How do you enter a nominee distribution for exempt-interest dividends?

[kalilahi]

I was able to do it on sch. b for interest and ordinary dividends, but exempt-interest dividends aren't supposed to be reported on sch. b, only 1040 line 2a.  If I use the same procedure for the exempt-interest dividend as for the ordinary dividend, the amount on line 2a doesn't change (i.e., no adjustment for the nominee distribution is made) and I get an error in TT b/c the amount of the adjustment is more than the amount of ordinary dividends listed on that 1099-DIV.  Do I just need to manual adjust the amount in 2a and make a statement somewhere (??) that the adjustment is for a nominee distribution?  

[MonikaK1]

Normally, to identify a nominee distribution, when entering Dividends in TurboTax, after you get past the initial screen to the question "Do these uncommon situations apply?", select "I need to adjust these dividends or this is an ESOP distribution" and then select "I need to adjust these dividends". 

The Learn More link next to this choice includes this information, "You received the dividend as a nominee: This means you received dividend income belonging to someone else (other than your spouse). The IRS and the person whose dividend you received will need to be informed of the payor and the amount".

In the next screen, "Tell us about your dividend adjustment", enter the adjustment amount and select "I received all or part of these dividends for someone else (I am a nominee)".

You can make manual adjustments if this option doesn't produce the needed result. See this thread for a discussion of similar issues.

[kalilahi]

Yes, this procedure works fine for ordinary dividends and interest, but I have exempt-interest dividends and, while TT will allow me to make the adjustment as discussed below, it DOES NOT deduct the adjustment from 1040 line 2a (where the exempt interest is reported) AND it gives me an error saying that the adjustment is greater than the ordinary dividends reported.  This is the case because there is only a couple of dollars of ordinary dividends and the majority is tax-exempt.  I can't see any way to make TT make the adjustment on the1040 form.  It only reports the adjustment on the worksheet for the 1099.  Do I have to do that manually and, if so, where do I note that adjustment was made?

[DianeW777]

In your situation I suggest you enter only your amount on your tax return then physically nominee the balance to the other person.  This allows each of you to report only your share of each type of dividend on each tax return.  When you have different types of dividends (ordinary and capital gain distributions, exempt or others) it becomes more complicated.

Nominee returns. 

Generally, if you receive a Form 1099 for amounts that actually belong to another person or entity, you are considered a nominee recipient. You must file a Form 1099 with the IRS (the same type of Form 1099 you received).  You must also furnish a Form 1099 to each of the other owners. 

File the new Form 1099 with Form 1096 (this is a transmittal for the 1099) by mailing to the Internal Revenue Service Center for your area. (Provided on the Form 1096)

• On each new Form 1099, list as the payer the person on the original form and the other owner, as the recipient. On Form 1096, list the person on the original form as the nominee filer, not the original payer (financial institution).  The nominee is responsible for filing the subsequent Forms 1099 to show the amount allocable to each owner.

The forms filed with the IRS should be the red copy so if you don't have a color printer, go to the IRS website and order the forms: 

• Form 1096 
• Form 1099-DIV

@kalilahi 

[Anonymous_]

A good place to make this adjustment would be Line 24z of Schedule 1 (unfortunately, TurboTax has not yet implemented that particular line).

[kalilahi]

Thanks for the input.  I was able to physically make adjustments in the 1099-Div using additional statements in each box of the 1099-Div.  That seems to have worked and the additional statements will print with sch. B.  I was also able to make needed adjustments for 1099-R using a negative entry for additional income and indicating it as IRD on line 27. ( Nominee adjustments for ordinary div and interest was straight forward in the program.)  My only other source of difficulty is how to deal with the state withholding portion of the 1099-R.  Nor straight forward at all to move that, but I did the same thing as for the exempt-interest dividends and hopefully the explanations will be sufficient.

[kalilahi]

Line 24, not 27...