I ran a test and added both my kids dividend earnings to our taxes and compared how much our Federal and State taxes changed. Then I created a TurboTax return for each child, reported the dividends, added our income as well as their sibling income as instructed.
The amount due in State taxes is identical. Meaning, what was added to our tax return when I included their dividends is the same dollar amount if I add both of my children's separate returns together.
However, The Federal taxes are higher if we report their income compared to them filing their own return.
Is there a reason for this discrepancy? Why would I not just have them file their own returns for the dividends? We still claim them as dependents since we support them. Am I doing something wrong?
