# Mother and Son Joint account



## Arizona111

I am a US resident and my mother lives in a south asian country. Yesterday i found out that i am on a joint account with her. Its in a local bank the account is US Joint account.

Like i said i am a resident and she's not a US resident or a Citizen.
This is her account my name is their just in case God forbid something happens to her.

Is this taxable please advice?
Thanks


----------



## Bevdeforges

It's not taxable, though depending on how much is in it, it may be reportable (i.e. FBAR). Though, if you have honestly had no knowledge of this account (and if you do not have the account information - account number and bank name and address) I'd be tempted to just skip it until and unless you have access to the information.

There is a box you can check on the FBAR report to indicate that you don't know how much is in the account, too, though I'm not sure if checking that would set off any alarms.
Cheers,
Bev


----------



## BBCWatcher

Actually the interest earned on that joint account is taxable on a pro-rata share basis. With one joint account holder your pro-rata share is 50%, so _ordinarily_ 50% of the interest would be taxable. Indonesian income tax paid on that interest is creditable against U.S. income tax via the Foreign Tax Credit, again on a pro-rata basis.

"Taxable" is not the same as "owe tax." If, for example, the Indonesian income tax rate (if any) paid on that bank account interest is equal to or higher than your U.S. income tax rate, you won't end up owing U.S. tax on that income. Or if that interest income falls within your personal exemption or standard deduction, you won't owe U.S. tax.

But tax_*able*_? Yes, afraid so. I'm going to disagree with Bev on that one.

The applicable IRS forms are Form 1040 Schedule B ("Interest and Ordinary Dividends") and Form 1116 ("Foreign Tax Credit"). If the account is large enough you may also have to file FinCEN Form 114 ("FBAR") and/or IRS Form 8938 ("FATCA"). There may be additional state/local income tax filing depending on where you reside.

If the account is a "Payable on Death" (POD) account or the equivalent, where you are the beneficiary upon death of the account holder and not an actual joint account holder while that person is living, that's not your account. Not yet, anyway. There's no filing and no taxability in that case. (I like POD accounts for that reason and others.)


----------



## Bevdeforges

In the States, you'd be considered the 50% owner of the account if you held such an account with your spouse. However, it can be very different if you hold the account with your mother (or other family members). 

I know when I became a signer on my Dad's accounts (in the States), he was listed as the "primary" account holder and thus all tax documents were directed to him. Since he had too little income to even bother filing (and had a letter from the IRS to prove it!), that little bit of interest went unreported.

Like all things tax-related, "it depends" on the facts and circumstances of the situation. And particularly if you were put on the account without your knowledge, I suspect you could argue that your mother is the primary account holder and responsible for reporting the interest.
Cheers,
Bev


----------



## BBCWatcher

Bevdeforges said:


> And particularly if you were put on the account without your knowledge, I suspect you could argue that your mother is the primary account holder and responsible for reporting the interest.


Well, that knowledge exists now. If that's the case, if somehow your mother added you to the account as a joint holder (not a POD beneficiary), then there's a solution. You write a letter to the bank asking them to take you off the account, send it registered mail, and keep a copy of the letter and the proof of delivery in your personal files.

That argument would not work, in my view, if the taxpayer made no attempt to correct the problem once aware of it.


----------



## Arizona111

I am in the process of changing my name from joint to benificiary.
I didnt even knew that the account existed till yesterday. The Interest in that account is maybe .01% every year amount is more then 10k but interest is around maybe 2-20$ every year
Thanks


----------



## Bevdeforges

Just a thought - but it may well depend on the laws in the country where your mother has that account. (Frankly, how she added your name to the account without your having to sign anything really does make the "beneficiary" tag seem much more logical.)

But in some places (including some states) only a married couple can have an account in "joint" name - i.e. where each is considered to be a 50% owner of the account. Depends on the local laws and defaults, but there may well be a "primary" holder of the account (as with my father's account) who is considered responsible for the whole thing. Or, as in some places, you're only considered to "own" the proportion of the account (and related interest) as your contribution to the account balance. (For FBAR, you'd still be expected to report the entire high balance, but for income tax purposes, they wouldn't necessarily be expecting you to report "your" share of the interest.)
Cheers,
Bev


----------



## BBCWatcher

"Payable on Death" beneficiary, specifically, or Indonesian equivalent. You don't want to be a simple beneficiary, meaning that the bank pays you that interest.

I think you've got a good approach there. The extra reporting and paperwork is not worth that tiny amount of interest.

Keep these records in your personal files in case there's any future question. Also, do not withdraw any funds from that account. I'm afraid you will still have to file FBARs and potentially FATCAs for the calendar years when you were listed as a joint account holder and when you were/are subject to U.S. reporting -- nothing you can do to avoid that. But, starting with your 2015 report, assuming you get that joint account holding removed this year (2014), you can drop the account from FBAR/FATCA reporting. Assuming of course your mother is still living, and we hope that's for a very long time to come.


----------



## BBCWatcher

Bevdeforges said:


> Just a thought - but it may well depend on the laws in the country where your mother has that account. (Frankly, how she added your name to the account without your having to sign anything really does make the "beneficiary" tag seem much more logical.)


Indonesian banking might be somewhat more careless, unfortunately.

This problem can occur when a parent lists a minor as a simple joint account holder. That's allowed some places, and the minor may not even be aware -- and isn't legally competent even if aware. Minors tend to become adults eventually, of course. I'm not referring to custodial/UGMA accounts (or similar) which are not really true joint accounts.

Anyway, I like the original poster's idea to get this switched to a POD account if possible.


----------



## humanaso

Bevdeforges said:


> Just a thought - but it may well depend on the laws in the country where your mother has that account. (Frankly, how she added your name to the account without your having to sign anything really does make the "beneficiary" tag seem much more logical.)
> 
> But in some places (including some states) only a married couple can have an account in "joint" name - i.e. where each is considered to be a 50% owner of the account. Depends on the local laws and defaults, but there may well be a "primary" holder of the account (as with my father's account) who is considered responsible for the whole thing. Or, as in some places, you're only considered to "own" the proportion of the account (and related interest) as your contribution to the account balance. (For FBAR, you'd still be expected to report the entire high balance, but for income tax purposes, they wouldn't necessarily be expecting you to report "your" share of the interest.)
> Cheers,
> Bev


My accountant told me a joint account between me (USC) and my brother (non-US person) is "*Deemed*" a 50/50 account unless a specified otherwise in writing. 

He said that an agreement of understanding takes precedent over what is "*Deemed*". 

Example 40/60, 10/90 etc. A statement to that effect signed by both parties would suffice to establish this. Taking it one step further, I am thinking that this statement could also establish 0/100 meaning The US person has 0 beneficial ownership as the tax liability is 100% on the non-US person. I would like to hear Bev's and others opinion on this.


----------



## Bevdeforges

I'll be the first to admit that I am not a lawyer. But I'll also offer that the whole FBAR/FATCA thing is an attempt to find money launderers and tax evaders - which means that a "good faith" stance regarding the particulars of any jointly held account will get you at least a hearing if and when the IRS questions you about a particular filing.

If it comes down to it, as long as you have reasonable grounds for whatever tax stance you take and you take that stance consistently, you should be able to defend your position in the event of an audit.
Cheers,
Bev


----------



## BBCWatcher

You're on much safer ground if you can point to accepted precedent.

I seriously doubt a private side letter would be sufficient to avoid FBAR/FATCA reporting. Treasury already wants signature authority accounts and doesn't care who receives the interest.

As for the interest, there are much more credible solutions than a private side letter. As an example, if the bank paid the interest to a separate, non-joint account (and such funds were never moved back or gifted to the other party) that'd probably work. Payable on Death (POD) beneficiary accounts instead of joint accounts are acceptable. Limited powers of attorney instead of joint accounts are acceptable.


----------



## Bevdeforges

Actually, I suspect that if you can show that the joint owner/signer of the account has declared the full amount of any interest paid on their own tax returns (particularly if they are also a US taxpayer) the issue would be resolved. There is certainly precedence for that in the US banking system - the interest for a US joint bank account is reported against a single US SS number, and that is the taxpayer who is expected to report the interest as their income.

So far at least, there is little or no evidence that the IRS does much tracing of reported foreign bank accounts to interest declared on your tax returns.
Cheers,
Bev


----------



## BBCWatcher

Bevdeforges said:


> I suspect that if you can show that the joint owner/signer of the account has declared the full amount of any interest paid on their own tax returns (particularly if they are also a US taxpayer) the issue would be resolved.


If we're talking about FBAR/FATCA, obviously that's not going to matter.

If we're talking about how to treat the interest paid on that account, I'd still vote no unless the IRS has instructions or rules that say otherwise, or unless there's some decent precedent. First of all, in many countries income tax on bank interest is withheld at source. Whose interest was it? Who paid the tax? The withholding tells you nothing, and that income and income tax is never tied to anybody's tax return.

But beyond that, the IRS would likely ask a simple question: why didn't you report your pro-rata share of the bank interest and also take a Foreign Tax Credit? There's plenty of income that's reportable but never taxed, but it's still reportable. And what difference does a foreign tax agency's reporting requirements have on whether and how something is reportable to the IRS? It never has before in any other context absent a tax treaty that says otherwise. (And income tax comes through the Foreign Tax Credit only.)

So no, I'm not buying that argument either. The IRS doesn't care how Thailand's tax authorities (for example) want Thai income tax filings to be prepared. If you're a joint account holder you're a joint account holder, and that comes with responsibilities. Don't want the responsibilities? Don't be a joint account holder. There are many alternatives.


----------

