1099 Nominee: What It Is and How to Report It

If you received a Form 1099 that includes money belonging to someone else, you’re what the IRS calls a 1099 nominee, and you have two jobs: strip the other person’s share off your own tax return so you’re not taxed on it, and issue a new 1099 to the person who actually earned the income. Do only the first and the real owner has no paper trail. Do only the second and you’ll pay tax on money you never kept. The mechanics are simple once you know which form goes where.

What Counts as Nominee Income

Nominee income is money reported on a 1099 under your name and taxpayer ID even though some or all of it belongs to another person. The IRS puts it plainly: “if you receive a Form 1099 for amounts that actually belong to another person, you are considered a nominee recipient.”¹

It comes up most often with jointly held bank or investment accounts, where the bank issues one 1099-INT or 1099-DIV tied to a single Social Security number even though the interest or dividends belong partly to a co-owner. It also happens when a contractor is paid for work that included a subcontractor’s share, or when a property manager collects rent that belongs to the owner.

One boundary worth naming: spouses filing together don’t need to do nominee reporting for each other. If you and your spouse share a joint account and the 1099 lists only one of you, no nominee return passes between you.¹

Step 1: Take the Other Person’s Share Off Your Return

Your own return has to reflect only the income that’s actually yours. How you make the adjustment depends on the type of 1099.

Interest and Dividends Go Through Schedule B

For a 1099-INT or 1099-DIV, the adjustment happens on Schedule B, not on the face of the 1040. Report the full amount from the 1099, then back out the nominee portion right there on the schedule.

For interest, list the full 1099-INT amount on Schedule B, Part I, line 1. Below your last interest entry, write a subtotal. On the next line, write “Nominee Distribution” and enter the amount that belongs to someone else. Subtract that from the subtotal and put the result on line 2.² That net figure flows to Form 1040, line 2b.

Dividends work the same way in Part II. Full 1099-DIV amount on line 5, subtotal, “Nominee Distribution” line for the other person’s share, subtraction, and the result on line 6 (which feeds Form 1040, line 3b).²

So if a joint brokerage account produced $5,000 in dividends under your name and $2,000 of it belongs to your co-owner, you list the $5,000, subtract the $2,000 as a nominee distribution, and end up taxed on $3,000.

Business Income Comes Off on Schedule C

When a 1099-NEC or 1099-MISC reports business income that isn’t fully yours, the adjustment goes on Schedule C. Report the full 1099 amount as gross receipts on line 1, then deduct the nominee portion. The practical spot is line 27a (Other Expenses), labeled clearly as “Nominee Payment” so the IRS can see why your reported income doesn’t match the 1099 in its files.³

This matters twice. It lowers your gross profit, and it lowers your self-employment tax. Without the deduction, you’d pay Social Security and Medicare on income that passed through you. Keep a copy of the nominee 1099 you issue as backup.

Step 2: Issue a New 1099 to the Actual Owner

The bank or company that sent you the original 1099 won’t fix anything. The IRS is direct: “the nominee, not the original payer, is responsible for filing the subsequent Forms 1099 to show the amount allocable to each owner.”¹ The reporting is yours to do.

Collect a W-9 First

You need the actual owner’s taxpayer identification number before you can complete a 1099. Have them fill out a Form W-9. If they refuse or fail to provide a TIN, you’re required to withhold 24% of the payment as backup withholding and send it to the IRS.⁴ Not collecting when required can leave you personally liable for the amount that should have been withheld.

Match the Form and the Box

The 1099 you issue has to match the one you received. A 1099-INT begets a 1099-INT; a 1099-DIV begets a 1099-DIV. The amount goes in the same box it appeared in on the original.¹ If $4,000 of nonemployee compensation showed up in Box 1 of your 1099-NEC, the nominee 1099-NEC you issue puts $4,000 in Box 1.

Fill In Payer and Recipient

On the new 1099, you’re the payer and the actual owner is the recipient. On the transmittal Form 1096 (paper filers only), you’re the filer.¹

Filing the Nominee 1099 With the IRS

You can file on paper or electronically, but the choice may not be yours. Since tax year 2023, anyone filing 10 or more information returns of any type combined has to file them electronically.⁵ A single nominee 1099 is comfortably under that threshold.

For electronic filing, the IRS runs a free portal called the Information Returns Intake System (IRIS). It lets you key in up to 100 returns at a time, upload data by CSV, and download copies for recipients.⁶ You have to register for an IRIS Transmitter Control Code first. Starting with Filing Season 2027, IRIS will be the only electronic system the IRS accepts for these returns.

If you file on paper, you also need Form 1096 as a cover sheet. Each type of 1099 gets its own 1096, so a nominee 1099-INT and a nominee 1099-DIV go in with two separate cover sheets.⁷ Mail to the IRS Submission Processing Center for your area. Don’t attach a 1096 to an electronic filing.

Deadlines to Watch

Two separate deadlines apply: one for the copy to the actual owner, one for the filing with the IRS.

Copy B to the actual owner: January 31 of the year following the tax year.
1099-NEC filed with the IRS: January 31 as well. Recipient and IRS deadlines are the same for this form.
All other 1099s filed with the IRS: February 28 on paper, March 31 electronically.

If any date lands on a weekend or legal holiday, it moves to the next business day.⁸ The 1099-NEC’s earlier IRS date is the one that surprises people. Mark both.

Penalties for Skipping It

The IRS charges tiered penalties on each 1099 you file late or don’t file at all:

Up to 30 days late: $60 per return.
31 days late through August 1: $130 per return.
After August 1 or never filed: $340 per return.
Intentional disregard: $680 per return, with no maximum.

Those figures apply for the 2026 tax year, and the same penalties apply separately to the payee statement — meaning the copy you owe the actual owner.⁹ Missing both the IRS filing and the recipient copy can double your exposure on a single return.

There’s a separate risk on your own return. If you don’t back out the nominee portion on Schedule B or Schedule C, the IRS will eventually send a notice proposing tax on the full 1099 amount. Untangling that after the fact takes longer than doing the nominee reporting correctly the first time.

What the Actual Owner Does With the Form

When the real owner receives the nominee 1099 you issued, they treat it like any other 1099. A 1099-NEC goes on their Schedule C as business income and picks up self-employment tax.¹⁰ A 1099-INT or 1099-DIV goes on their Schedule B in the ordinary way. They should keep the nominee 1099 in their records; if the IRS ever asks why their reported income doesn’t tie to a form from a recognized institution, that document is the answer.

1
Internal Revenue Service. 2025 General Instructions for Certain Information Returns
2
Internal Revenue Service. 2025 Instructions for Schedule B (Form 1040)
3
Internal Revenue Service. Instructions for Schedule C (Form 1040)
4
Internal Revenue Service. Instructions for the Requester of Form W-9
5
Internal Revenue Service. E-file Information Returns
6
Internal Revenue Service. E-file Information Returns With IRIS
7
Internal Revenue Service. General Instructions for Certain Information Returns (2025)
8
Internal Revenue Service. 2026 Publication 1099
9
Internal Revenue Service. Information Return Penalties
10
Internal Revenue Service. Schedule C and Schedule SE