Today TaxMama hears from Susi in New Jersey, with a common problem. “I have joint brokerage accounts with different members of my family that I manage. The brokerages send the year-end 1099’s in the name of the ‘’primary’’ owner. How can I apportion the profit/loss to each member according to his/her fair share (contribution) in an account, that will be acceptable to the IRS?”
Dear Susi,
The answer is easier than you think.
First of all, have each person report the full amount of the 1099 that came in their names. IRS’s computers match up the amounts to the Social Security Numbers and issue scary letters if there are differences.
Next, do a spreadsheet to allocate all the amounts to the appropriate people. Once you have the amount that should be reported on each person’s tax return for dividends, interest, or capital gains, do one of two things.
1) Add amounts to those people’s tax returns that do not show enough income from the 1099s they received.
2) Subtract amounts from those people’s tax returns who show too much in any category. When you deduct the amounts, the description on that line should be “Nominee Income – See Attached”. Include a statement with the tax return that shows the name, address and Social Security number of each nominee (family member) to whom you are assigning the income.
For the future, consider setting up a trust, partnership or LLC for the family. Transfer all the accounts into the name and taxpayer identification number of the one entity. Then you can file the one tax return, with K-1s that split the income among the family members according to their ownership percentage. The accounts will be easier to manage that way, too.
And remember, you can find answers to all kinds of questions about shared accounts and other tax issues, free. Where? Where else? At TaxMama.com.
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