Does parent need to pay taxes on joint account with minor who is the primary account holder?

[Viking99]

The dependent minor was the primary account holder with parent as joint account holder. The minor will therefore receive the 1099-INT.
The account was a short term, high interest CD that paid $515 in interest (The account is now closed).

The child had no other income.

Because this unearned income is less than the threshold ($2,200), the child does not need to pay taxes.

However, since this is a joint account with a parent;

1. Does the parent need to show what part of the money belongs to the child/parent?
2. Is the parent required to pay taxes on the parent's share of the interest?

[DJS]

Was this a joint or a custodian account?

All owners of a joint account pay taxes on it. On a custodial account The IRS considers the minor child the owner of the account, so the earnings in it are taxed at the child's tax rate, if at all. Every child under 19 years old—24 for full-time students—who files as part of their parents' tax return is allowed a certain amount of “unearned income” at a reduced tax rate. When you open a custodial account -- also called a Uniform Gift to Minors Act account, or UGMA account -- you provide the bank or credit union the child's Social Security number. The interest earnings are taxable to the child.

However, If this is really a joint account and the joint account earns interest, you may be held liable for the income produced on the account. For most accounts co-owned by parent and child, usually only the parent’s Social Security number is on the account. The bank will then send the parent the Form 1099-INT showing the full amount of interest earned during the year. Unless your child made deposits to the account, you must report the entire amount on your taxes. If your child contributed a significant portion of the funds and you receive the Form 1099-INT, you can share the tax liability proportionally by filing a Form 1099-INT for your child’s share with both the Internal Revenue Service and your child.

[Viking99]

@DJS,

Thank you for your answer. As I explained in my original post:
1. This was a joint (not custodian) account.

2. The child was the primary account holder with parent as joint account holder.

3. The child will receive the 1099-INT.
4. The interest amount was $515 (from a CD) and no other unearned income for the child, so the child does not need to pay tax on the interest.

Again, how should this be handled:
1. Does the parent need to show what part of the money belongs to the child/parent?
2. Is the parent required to pay taxes on the parent's share of the interest? How?

[DJS]

The final point still applies, but in reverse since your child is receiving the 1099-INT.

In this case the bank sends the child the Form 1099-INT showing the full amount of interest earned during the year. Unless you made deposits to the account, your child must report the entire amount on their taxes, unless they have no tax liability. If you contributed a significant portion of the funds and your child receives the Form 1099-INT, you can share the tax liability proportionally by filing a Form 1099-INT for your share. Frankly, that seems unlikely. 

[Viking99]

Sorry, I don't follow what you mean by "unlikely"?

"If you contributed a significant portion of the funds and your child receives the Form 1099-INT, you can share the tax liability proportionally by filing a Form 1099-INT for your share. Frankly, that seems unlikely."

Do you mean that the minor child needs to send me a 1099-INT for my share of the $515 interest? (Since the interest was only $515, the child has no tax liability). Or maybe you meant that it would not be necessary?

[DJS]

Unless you contributed some some substantial portion of the account you would not need to have her send you and 1099-INT. Even then, you might overlook this.

[cactuswren]

@DJS I am in a similar situation and need help.

My minor child is the primary account holder and I am joint owner. The 1099-INT has only my child's name. I transfer money to the child's account monthly - I am the main source of funds for the account (child receives small gifts from grandparents for birthday/christmas). Do I need to pay taxes in the interest under my name or fill out any separate forms?

[LenaH]

In most cases, no. If your dependent child made less than $1,100 in interest, dividends, and capital gains distributions combined, and that was their sole source of income, the child's income doesn't need to be reported on any tax return. 

Otherwise, here's how to enter your child's 1099-INT:

1. Open or continue your return. 
2. Search for child income and select the Jump to link.
3. TurboTax will ask a series of questions to determine if their income needs to be reported on a tax return. You can report it on your return or their return.

Note: If the child's income is $12,400 or more, it must be on the child's tax return. It can't be included on the parents' tax return.

@catcuswren