Joint Account Taxation

F

Flashboy

I have a joint account with a friend of mine. I am told by the brokerage that the 1099 will be issued to the first applicant's social security no. and that he and I are to split it up.

Will the IRS accept me not claiming the entire amount issued on the 1099 as long as he claims his half?

Does anyone know how to best handle this??


Thanks,
Jeff
 
attach a simple note to your schedule D state that the remaining transactions are filed by other SSN, that's all you need to say, don't try to make it into complicate reason, just the fact.
 
I went through this doint my '02 taxes where my father and I had a joint account with his name first and all income, etc was put on the 1099s to only his SSN. I asked the IRS about this and was told he may nominate me and make out a 1099 to my SSN if he desires and it is appropriate (don't really know what that means and neither did the IRS rep I talked to).

They said that their computers check to make sure all 1099 income,etc gets reported. So, you may take a risk by not having it all accounted for in both returns.


DISCLAIMER: I'm not a tax expert and neither are the 15+ IRS employees I talked to about this issue. Basically, I was told to talk to an accont or tax attorney. Hard to believe the guys making the rules make you pay someone to understand them...

Doug S
 
Quote from Flashboy:
I have a joint account with a friend of mine. I am told by the brokerage that the 1099 will be issued to the first applicant's social security no. and that he and I are to split it up.

Will the IRS accept me not claiming the entire amount issued on the 1099 as long as he claims his half?

Does anyone know how to best handle this??
More...


I suspect that no one will much care for my opinion but, again, in my opinion, the only folks that should be holding joint accounts are those who will be filing joint returns (e.g. married filing jointly).

The problem is amounts reported on a W2s, 1099s, et al, are not linked to amounts reported on 1040s by human beings; computers do that and they're going to be trying to match =one= SSN shown on the 1099 with the SSN(s) shown on =one= return.

You could calculate the total tax liability, report all of it on your return, and simply have your friend reimburse you for his/her share.
 
.....I asked the IRS about this and was told he may nominate me and make out a 1099 to my SSN if he desires and it is appropriate (don't really know what that means and neither did the IRS rep I talked to).....

They never do because, typically, you're talking to a level one idiot. That's one reason an individual taxpayer can't rely on information given by any IRS employee that's not in the form of a PLR. In fact, as frequently as they're mentioned, even official IRS publications and instructions are not considered primary authority and carry virtually no weight. Generally, only the Code, Regs, Rev Rulings, Rev Procs., and court decisions are considered authoritative and binding. Almost everything else (including this message) is pretty much viewed as crap by the IRS.
 
About joint accounts:

You may want to consider the type of ownership of your account. In a joint account (with rights of survivorship?), each party is presumed to own the whole account, not 50% as commonly thought. Therefore, if you or your partner, for any legal reason, is subjected to a claim, of any kind, the claiming party has rights over the whole account, not just half. Also, should one of the partners die, unless you're married to each other, the whole account will be calculated as part of the deceased's estate, which means estate taxes may be due. Also, if there's a falling out between the two of you, either party can claim the entire account perfectly legally. Going to court to prove who donated what into the account will cost you both court and lawyer's fees.

That's why joint accounts are usually best for husband/wife ownership. Not partners, not siblings, not parent/child. You may wish to look into tenants-in-common type of ownership instead, which do not have the liabilities of a joint account.
 
GMS,

IN your post:

"
You may want to consider the type of ownership of your account. In a joint account (with rights of survivorship?), each party is presumed to own the whole account, not 50% as commonly thought. Therefore, if you or your partner, for any legal reason, is subjected to a claim, of any kind, the claiming party has rights over the whole account, not just half. Also, should one of the partners die, unless you're married to each other, the whole account will be calculated as part of the deceased's estate, which means estate taxes may be due. Also, if there's a falling out between the two of you, either party can claim the entire account perfectly legally. Going to court to prove who donated what into the account will cost you both court and lawyer's fees.
"

In an earlier post, I mentioned the joint account I had with my father. He passed away last year. The advantage to having a joint account in this situation was since it was joint, with right of survivorship, that upon his death, the funds in the account became mine and were not subject to probate nor did the attorney charge the customary 3.5% probate fee on these funds.

My father set the account up this way so the funds would not be subject to the probate process or fees.

So, I think all this shows is there are plusses and minuses to joint accounts.

Doug S
 
My father set the account up this way so the funds would not be subject to the probate process or fees.

That's usually a big reason people set up jt accounts.

A much better way to set up anything like that is simply through a living trust. It bypasses probate. It has a tax advantage of a stepped up basis to the benefactor of the deceased party's ownership. The funds would be protected against any claims not made against the trustee, effectively cutting the exposure to liability (I mentioned in the previous posts) in half.

My sympathies about your dad.
 
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