Joint Mutual Fund (Not Married) - Capital Gains and Dividends

Forum|Forum|4 years ago
February 23, 2022
12 replies
97 views

I have a joint mutual fund with my boyfriend. We both contributed equally to the amount in the mutual fund. I received a 1099-DIV noting that we had dividends and capital gains. It would be tax advantageous for me if my boyfriend could report that on his taxes, but I've read elsewhere that you may have to report the dividends/capital gains in proportion to the amount you invested in the mutual fund. In that case, since I contributed 50% of the mutual funds, should I report on the 1099-DIV half of the amounts listed on my form (and have him do the same)? Will this be an issue with the IRS with the numbers not being in full (or I guess they'll be in full if they match up both of our taxes). Thank you!

Best answer by GeorgeM777

Generally, the person whose name is on the account, and it appears this may be you because you received the 1099-DIV, is the one responsible for paying the tax. Thus, if you are the owner of the account, you could pay the tax, if any, in full. However, you have stated that the account in question was jointly funded. Therefore, if you choose to allocate the dividends, interest, etc., in a way that represents your true ownership interest (you mentioned it was 50-50), then you need to notify the IRS of same. Otherwise, if you don't notify the IRS, the IRS won't know why you did not report all of the dividends.

To split the dividend income, you’ll need to fill out a Form 1099-DIV. You will list your information as the payer and the joint owner’s (your boyfriend) information as the recipient. You’ll list the joint owner’s dividend income in box 1a, total dividends or box 1b qualified dividends. Your 1099-DIV will tell you if the dividends are qualified or not.

Make sure you only list the portion the joint owner is responsible for, not the full amount. This will let the IRS know you aren’t reporting the reported portion of the dividends on your tax return. It also alerts the IRS that the joint owner and recipient of the 1099-DIV will be reporting their share of the income on their tax return. The form will need to be sent to the person receiving the interest (the joint owner) and to the IRS. The IRS also requires you to file Form 1096, which is a summary of all 1099 forms you send to the IRS.

Use Google, and the search term 2021 IRS 1099-DIV, to access a 1099-DIV.

@apunke

G

GeorgeM777Answer

Alumni - Intuit

Generally, the person whose name is on the account, and it appears this may be you because you received the 1099-DIV, is the one responsible for paying the tax. Thus, if you are the owner of the account, you could pay the tax, if any, in full. However, you have stated that the account in question was jointly funded. Therefore, if you choose to allocate the dividends, interest, etc., in a way that represents your true ownership interest (you mentioned it was 50-50), then you need to notify the IRS of same. Otherwise, if you don't notify the IRS, the IRS won't know why you did not report all of the dividends.

To split the dividend income, you’ll need to fill out a Form 1099-DIV. You will list your information as the payer and the joint owner’s (your boyfriend) information as the recipient. You’ll list the joint owner’s dividend income in box 1a, total dividends or box 1b qualified dividends. Your 1099-DIV will tell you if the dividends are qualified or not.

Make sure you only list the portion the joint owner is responsible for, not the full amount. This will let the IRS know you aren’t reporting the reported portion of the dividends on your tax return. It also alerts the IRS that the joint owner and recipient of the 1099-DIV will be reporting their share of the income on their tax return. The form will need to be sent to the person receiving the interest (the joint owner) and to the IRS. The IRS also requires you to file Form 1096, which is a summary of all 1099 forms you send to the IRS.

Use Google, and the search term 2021 IRS 1099-DIV, to access a 1099-DIV.

@apunke

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A

apunkeAuthor

Level 2

@GeorgeM777 Both of our names are on the account, but the TIN listed on the account is my SSN. I haven't filed my taxes yet, but I initially filled out the 1099-DIV form with my financial company as the payer and listed 1/2 of the dividends and capital gains. To clarify, are you saying that I need to fill out a 2nd 1099-DIV with me listed as the payer and my boyfriend as the recipient? How do I list him as the recipient on Turbo Tax? I only see a spot for "payer" and then a spot for 1a/1b and 2a. If so, then how should I list my information with the financial company as the payer?

Spino

Alumni - Champ

Every account is reported with one tax ID (SS#) even if it is a joint account. Since you are not filing jointly, the one of you who has the taxID for the account reports the income. Anything else is between the two of you.

For instance, your boyfriend could pay you interest or you could charge him interest, but it is not in your best interest (see that pun?!) to report this, since every reported transaction is a chance for the IRS to collect more money.

What you can do going forward is open an account with the other person's tax ID, even if it is also a joint account. As you can see, all else being equal, it behooves you to report the income with the tax ID of the person who is likely to pay less tax on it.

Of course, you can give each other up to $15,000 a year without tax consequences or reporting, so you can split the liability without formally reporting it separately however it appears right to the two of you to do so.

A

apunkeAuthor

Level 2

I went back and reviewed the account. Both of our names are listed on there, but it's listed as my SSN. Based on that, are you saying that I should be the one to report the entire income and that it's not OK to split the dividends 50/50 on each other's taxes? Thank you for your help!

Spino

Alumni - Champ

It's not okay to split the reporting. You can file your own 1099 to your boyfriend as someone else discussed, but I really don't recommend that. If you did that, then you could make an entry deducting the amount you cross post, but keep it separate from your 1099 reporting so that the IRS can tie out your 1099 with the bank/broker's filing.
BTW, if you do make that entry, you should not file a 1096/1099, since you are not a business. Only businesses make those filings. The same would be true if you made a mortgage loan to your boyfriend. You would report the interest he paid you, he could deduct the interest, but you would not file a 1096/1099. If you do this, you should both have a written, signed copy of the agreement with your tax records.

Spino

Alumni - Champ

@apunke Joint tenancy with right of survivorship is not the same as each owning 50%. If you want to each own 50% and are not viewed by the law as having community property for whatever reason, the best solution might be to have two accounts. Each of you can own one and declare the other as your beneficiary or payable upon death (TOD). IF you do have a joint tenancy with right of survivorship one practice is to declare the owner as the person who will pay the lower tax rate. Owning things in common is in some states evidence you are "common law" spouses, so this is also something to consider.
Also, I suggest you separate the two questions: 1) How to pay what you already owe (the IRS) and 2) how to best structure things going forward. The IRS, for one, will be most comfortable with this approach 😉