JWROS Question
I have a client that wants to open a JWROS account with her brother. Her brother wants to know if he will have to pay taxes on dividends and capital gains and will he have to report that on his personal taxes?
I have a client that wants to open a JWROS account with her brother. Her brother wants to know if he will have to pay taxes on dividends and capital gains and will he have to report that on his personal taxes?
Permalink Submitted by Alan - IRA critic on Mon, 2024-06-24 19:32
The broker or other custodian will only issue a 1099 form to the sibling whose SSN is linked to the account. If one sibling supplied most of the contributions to the account, that SSN should be on the account, but if each contributes 50%, then either SSN can be provided. The broker will only accept one SSN per account. The recipient of the 1099R showing the income should then issue their own 1099 to the other sibling for the amount of those earnings the sibling will receive so that each of them reports income on their returns in proportion to the amounts they actually receive. In practice, it is not clear how often this is done properly or if the IRS cares.
While so called convenience accounts are more frequent between elder parents and their children in which the account holds only amounts contributed by the parent, in some cases this might occur between siblings in certain situations. In such a case, the 1099 income would only be reported by the sibling who funded the account.
Permalink Submitted by PaulC on Thu, 2024-06-27 16:23
Depending upon the goals for having the account held as JTWROS, an alternative could be a Transfer on Death (TOD) designation, if permitted. The client should understand that opening a joint account surrenders full independent control of the account, even if the client actually is the one funding the account.
Permalink Submitted by Alan - IRA critic on Thu, 2024-06-27 23:28
If the brother did not contribute to the account but withdraws from it, the withdrawal would subject the client to gift taxes (estimated 2025 exclusion 19,000).