You are correct. The income will be reported on your child's return and Form 8615 may need to be used depending on the amount of total taxable income of your child.
The answers to your questions are shown below.
- Yes you can file this as other income because it has changed it's character to 'Unclaimed Property'. Do not go through the 1099-R workflow to indicate you didn't receive one. If you do you will be creating a 'substitute' 1099-R which will not be found by the IRS or yourself.
- The income to your child is unearned income. However, it would be considered as miscellaneous income and not interest or dividends.
- You are correct. Form 8615 would be used for your child's return and Form 8814 would not be allowed to be used. The reason is as you stated. It is not considered interest, dividends or capital gains.
- Yes, only the earnings portion would be included, however you should be prepared to show that should the IRS question it later.
- What is Form 8615: Tax for Certain Children Who Have Unearned Income
- IRS Instructions Form 8615: Unearned Income -- Unearned income is generally all income other than salaries, wages, and other amounts received as pay for work actually performed earned income). It includes taxable interest, dividends, capital gains (including capital gain distributions), rents, royalties, pension and annuity income, taxable scholarship and fellowship grants not reported on Form W-2, unemployment compensation, alimony, the taxable part of social security and pension payments, and income (other than earned income) received as the beneficiary of a trust.
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