Reporting 1099-DIV income for a joint account with a relative

[umamiking]

Hi, my wife has a joint investment account at Charles Schwab with her sister who resides in New York City. It's a small amount of dividends but enough to affect our AGI and refund amount. My wife is the primary on the account with a 55% ownership while her sister is the remaining 45%. I understand that the institution will only send out one 1099-DIV, which my wife received. We are filing married jointly. 

How can we claim just her share of the dividends? Can we simply multiple the boxes with values (1a, 1b, 2a, 7) by her portion (55%)? Does Turbotax explicitly handle this situation? 

We are located in California.

Update: After importing the 1099-DIV values, I noticed I could choose the option to adjust dividends. The next part is confusing because it asks me the adjustment amount so I entered 45% of the total ordinary dividends value (my wife's sister's share). Once I do this, it doesn't seem to reflect anywhere and without filing it, Turbotax won't show me any additional "schedule" documents they plan on producing, so I can't double check. Is there a better way to do this?

[PattiF]

There will be no other information entered for the adjusted dividends in TurboTax. You indicated that the dividends are adjusted and that will be reflected in your return.

There is one more thing that you need to do to report Form 1099-DIV divisions. Income reported that actually belongs partially to another person needs to be adjusted with the IRS.

Nominee Actions/Returns:

Generally, if you receive a Form 1099-DIV for amounts that actually belong to another person or entity, you are considered a nominee recipient. You must file a Form 1099-DIV 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-DIV 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 yourself or the original Payee as the payer and the other owner, as the recipient. On Form 1096, list yourself or the original Payee as the nominee filer, not the original payer.  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 here: 

• Form 1096-Transmittal 
• Form 1099-DIV

Split the amount as needed and enter only the necessary portions on the appropriate returns.

[umamiking]

Hi, thank you for the response. I am still confused about a few things. You said " You indicated that the dividends are adjusted and that will be reflected in your return." - that is not the case. I am not sure what you mean by adjusted. Do you mean that the 1099-DIV is adjusted to reflect only my partner's share? Adjusted by whom? Right now with the data imported from Schwab into Turbotax, it's showing the full amounts for 1099- DIV, INT and B. My question is how do we claim only her share (55%)?

Are you suggesting I manually do the split and only report my wife's share (55%) of the dividends and interest income and gains/losses? The real complication is that last bit - the 1099-B has over 50 transactions. Should I just adjust gain/loss amount? This would look confusing because it won't add up correctly with the cost basis to equal proceeds.

[apunke]

@PattiF - I have a follow-up question. I have a similar situation, and I submitted 1099-DIV and 1096 like you mentioned. I gave a copy of the 1099-DIV to the recipient. When the  recipient goes to enter the 1099-DIV on turbo tax, it asks for the federal employ FEIN (in the format of xx-xxxxxxx) of the payer. When I filled out 1099-DIV, I entered my SSN as the TIN. So, when entering the payer's FEIN, is it OK to enter my SSN as the FEIN of the payer? I don't know what else you would put, but it concerns me that it's different formatting. 

[PattiF]

Yes, it is correct to use your SSN on the new form that you have created. 

From @DianneW77:

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 yourself as the payer and the other owner, as the recipient. On Form 1096, list yourself as the nominee filer, not the original payer.  The nominee is responsible for filing the subsequent Forms 1099 to show the amount allocable to each owner.

@apunke