for a broader look again. At that point, they may or may not launch back into another rapid-fire exchange.
Okay...italicizing thoughts. You WANT to do this. There is a subset of editors who say you italicize UNLESS you are using a tag, connected with a comma to the thought. If you say:
*You don't want to do that,* she mentally berated herself. *It would be the last mistake you ever made.*
Some editors will say to italicize everything but 'she mentally berated herself' as you do ALL internal thoughts. Some will say to italicize only the second part, because the first has a tag. I lean toward the former, personally. It's the way I submit all of mine.
Or, I should say... I submit it either italicized or underlined, depending on the guidelines I'm working to. When changing from italics to underlining, always look for imperfect underlines and correct them. For this reason, I find it easier to type a book in initially with underlines and then change to italics when necessary. That saves you that step in reformatting. You KNOW it's right from step one, if it's underlined to begin with.
As for the rest... Remember that dialog is ALLOWED to use poor grammar, if that's what the character would use in speech...or thought, but punctuate it correctly. Since punctuation is for the reader and not actually a part of speaking.
Remember that people don't always use the same SORT of speech when speaking aloud and when holding an internal dialog. The character may well be politically correct or be using office etiquette in the spoken words and be painting a blue streak of obscenity in internal dialog. Often, you have to censor what comes out of your mouth, but you don't have to censor what you think...unless you live in a world of telepaths.
Remember that answering machines are dialog too. Always have the time/date stamp on phone messages characters listen to. The devil is in the details. Don't mess that one up.
Caveat! I can't stress this one more, since I see it so often. This is newbie mistake number 235. (No, I don't really have numbers for these! It's a stress-reliever.) If you have a character on the phone, DO NOT show only one side of the conversation, unless the POV character is standing across the room and listening to a single side of the conversation. Think about it. The POV character is on the phone. When YOU are on the phone, do you hear only your own voice? Of course not! You have to hear the other person (or at least read it off of a screen, if it's--what is that called?--TDD?). The text phones... Anyway, you HEAR the other person, so make a two-sided conversation. Remember to use scene and motion for the side the POV character is on. You can even add some sound backdrop for the other side...tapping, background for wherever the caller is. Their voice is not the only thing you hear. And, what you can hear may be important, either for plotline or for characterization.
There are also some suggestions I can make for telepaths, if you really want/need them.