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: back the other person’s share out of your own return so you aren’t taxed on it, and issue a fresh 1099 to the person who actually earned it. Handle only one step and something breaks. Skip the adjustment and you pay tax on income you never kept; skip the new 1099 and the real owner has no documentation for income they’re supposed to report.
When You’re a Nominee
You’re a nominee any time a 1099 lands under your name and taxpayer identification number for amounts that actually belong to another person.1Internal Revenue Service. 2025 General Instructions for Certain Information Returns The classic case is a joint bank or brokerage account where the 1099-INT or 1099-DIV is tied to one Social Security number but the interest or dividends belong partly to a co-owner. It also shows up 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 stating up front: spouses don’t do this for each other. If a joint account issues a 1099 under one spouse’s name, no nominee return is required between the two of you.1Internal Revenue Service. 2025 General Instructions for Certain Information Returns
Back the Other Person’s Share Off Your Return
Your return should reflect only what’s actually yours. How you make the adjustment depends on the kind of 1099.
Interest and Dividends on Schedule B
For a 1099-INT, report the full amount on Schedule B, Part I, line 1. Below your last interest entry, write a subtotal. On the next line, write “Nominee Distribution” and the amount that belongs to someone else. Subtract it, and put the net on line 2.2Internal Revenue Service. 2025 Instructions for Schedule B (Form 1040) That net is what flows to Form 1040, line 2b.
Dividends work the same way in Part II. Full 1099-DIV amount on line 5, subtotal, “Nominee Distribution” with the other person’s share, subtract, and the result goes on line 6 and then to Form 1040, line 3b.2Internal Revenue Service. 2025 Instructions for Schedule B (Form 1040)
A quick example. Your joint brokerage account throws off $5,000 in dividends reported under your name, but $2,000 belongs to your co-owner. You list $5,000 on line 5, write the subtotal, then subtract $2,000 as a nominee distribution. Your taxable dividend income is $3,000.
Business Income on Schedule C
When a 1099-NEC or 1099-MISC reports business income that’s partly someone else’s, report the full 1099 amount as gross receipts on Schedule C, line 1. Then deduct the nominee portion as an expense. The cleanest spot is line 27a (Other Expenses), labeled “Nominee Payment” so the IRS can see immediately why your reported income is lower than the 1099 on file.3Internal Revenue Service. Instructions for Schedule C (Form 1040)
This matters for self-employment tax too, not just income tax. Without the deduction, you’d pay Social Security and Medicare on money you never kept. Hold on to a copy of the nominee 1099 you issue as backup.
Issue a New 1099 to the Real Owner
The bank or company that sent you the original 1099 has no obligation to fix anything. The IRS puts the responsibility on you: “the nominee, not the original payer, is responsible for filing the subsequent Forms 1099 to show the amount allocable to each owner.”1Internal Revenue Service. 2025 General Instructions for Certain Information Returns
Get a W-9 First
You need the real owner’s taxpayer identification number before you can issue anything. Have them complete a Form W-9. If they won’t give you a TIN, you’re required to withhold 24% of the payment as backup withholding and send it to the IRS.4Internal Revenue Service. Instructions for the Requester of Form W-9 Failing to collect backup withholding when it’s required can leave you personally on the hook for the uncollected amount.
Match the Form and the Box
The new 1099 has to be the same type as the one you received. 1099-INT in, 1099-INT out. 1099-DIV in, 1099-DIV out. The amount goes in the same box it occupied on the original.1Internal Revenue Service. 2025 General Instructions for Certain Information Returns If $4,000 of nonemployee compensation sat in Box 1 of a 1099-NEC, $4,000 goes in Box 1 of the new 1099-NEC.
Payer, Recipient, and Filer
On the new 1099, you’re the payer and the real owner is the recipient. On the transmittal Form 1096, if you’re filing on paper, you’re the filer.1Internal Revenue Service. 2025 General Instructions for Certain Information Returns
How to File It With the IRS
You can file electronically or on paper, but the choice may already be made. Since tax year 2023, anyone filing 10 or more information returns of any type combined must file electronically.5Internal Revenue Service. E-file Information Returns A single nominee 1099 sits well under that threshold, so either method works.
For electronic filing, the IRS runs a free portal called the Information Returns Intake System (IRIS). The IRIS Taxpayer Portal lets you enter data for up to 100 returns at a time, upload a CSV, and download recipient copies.6Internal Revenue Service. E-file Information Returns With IRIS You’ll need to register for an IRIS Transmitter Control Code before you can file.
On paper, Form 1096 goes on top as a cover sheet, and each type of 1099 needs its own 1096. A nominee 1099-INT and a nominee 1099-DIV mean two separate 1096 forms.7Internal Revenue Service. General Instructions for Certain Information Returns (2025) Mail everything to the IRS Submission Processing Center for your area. Don’t attach a 1096 to an electronic filing.
Deadlines
There are two deadlines, one for the real owner’s copy and one for the IRS copy.
- Copy B to the real owner: January 31 of the year after the tax year.
- 1099-NEC filed with the IRS: January 31, same day as the recipient copy.
- All other 1099 types filed with the IRS: February 28 on paper, March 31 electronically.
If a date falls on a weekend or legal holiday, it slides to the next business day.8Internal Revenue Service. 2026 Publication 1099 The 1099-NEC’s early January 31 IRS deadline is the one that trips people up.
Penalties for Skipping It
Each 1099 you fail to file or file late carries a tiered penalty. For the 2026 tax year:
- 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, no cap
The same amounts apply separately to the payee statement, meaning the copy you owe the real owner.9Internal Revenue Service. Information Return Penalties Miss both the IRS filing and the recipient copy and the penalty effectively doubles.
Separate from the 1099 penalties, forgetting to back the nominee amount off your own return invites an IRS notice proposing more tax on income that was never yours. Fixing that after the fact takes more work than handling nominee reporting correctly the first time.
What the Real Owner Does With It
Once the real owner has the nominee 1099, they report the income on their own return like any other 1099. A nominee 1099-NEC goes on their Schedule C and is subject to self-employment tax for Social Security and Medicare.10Internal Revenue Service. Schedule C and Schedule SE A nominee 1099-INT or 1099-DIV goes on their Schedule B and then onto Form 1040 the usual way. They should keep the nominee 1099 with their records in case the IRS asks why their reported income doesn’t match a 1099 from any recognized institution.