What happens to taxes after I’m added to a bank account?
By Karin Price Mueller | NJMoneyHelp.com for NJ.com
Q. I consigned on an apartment for a friend. She then added me to her bank account in case something happens and she can’t pay so I would have access to her accounts in order to pay her rent. Will this affect my taxes at the end of the year if it shows on my account? We use the same bank.
A. It’s kind of you to be there to help your friend, but there are consequences to consider.
When you cosign a lease or a loan for a relative or friend, you become 100% liable for all future payments if the owner can’t make the payments, said Bernie Kiely, a certified financial planner and certified public accountant with Kiely Capital Management in Morristown.
You say she “added” you to her bank account. This can mean she either added you as a co-owner of the account or she gave you power of attorney over the account, he said.
As co-owner, half of the money in the account belongs to you, while if you have power of attorney, the account still belongs to your friend, but you have the power to write checks on the account, Kiely said. A power of attorney is a common way that adult children help out their elderly parents, he said.
“As far as taxation of the account goes, your friend is the original owner of the account and her Social Security number would appear on the 1099-INT and she would be required to pay any tax due on the interest income,” Kiely said.
Email your questions to Ask@NJMoneyHelp.com.
Karin Price Mueller writes the Bamboozled column for NJ Advance Media and is the founder of NJMoneyHelp.com. Follow NJMoneyHelp on Twitter @NJMoneyHelp. Find NJMoneyHelp on Facebook. Sign up for NJMoneyHelp.com’s weekly e-newsletter.