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How to report 50-50 interest income in a joint CD

Greta
Level 9

Client and girlfriend (unmarried) pooled funds 50-50 and invested in an interest-bearing certificate of deposit. His name appears first, so the 1099-INT is all in his SSN. How do I adjust Sch B to indicate that? I can't enter a negative number for her share.

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Accepted Solutions
rbynaker
Level 13

The magic word you're looking for in the Sch B instructions is "nominee".  There's a box for it in ProSeries on the Sch B Worksheet (double click on the Sch B line to get to the detail.)

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9 Comments 9
Greta
Level 9

Con't

Perhaps enter girlfriend's interest income share as a negative income on Schedule 1 Line 8z?

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rbynaker
Level 13

The magic word you're looking for in the Sch B instructions is "nominee".  There's a box for it in ProSeries on the Sch B Worksheet (double click on the Sch B line to get to the detail.)

Greta
Level 9

WOW. 'Nominee' is the magic word indeed! Thank you!

I even waited for the details box to open, I was so thrilled. (During tax season I can't wait for it. Can that be fixed somehow?)

 

Terry53029
Level 14
Level 14

@Greta Nominee interest is interest that a person collects on behalf of someone else. When a person receives nominee interest, they are responsible for either paying tax on that interest or passing the interest on to its rightful owner. If the person who receives the nominee interest opts to pass the money on to the other person, they must fill out and file the tax form 1099-INT.

sjrcpa
Level 15

@Terry53029 I wouldn't in this case. It's a joint account. He is not collecting on behalf of someone else. 1099s just allow for one SSN.

Of course, girlfriend should report her half.

The more I know, the more I don't know.
Greta
Level 9

Girlfriend will report her half of the interest income. 'Nominee' isn't who she is, since she's half owner? So how do I subtract her half from his Sch B? Code H (in Sch B page 2) is "Other Deduction." Is that where I might put her half? These numbers are substantial since CD interest rates have gone up.

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sjrcpa
Level 15

On his return I'd use nominee.

I was just saying he does not need to issue a 1099-INT to her since her name is already on the account.

The more I know, the more I don't know.
rbynaker
Level 13

I agree with Terry.  Is there something in the Regs that would suggest a 1099 is not required?

The instructions are fairly clear to me:

https://www.irs.gov/pub/irs-pdf/i1099gi.pdf

From page 3 under "Who Must File":

"Generally, if you receive
a Form 1099 for amounts that actually belong to another
person, you are considered a nominee recipient. You
must file a Form 1099 with the IRS (the same type of Form
1099 you received) for each of the other owners showing
the amounts allocable to each."

Practically speaking, I would guess there's an extremely high percentage of nominee income that does not get reported on a 1099 and I've never seen IRS penalize anyone for non-filing in these situations.  But my read of the instructions is that it is required.  For what that's worth. <shrug>

Rick

TaxGuyBill
Level 15

@rbynaker wrote:

Is there something in the Regs that would suggest a 1099 is not required?

Practically speaking, I would guess there's an extremely high percentage of nominee income that does not get reported on a 1099 and I've never seen IRS penalize anyone for non-filing in these situations. 


 

It's the "CAGMC" doctrine.   🤣