Who pays taxes on a joint account?

By | December 8, 2013

On a joint investment or banking account, who pays taxes on the gains?

Joint accounts. If two or more persons hold property (such as a savings account, bond, or stock) as joint tenants, tenants by the entirety, or tenants in common, each person’s share of any interest or dividends from the property is determined by local law.

Even in a joint account there is a primary social security number, and that is who the investment company will report on to the IRS. In the event of a miscommunication, one of the owners has to report it, and if there is an IRS audit, one of the taxpayers will have to provide proof that income was claimed every year.


Who pays taxes on a joint account?

One possible issue is that if you are each contributing capital, you’ll have to divy up all gains and losses by the amount of capital each of you contributed. If you just want to take care of another persons finances, just have the other person add you to his accounts as an authorized person. If you want him to help you with your investments, just add him to your account. Remember though, capital gains tax don’t work the same way as regular income tax.┬áIf the funds in a joint account belong to one person, list that person’s name first on the account and give that person’s SSN to the payer. If the joint account contains combined funds, give the SSN of the person whose name is listed first on the account. This is because only one name and SSN can be shown on Form 1099.


Tax Filing on Joint Accounts

These rules apply both to joint ownership by a married couple and to joint ownership by other individuals. For example, if you open a joint savings account with your child using funds belonging to the child, list the child’s name first on the account and give the child’s SSN.

Basically, wiith you contributing all of the capital, there could be interesting tax implications. How you intend to tax the resulting income and loss could either be straight forward or problematic. If you, not the other taxpayer, is allocated all of the gain and loss then it is straightforward but if you allocate loss to your them and income to you then it may be looked at as abusive. If you allocate both gains and losses to the other taxpayer then you may have other interesting issues since allocations are contrary to the capital contributions made.