Nominee Interest

[S T]

I have a dilemna.

Completing Taxpayer's return for file date 10/15/08. Taxpayer received 1099 INT for interest that belongs to Parent, approx $9,600.

Parent's return was filed in April for the stimulus rebate not reporting the above interest income. An amended return would need to be filed, however, the additional interest would not generate any tax liability and should not jeopardize the $300 stimulus rebate already received.

A 1099 INT has not been issued, so it is late and I would assume would be assessed the $50 late file penalty

Taxpayer's return would have a tax liability reduction of approximately $1,700

Anyone see any adverse issues with the above.

Sandy

[Black Bart]

Nope.

Anyone see any adverse issues with the above.

Sandy

And anyway, it's a long shot that they'll be penalized (I've sent several in late -- client was never billed). While Pop or Pop's bank is (I assume) responsible for the glitch, even if Pop does get a bill and demands TP reimburse him, the $1,650 gain outweighs any other concerns.

[veritas]

Why did

your client receive a 1099 for parents' interest?

[S T]

Account

Reported under t/p social security number. Parents funds that t/p manages, as parent is 99 years old with Alzheimers.

[veritas]

Sounds like

joint ownership. Would not half the interest be reported on your client's return?

[S T]

Thought about that

The monies in the account are the parent's funds and can be traced, so t/p has not withdrawn any funds personally. Funds are in bank CD for medical care as needed.

Therein lies my concern.

Sandy

[veritas]

Ah

yes. We have had this dscussion before. Make sure the bank uses the parent's social going forward.

I would prepare the 1099 nominee for the interest to the parent.

[S T]

Thanks

Thanks Veritas,

Guess I will file the 1099 INT late and see what happens in regards to the penalty.

Sandy

[DTS]

Sandy

I had a situation exactly like this last year, but all I did was report on my t/p's return and then backed it out showing the mom's SS and then reported this on her return, no 1099 issued.

However, I made a stupid error on this reporting due to being rushed and exhausted with two days left to file. I forgot to put the amount of interest down before backing it out. Client got a letter, which I addressed and the gal at the IRS told me all they needed to see was the amount of interest on the B that was being backed out. I prepared a revised B for her, faxed it to her, apologized for the stupid error on my end and she told that took care of it.

D

[Kram BergGold]

Amend parent's return

It seems from your post that the parent will pay less tax. So amend the parent's return to include the interest, I would even amend if it were the same or higher as well.. Then back that amount off your client's return. As for the 1099 form either do one or not. If you choose not, then get a P of A from both parties so you can prove to IRS that the money was reported if they ever question it. I agree filing a 1099 late has never resulted in a penalty to a client of mine.

[S T]

Reporting

Thanks

I reported nominee interest, and have amended the parent return. Still not sure about the 1099 INT form, so will have to make a decision on that.

Sandy