Like secret agents in old spy movies, taxpayers are only numbers to the federal government. For example, the Internal Revenue Service only cares about the taxpayer number associated with a joint account, which is the Social Security number for one of the account holders. Account income is reported annually on a Form 1099 to the person with that identifying number. To avoid a nasty letter from the government, a tax return should match the reported income and correctly adjust for the joint party’s share.
Enter the full amount of interest or dividend income from the joint account on Schedule B of the tax return for the person receiving Form 1099. This individual is the account holder whose Social Security number is provided to the financial institution.
List a description on the next line of Schedule B stating that account income was “received as nominee for” followed by the Social Security number of the other joint account holder.
Place the portion of account income claimed by the other joint account holder as a negative number on the line of Schedule B showing that person’s Social Security number as nominee.
State the portion of account income claimed by the other joint account holder on her tax return just as if she had received a separate Form 1099 for this amount.
Items you will need
- Form 1099-INT or 1099-DIV for the joint account
- IRS Schedule B
- Financial institutions commonly offer different types of joint accounts. The most common are “joint tenants” and “tenants-in-common.” In each case, only one Social Security number is listed on the account.
- All account holders equally own accounts for “joint tenants.” For example, two individuals that are joint tenants each own 50 percent of the account. Both of them should therefore report 50 percent of the account income on their separate tax returns. Tenants-in-common are similar accounts, but account holders may have unequal ownership percentages.
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