If you receive income in your name that actually belongs to someone else, aside from your spouse if married filing jointly, you are a nominee. This means you must file a 1099 form with the IRS appropriate to the type of income you received and give a copy of it to the income’s actual owner.
One of the most common nominee situations is a joint bank account or brokerage account with all of its income reported under your Social Security (SS) number. You will need to provide the IRS and your account co-owner with a 1099 reporting the co-owner’s share of the income under his or her SS number. Then, when you file your return, you need to show all the income but back out the co-owner’s share as a “nominee amount.”
The type of 1099 to file depends upon the type of income: 1099-INT for interest, 1099-DIV for dividends, and 1099-B for the proceeds from selling stocks and bonds. If the joint account is a brokerage account that has produced interest and dividend income, along with stock or bond sales, the nominee will need to prepare one of each type of 1099 for each co-owner.
You should provide Forms 1099-INT and 1099-DIV as a nominee to the recipients by January 31, while the deadline for Form 1099-B is February 15. To avoid penalties, you need to send copies of the 1099s to the IRS by February 28, on magnetic media or optically scannable paper forms (OCR forms). This firm prepares 1099s in OCR format for submission to the IRS along with the required 1096 transmittal form. This service provides recipient and file copies for your records.
If you have questions about filing 1099s as a nominee, please call this office.