Split interest/dividend income and capital gain on a joint accounts between siblings

[Timoh1]

Hi,

The 1099 only sent to the primary account holders.  The account is equally held by 3 siblings.  Ideally, each one should file their share which is one-third.  But only has one 1099 and addressed to the primary holder.  Can you advise how could we file one-third on each return?  Anything we need to submit to IRS to segregate the income/gain?  Or we just simply enter one-third of each return?

Thanks.

[DavidD66]

The way to treat this is for the primary account holder to report 100% of the interest, dividends, distributions, and capital gains on their tax return.  The primary account holder would also report nominee interest, dividends, etc. to the other account holders (siblings).  Instructions on how to report nominee income below.  You might be able to get away with each of you reporting 1/3 of everything on your tax returns, but the IRS matches the amounts reported to them to what is reported on the primary's tax return.  Since the amounts won't match, the primary can expect a letter from the IRS and a proposed adjustment to their tax return.  A response with an explanation will be required.

You can also use the following nominee procedures to assign the portion of the income being reported by the person whose SSN is not on the tax document.

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 allocated to each joint account holder.