Nominee interest is when a person collects interest on behalf of someone else. If a person receives interest on behalf of someone else, they are responsible for paying taxes on the interest or to pass the interest on to the owner. If the interest is passed onto the owner, the taxpayer must first report on his or her return the full amount of the interest. The reason for this is the amount that the individual reports must match what the IRS has on record. However, the taxpayer is then allowed to subtract out the nominee interest because the interest actually belongs to someone else, and is taxable to that person.
Where Do I Report Nominee Interest?
To report nominee interest in the program please follow this path:
- Federal Section
- Income
- 1099-INT, DIV, OID
- Did you earn any interest or dividend income from a bank, brokerage firm or some other financial institution?
- Add or Edit a Schedule B Interest entry
Once you enter the nominee interest you will see that it has been reported on your Schedule B under Part I line 1.