Reporting half of 1099-div as nominee

[BradM79]

I have a 1099-DIV for a joint investment account which was split 50/50 in 2024 between me and my ex-wife pursuant to divorce. The tax burden was to be split evenly. I know how to do the nominee process to claim half the income, theoretically. But it isn’t working in TurboTax! Here is why…

My 1099-DIV has income in 4 different boxes: 1a, 1b, 2a, and 5. When I enter all 4 boxes as one 1099 in TurboTax, which would be normal, I check the box that I need to make an adjustment as nominee. So far so good, except that then TurboTax only gives me one box to enter an adjusted amount!

I don’t know what adjustment amount to enter, because those boxes are taxed differently. It’s not as simple as just adding all four boxes together and dividing by half.

So, one TT phone rep told me, as a workaround, to create 4 different 1099s in TurboTax - one for each of the 4 boxes. And that worked until I scanned my return for errors, and TT freaked out and found “errors” because of the artificial/divided 1099 entries showing 0 income in box 1a and positive income in box 1b. That’s obviously impossible, and TT doesn’t understand I was just using a workaround (suggested by a TT rep).

TT won’t let me file until those “errors” are corrected.

I think I might be able to fix this if I do a 1099 for box 1a and 1b together. But what is the calculation to do a 50% adjustment to the tax burden if I do that?

[DianeW777]

My advice would be to report exactly half in each box, reporting only your share of the income. Have your ex-wife do the same.  This makes the reporting a simple process. As far as the IRS, they may or may not come asking about the income,  Keep a copy the 1099-DIV in your tax file.

You can also use the physical nominee process to make it clear with the IRS if you prefer:

Nominee Returns.  This is how the IRS knows what you are doing.

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.

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
• Form 1099-DIV

[BradM79]

Hmmm… yeah that would certainly be a simpler process. I just worry about my reported income mismatching a 1099 issues with my SSN on it. 

I mean, the whole point of the nominee process on Schedule B is to address this very issue. But TT doesn’t seem equipped to properly handle it.

If I just knew the calculation, I could enter the adjustment in the one box TT provides. But I’m not a tax expert, which is why I bought TT. It’s supposed to make this easy and why they only provide one box is so frustrating.

What calculation would I used to claim an aggregate adjustment for the amounts in boxes 1a, 1b, and 2a?

[BradM79]

So... nobody knows the calculation of how to do an aggregate nominee adjustment to split a 1099 in half when there are amounts in boxes 1a, 1b, 2a, etc.?

I'm surprised. I realize this isn't a common situation, but it certainly cannot be unique. People divorce and have to split investment accounts. There is a nominee process for this reason. The IRS provides one box to enter one aggregate adjustment. But zero explanation as to how to calculate that aggregate adjustment when the 1099-div reports income in multiple boxes.

I've Googled this and I'm not finding anything. I cannot believe there is not an answer.

[Hal_Al]

You might want to try this: put the full amount in box 1a. That should get you the nominee process. Put only the half amounts in the other boxes.  I haven't tried it. Just a thought. 

[BradM79]

Box 1a ordinary dividends is taxed differently than box 2a capital gains. So that would not work. It would also result in a mismatch from the 1099-div submitted to the IRS.

There must be a calculation to determine a 50% aggregate adjustment to all the income in boxes 1a, 1b, and 2a. But nobody seems to know what it is. And yet the IRS only provides one box for one aggregate adjustment so there must be a calculation!