What is nominee income?

You open a 1099 and see income listed under your name. But you never earned it. Confused? You are not the only one. This happens more often than you think, especially when nominee income is involved.

Nominee income means money was reported to the IRS under your name, but it actually belongs to someone else. It might be your business’s income. It might be a shared account. Either way, it’s stressful to see income you never received tied to your tax ID. But once you understand what nominee income is, it becomes easier to fix. 

This article breaks down nominee income. 

What counts as nominee income? 

Nominee income shows up on paper as yours, but you’re not the actual recipient. The IRS sees it under your Social Security number or business EIN, but the money should have gone elsewhere. 

Here are a few reasons this happens: 

• You are listed first on a shared account 
• A customer paid you personally instead of paying your business 
• A financial institution sent the 1099 to the wrong entity 

Even if it was a simple mistake, the IRS still holds you responsible for explaining it. If you ignore it, it can look like underreporting or worse. Nominee income matters because: 

• You could get taxed twice 
• Your business records may be thrown off
• It could trigger IRS attention 

Common Scenarios That Create Nominee Income 

Let’s bring this to life with a few examples: 

• Joint bank accounts: Two friends open an account. The bank sends the 1099 interest income to the one listed first, even though they split the money. 
• Real estate commissions: You work through your LLC, but the check comes to your personal name. Now your personal 1099 shows income that belongs to the business. 
• Investment accounts: Dividends are reported under your name, but the account is held by your S Corp or LLC 

If any of this sounds familiar, nominee income is likely the reason. 

How can I tell if it’s nominee income? 

Nominee income is not always obvious. But watch for these signs: 

• Your 1099 includes income that doesn’t match your books 
• Dividends or interest are listed under your name, but the money belongs to your business 
• You are being taxed on money you never received 

When you spot something off, don’t guess. Review your 1099s closely and loop in a tax professional if you need clarity.

Can you shift nominee income to your business? 

Yes, as long as the money was truly meant for your business. You must follow IRS procedures and have documentation that shows who earned the income. 

Here’s when it is appropriate to reassign it: 

• The payment belongs to your LLC or corporation 
• You have invoices, contracts, or notes that support it 
• You issue a corrected 1099 to your business 

To shift the income, start by filing a corrected 1099 showing the business name and EIN. Then, you can report the income on your business tax return and remove it from your personal return. 

How do I report nominee income correctly? 

Follow these steps if nominee income lands on your tax documents: 

• Find out who the real recipient is 
• Prepare a new 1099 form with the right name and tax ID 
• List yourself as the payer, and the correct recipient as the payee 
• File the corrected 1099 with the IRS 
• Send the corrected 1099 to the recipient 
• Update your personal return to remove the income 

What happens if I don’t fix it? 

Nominee income may seem small, but it can cause big problems if ignored. Mistakes to avoid include: 

• Reporting income that should have been reassigned 
• Leaving the 1099 off your return entirely 
• Entering the wrong name or tax ID when correcting it 

Possible consequences include overpaying on taxes, notices from the IRS, and your business return getting flagged. 

The Bottom Line 

Nominee income is more common than people realize. It doesn’t mean you made a mistake. It just means you need to handle it carefully and correctly. If you’re unsure how to fix nominee income or need help with 1099s, our team is ready to step in. You’ve got this; and now you have a plan to move forward.