Who has to declare interest income on joint accounts?

Question

I was told the first name on a joint bank account in the US is the one held accountable by the IRS for taxes and the one who should declare interest income. Second and third account holders are not liable. Is this true?

Answer 1

The first person listed on the account is the one whose TIN the institution has and therefore, that is the number that will be used on the 1099 and given to the IRS.

Anyone whose name is on the account can be held liable. It's easier for the IRS to go after the one whose TIN is on the account. Depending on the taxes on the amount, the IRS will go after the taxpayer who resists least or the one with "deep pockets."

If the account is held equally, say by 3 people, the equitable way to do it would be for the first one to report on Schedule B Income of $1,000 less $666 to other nominees. Then the other two would report $333 each.

Answer 2

The first-named person should strictly speaking issue a 1099 to each of the other account holders for their share and file copies with the IRS. In practice, what happens is that you note the full amount shown on the 1099 on your return and then deduct the other account-holders' shares.

This assumes that you are all beneficial owners of the account.

Answer 3

Yes, this is correct. The first person is the primary and responsible for reporting the interest on their tax return.