Who Pays the Tax on a Joint Bank Account?

Who Pays the Tax on a Joint Bank Account? thumbnail
Who Pays the Tax on a Joint Bank Account?

A joint bank account is a financial account that is owned by two or more people. All account holders' names are listed on a joint bank account, with one person signing an IRS W9 form for tax purposes.

  1. Types

    • There can be several forms of joint bank accounts: checking, savings, certificates of deposit (CD) and money market.

    Considerations

    • Typically, an agreement is signed by all parties who are on the account, detailing whether or not transactions require everyone's signature, or if one party can act alone.

    Advantage

    • If one of the joint account holders dies, the other(s) immediately receives all monies from the account. There is no risk of funds being held up in probate court.

    Disadvantage

    • If a joint account holder writes bad checks, you are liable as well. You also risk losing the money from your joint account if the other person is subject to a lawsuit.

    Taxes

    • The person who signs the W9 tax form when the bank account was opened owes the income tax on the interest in a joint account. This is usually the first person listed on the account.

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  • Photo Credit Kozumel/Flickr

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