What is a nominee adjustment?

[Anita01 · Accepted solution]

TurboTax explains a nominee adjustment in this manner:

"Nominee Interest: Some or all of the interest belongs to someone else but the entire amount was reported under your Social Security number. This includes interest belonging to your child but reported under your ID number."

It's not unusual for a broker or fiduciary to send a form like a 1099-INT under one social security number when the interest, in part or all, belongs to someone else.  A nominee adjustment removes the amount from your taxable income.

In Turbotax you do this by entering the 099-INT, then checking on the next screen that you need to adjust the amount.  You'll then be able to enter the adjustment amount and check the reason for the adjustment.

You can do the same on a 1099-DIV.

[rob613]

What types of income can be adjusted this way?  For example if an IRA plan administrator makes a mistake and sends an RMD to the wrong heir / beneficiary of an inherited IRA, can 1099-R income be adjusted to reflect that it should be the income of the more correct heir?

I see that there are articles discussing Nominee Adjustment for both 1099-INT and 1099-DIV.

[Hal_Al]

Q. Can 1099-R income be adjusted to reflect  an IRA plan administrator  mistake and sending an RMD to the wrong heir / beneficiary of an inherited IRA?

A.  No. The administrator should issue corrected 1099-Rs. But more accurately, probably not.  It depends on the details of what happened.  A nominee adjustment for a 1099-DIV or 1099-Int is shown on Schedule B. There is no place on the IRS forms foe adjusting a 1099-R. 

If you receive this as the result of an inheritance, and decided to share with others;  you are actually making them a gift, which is not taxable to them, nor deductible (adjustable) by you.

________________________________________________________________________

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. You also must furnish a Form 1099 to each of the other owners. File the new Form 1099 with Form 1096 with the Internal Revenue Service Center for your area. On each new Form 1099, list yourself as the "payer" and the other owner as the "recipient." On Form 1096, list yourself as the "Filer." A spouse is not required to file a nominee return to show amounts owned by the other spouse. The nominee, not the original payer, is responsible for filing the subsequent Forms 1099 to show the amount allocable to each owner.

https://www.irs.gov/instructions/i1099gi