A joint bank account allows for each account owner to make deposits, withdrawals, transfers and similar activities. Responsibility for activity on joint bank accounts works a little differently than for individual bank accounts, but they could provide some benefits in the right context.
Let’s look into how joint bank accounts work and what to consider before opening one.
What is a joint bank account?
Joint bank accounts are opened any time more than one individual applies – and is approved for – shared ownership of a bank account.
Joint bank accounts can be used the same way individual bank accounts are used, with the caveat that any of the joint account owners can access it, perform transactions and monitor its activity.
How do joint bank accounts work?
Any joint owner of the account can use it however they choose, meaning they can deposit, withdraw, and transfer funds at will. However, this also means that each joint owner is individually responsible for all activity on the joint account even if they did not participate in, or benefit from, the transactions on the joint account.
Your bank can act on the instruction of any one or more of the joint account owners at any time. In the event of conflicting instructions or a dispute among the owners of the account, though, your bank may require all joint account owners to act together in giving instructions or performing transactions.
Each account owner is also jointly responsible for all activity related to the joint account, including responsibility for paying overdrafts created by any authorized signer(s) or party to the account, whether or not they participate in the transaction or benefit from its proceeds.
Who pays taxes on a joint account?
Generally, interest received by account owners is reported by banks to the IRS for the year received, as required by applicable law. A bank may ask you to indicate a primary first titled holder of a joint bank account when the account is opened. If tax reporting is required, your bank will issue an information return to the first titled account owner. If a first titled owner is a foreign person and the joint owner is a US person, the bank will instead issue an information return to the US person. You should contact your bank for the important tax information provided to account owners.
