How are taxes handled on a joint brokerage account between siblings who aren't in the same household?

Thanks for the info! So if I'm understanding correctly, since I set up the account and my SSN is primary, I'll be the one getting the 1099 and responsible for all the taxes? Is there any way to split the tax burden since some of the investments are technically "his" now?

Yes, you've got it right. Since your SSN is listed as primary, you'll receive the 1099 and the IRS will expect you to report all the income on your return. For splitting the tax burden, you have a couple options. You can keep track of which portion of the income belongs to your brother and give him documentation. He can report his portion on his return with an explanation, while you report only your portion (with explanation that the rest was reported by him). Alternatively, you could report all income on your return and handle the splitting privately between yourselves - meaning you could ask him to reimburse you for his portion of the taxes.

Did it actually work for complicated scenarios? I've got a joint account with my cousin (long story) and we've been completely confused about who owes what, especially since some investments were mine and others were his.

How detailed do you need to be with the documentation? I share an account with my brother and we're trying to figure out if we need to track every single transaction or just the overall income.

It absolutely worked for our complicated scenario. We had different contribution amounts and some stocks that were specifically "hers" versus "mine." The tool helped us create a proper accounting of whose money generated which gains/losses and provided documentation templates. For documentation detail, we tracked at the investment level rather than every transaction. We documented which securities belonged to which person, then allocated the income from each accordingly. This was sufficient since we could show clear ownership trails if needed. The important part is having consistent documentation that shows your allocation method.

How does this even work? Seems sketchy that they could somehow get you through faster than just calling the normal number. Do they have some special connection to the IRS?

I'm very skeptical. The IRS wait times are insane because they're understaffed, not because there's some secret way to get through that only this company knows about. Sounds like they're just charging for something you could do yourself with enough patience.

It's not sketchy at all - they use a completely legitimate process. The IRS phone system is automated to limit how many people can be on hold at once. Claimyr uses technology to continuously call and navigate the initial prompts, then alerts you when they've secured a spot in the queue. They don't have any special connection to the IRS - they just automate the painful redial process that would drive anyone insane. Think of it like having an assistant continuously redialing so you don't have to waste your own time. It's basically just a more sophisticated version of what you'd do yourself, but without having to stay on the phone for hours.

That's actually a really good point! Would there be any gift tax implications if I transfer a significant amount to his individual account? The stocks I wanted to give him are worth about $15,000.

You're well within the annual gift tax exclusion limit which is $17,000 per person for 2023 (and will be slightly higher for 2024). This means you can gift up to that amount to any individual without having to report it on a gift tax return. Even if you were to exceed the annual exclusion, you'd only need to file a gift tax return to report it - you wouldn't actually owe any tax unless you've used up your lifetime gift/estate tax exemption (which is over $12 million per person). So you're definitely in the clear with a $15,000 gift!

Yes, this can get complicated with states. Generally, investment income follows your state of residence. If the 1099 is issued to the primary account holder, that person may need to file a non-resident return in the other person's state for their portion of the income, depending on state laws. Each state handles this differently.

This is such great advice about documenting everything from day one! I wish I had thought of that when I first opened our joint account. The spreadsheet idea is brilliant - it would have saved us so much confusion now. You're absolutely right about the other complications too. I hadn't even considered what would happen if one of us got into financial trouble or got married. That's definitely making me lean more toward the separate account approach. Better to clean this up now than deal with bigger headaches later. Thanks for the reality check on the broader implications beyond just taxes!

Wow, I hadn't even thought about the cost basis tracking nightmare! That's a really important point. We've already made a few trades in the account over the past 8 months, so I'm realizing this could get incredibly messy if we keep going down this path. The more I'm reading everyone's responses, the more convinced I am that separating into individual accounts is the way to go. It sounds like the upfront work of transferring the gifted shares now will save us years of complicated record-keeping and potential headaches down the road. Thanks for bringing up the cost basis issue - that's exactly the kind of thing I would have completely missed until it became a problem later!

This is really helpful timing advice! I'm definitely leaning toward making the switch to separate accounts before year-end now. Better to deal with the transfer process once than to have ongoing complications every tax season. Quick question about the brokerage documentation - should I specifically ask for something called a "gift letter" or is there standard paperwork they provide for these transfers? I want to make sure I get all the right documentation upfront so my brother doesn't have issues later if there's ever an audit. And you're absolutely right about having matching records. Even if we had decided to keep the joint setup, having both of us with identical documentation would be crucial. Thanks for that practical tip!