This is a really good discussion, but I have a question.
The so-called "support" test for a student to be considered independent (which is often now favorable) is, "did the person provide more than half of his or her own support?" The IRS worksheet here walks you through the support test. Of critical importance is that the student actually has to spend their own money, either from income, loans, or savings. For example, a student might not even have any earned income. If their yearly support was $40k and they withdrew $20k from savings, that would meet the criteria. It makes sense, they spent their own money on their support.
However, the corresponding criteria for kiddie tax from the form 8615 instructions is, "was a full-time student at least age 19 and under age 24 at the end of 2021 and didn’t have earned income that was more than
half of the child's support." If the student does have earned income that was more than half the support then they are not subject to the kiddie tax - however they don't have to spend that money! Just have the earned income.
Take the case of a student who's support is $40k and the parents pay 100% of that. However, the student does have a job with $20k earned income and another $20k in unearned income (or taxable scholarship) that they put into a savings account and don't spend on support. Wouldn't this student still be considered a dependent because the parents paid all of the support, but still not owe any kiddie tax on the unearned income - because they did have 50% earned income.
I believe that I have this case in TT, but I can not make TT get rid of the 8615. I agree with the earlier discussion that 8615 is probably being generated because of answers in the "PERSONAL INFO" section that put the student as a dependent. But I don't see anywhere later on to indicate that the student had earned income that was more than 50% of support. Again - that is different than the answer about providing support.
I'm tempted to override the 8615 check box at the top of the form. However, I would prefer to answer the correctly in the step-by-step. Is there a way to do that?
