Joint Accounts and Tax

[crevitch]

My wife (NJ resident) and her sister (PA resident) have a joint brokerage account designated JTWROS.  Her sister is the primary account holder, gets the 1099 and pays the taxes on the interest/dividends on the account.  Is this proper wrt state and federal income tax?  If not, what is the proper way to move the money into separate accounts?

[Hal_Al]

It is OK to do it the way they are doing it, if they are in agreement to do so.

The proper way is for the sister to report the whole 1099-INT amount on her return and then take a deduction for "nominee" amount (presumably half the interest).  In TurboTax (TT), the sister will get a screen asking if she needs to adjust the amount.  The deduction goes on Schedule B and is not an itemized deduction. 

You wife enters her share of the interest at the 1099-INT screen, in TT, even though she did not actually get a 1099.