To report nominee income, you file a new Form 1099 that names you as the payer and the actual owner as the recipient for their share, then report the full amount from the original 1099 on your own return and subtract the nominee portion so you’re only taxed on what’s actually yours. The mechanics differ slightly by income type, and the deadlines are tight, but the two-step structure is the same in every case.
When You’re a Nominee
You’re a nominee any time a Form 1099 arrives in your name and taxpayer identification number for income that legally belongs, in whole or in part, to someone else.1Internal Revenue Service. General Instructions for Certain Information Returns The classic case is a joint bank or brokerage account where only one holder’s Social Security number is on file, so the bank reports all the interest or dividends under that one number even though two people share the earnings.2Internal Revenue Service. Instructions for Schedule B (Form 1040) – Nominees Custodial accounts under UGMA or UTMA create the same mismatch: the parent’s name is on the account, but the income belongs to the child. Executors settling an estate can end up as nominees too, when dividends, rent, or interest land in their personal account before being distributed.
One important exception: if the actual owner is your spouse, you don’t file a nominee return at all.1Internal Revenue Service. General Instructions for Certain Information Returns Married couples filing jointly report everything on the same return anyway. Spouses filing separately each report their own share directly, without issuing 1099s to each other.
Step One: Issue a 1099 to the Actual Owner
File a new Form 1099 of the same type you received. Got a 1099-INT for interest? File a 1099-INT. Got a 1099-DIV for dividends? File a 1099-DIV. List yourself as the payer, the actual owner as the recipient, and show only the amount that belongs to them.1Internal Revenue Service. General Instructions for Certain Information Returns
The usual $10 minimum still applies. You’re only required to issue a 1099-INT if the interest you’re passing along is $10 or more.3Internal Revenue Service. Instructions for Forms 1099-INT and 1099-OID Below that, the actual owner still owes tax on the income; they just won’t get a formal form from you.
If you’re paper-filing, Form 1096 goes on top of your batch as a transmittal cover sheet. List yourself as the Filer.1Internal Revenue Service. General Instructions for Certain Information Returns Electronic filers skip Form 1096 entirely.
Step Two: Subtract the Nominee Portion on Your Return
For interest, report the full amount from the original 1099-INT on Schedule B, Part I, line 1. Write a subtotal after your last interest entry. Below that subtotal, write “Nominee Distribution” and the amount you’re passing along, then subtract it. The result goes on line 2 as your actual taxable interest.4Internal Revenue Service. Instructions for Schedule B (Form 1040) – Part I Interest
Dividends follow the same pattern in Part II. Full amount from the 1099-DIV on line 5, subtotal, “Nominee Distribution” line with the amount you’re redirecting, subtraction, net figure on line 6.5Internal Revenue Service. Instructions for Schedule B (Form 1040) – Part II Ordinary Dividends
The reason you list the full amount first and then subtract, rather than just leaving the nominee portion off, is matching. The IRS already has a copy of your original 1099. If your return shows less than what the payer reported, the computers flag it and a notice follows. Reporting the full amount and clearly labeling the reallocation shows the IRS what you did with the difference.
For rent, royalties, or other income reported on Schedule E, the same principle applies: report the full amount as it appears on the original 1099, then subtract the nominee’s portion so what remains matches what’s actually yours.
Deadlines
You have to furnish the 1099 to the actual owner by January 31 of the year following the tax year.6Internal Revenue Service. 2026 Publication 1099 Filing with the IRS depends on your method:
- Paper: February 28. When that date falls on a weekend, it moves to the next business day. For 2026, February 28 is a Saturday, so the paper deadline shifts to March 2, 2026.6Internal Revenue Service. 2026 Publication 1099
- Electronic: March 31, 2026.6Internal Revenue Service. 2026 Publication 1099
When You Have to File Electronically
If you’re filing 10 or more information returns of any type in a calendar year, the IRS requires electronic filing.7Internal Revenue Service. E-file Information Returns The count runs across all return types together, not just nominee 1099s. A single joint account usually stays well under that threshold. An executor handling an estate with several beneficiaries and multiple income streams can cross it quickly. The IRS accepts electronic information returns through the IRIS (Information Returns Intake System) portal.
If the Actual Owner Is a Foreign Person
Different rules apply when the income belongs to a nonresident alien or foreign entity. Instead of a standard 1099, the nominee may need to file Form 1042-S, which reports U.S.-source income paid to foreign persons.8Internal Revenue Service. About Form 1042-S, Foreign Person’s U.S. Source Income Subject to Withholding The nominee is also treated as a withholding agent, meaning you may have to withhold tax on the payment before passing it along.9Internal Revenue Service. Instructions for Form 1042-S (2026) Withholding rates and reporting details depend on the type of income and any applicable tax treaty. This is complex enough that a nominee in this position should consult a tax professional or review IRS Publication 515 before filing.
Penalties for Skipping It
The IRS charges a penalty for each 1099 you fail to file or furnish, scaled to how late you are:
- Up to 30 days late: $60 per form
- 31 days late through August 1: $130 per form
- After August 1 or never filed: $340 per form
- Intentional disregard: $680 per form, with no maximum cap
Penalties apply separately for each return you owe the IRS and each payee statement you owe the actual owner.10Internal Revenue Service. Information Return Penalties Missing both copies on one nominee obligation counts as two penalties, not one. The intentional disregard tier has no ceiling, and the IRS applies it when you knew about the requirement and chose not to comply.
There’s a second, non-penalty consequence worth naming. If you don’t subtract the nominee distribution on your return and don’t file the corresponding 1099, the IRS treats the entire original 1099 as yours. You’ll get a CP2000 notice proposing additional tax, and unwinding that after the fact is harder than filing correctly the first time.
What the Actual Owner Does
If you’re on the receiving end of a nominee 1099, report the income on your own return exactly as if the original payer had sent it to you. An $800 nominee 1099-INT goes on your Schedule B as $800 in interest income, taxed at your regular rate. Your obligation to report the income exists whether or not the nominee actually sends you a 1099. If they forget or refuse, report it anyway and keep records showing where the money came from: bank statements, the account agreement, correspondence with the nominee. That documentation is what answers any question the IRS raises.