Who pays the tax on the interest from a joint account?

That pretty well sums it up... ie, if myself and another person are joing checking acct holders, and lets say the acct has a nightly sweep automatically of all balances over $500 into a 5% money market acct. And lets say we keep a balance of $50,000 in the checking acct since it earns a nice rate of interest on unused balances. At the end of the year, how are the taxes handled.. I would assume that both owners, who I imagine have to each give their SS numbers when opening the account jointly, receive a

1099 at year's end. But how are the taxes handled, ie, can one pay the entire tax without the joint party being billed also? How is it tracked and handled as to who pays the tax on the interest earned on a joint acct like this. Same would apply if it were any kind of joint account where interest or dividends are earned. Thanks much.

paul

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Reply to
boostm3
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snipped-for-privacy@gmail.com (boostm3) posted:

"I imagine" and "I assume" are interesting concepts. Joint accounts, when opened, are usually clearly defined by the applicant and the bank: in most instances, the accounts are for a husband and wife who intend to file taxes jointly, and therefore only one of their SSNs is necessary for the 1099 to hit the target. I cannot imagine a "joint account" which would be offered to unrelated individuals, unless they had a "partnership" agreement or some such justification -- which would clarify the bank's reporting procedure. I would therefore suggest that answer to your questions about which party should handle the taxes due, can be answered by simply informing the bank of the T-I-N (Taxpayer Identification Number) that you wish to have attached to that account. The 1099 will be rendered accordingly. Bill

Reply to
Bill

Theoretically, each of you pays tax on your half of the interest earned. As a practical matter, the bank is likely to issue a 1099 to one of you for all the interest earned and that is who the IRS will look to to pay the tax.

Reply to
Mike Wellman

Only one 1099 will be issued to the person whose SSN is on the account. If that person wants to split the income with a joint owner, s/he should issue a 1099-INT to the joint owner for half the interest and file Form 1096 with the IRS. When filing taxes, list all of the interest included in the original 1099on schedule B and indicate that half of the interest was nominee interest and subtract it out. Dennis

Reply to
bono9763

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