Child - investment income of $1789, dependent SSDI of $10,608

[Spouse1234]

My wife is on SSDI. My oldest daughter, age 12, receives money as well as a dependent, earning $10,800 in 2023

My parents think they are helping, but they are old fashioned and do not believe in 529s. Instead, it seems  they have a UTMA setup for my kids, and for that oldest child, it earned $1789 in dividends in 2023, most of which is qualified, and a few dollars of interest.

She has no earned income.

Until this year, I didn't know about the UTMA, and have never reported her SSDI dependent income.

But this year, my dad shared it with me.

Can I use 8814? Or do I need to file a separate return for her because of the SSDI dependent benefits.

I'm not happy about this and wish my parents would just contribute to the 529 they have (but are against it) and I have for her.

[rjs]

You have to file a separate tax return for your daughter. You cannot report her income on your tax return because Social Security disability benefits is not one of the types of income that can be reported on Form 8814. She is required to file a tax return because her unearned income (investment income) is more than $1,250.

[Spouse1234]

Thank you for that. How would I go about filing the separate return for her on TurboTax? Would I do it at the end of mine, or do I have to start a whole new file?

We never reported reported to the SSDI people when our second and third child were born, since we don't know how. In many ways, that is a good thing, since if the second and third child go over $1250, I can still use Form 8414.

[rjs]

"How would I go about filing the separate return for her on TurboTax? Would I do it at the end of mine, or do I have to start a whole new file?"

You can't tack the child's tax return onto yours. If you are using the CD/Download Desktop TurboTax software, just start a new tax return. On the opening screen click the button that says "Start a New Return." If you already have a tax return open, on the File menu (not the File tab) select "New Tax Return." Save the new return with a different name. You can e-file up to 5 tax returns.

If you are using TurboTax Online, you have to use a different account for each tax return. A TurboTax Online account can only be used for one tax return. Create a new separate account for each child that has to file a separate return. Be careful to keep the user names straight for each account.

"We never reported reported to the SSDI people when our second and third child were born, since we don't know how."

Call Social Security (800-772-1213) to find out how to add the younger children. If SSDI is the child's only income the child does not have to file a tax return, and the child's SSDI does not get reported anywhere.

"In many ways, that is a good thing, since if the second and third child go over $1250, I can still use Form 8414."

Using Form 8414 is not necessarily an advantage. In many cases you can end up paying more tax than if you filed a separate return for the child. Except in very unusual circumstances, the only advantage is that it's less paperwork.

[Spouse1234]

Thank you. I have Desktop.

Did you mean to say that filing 8414 is sometimes less than a new return for a child, or more?

Also, my wife has tried calling that number for Social Security and waiting on hold for an hour and given up, frustrated.

[rjs]

"Did you mean to say that filing 8414 is sometimes less than a new return for a child, or more?"

Filing Form 8414 will almost always mean paying more tax or the same amount of tax compared to filing a separate return for the child. This is considering the total tax for both the parent and the child. It is extremely rare for Form 8414 to result in paying less tax overall.

"Also, my wife has tried calling that number for Social Security and waiting on hold for an hour and given up, frustrated."

Try calling at a less busy time. The Social Security web site says "Wait times to speak to a representative are typically shorter in the morning, later in the week, and later in the month." They're usually pretty good on the phone. An alternative would be to call your local office or make an appointment to go in to your local office.

[Spouse1234]

I will let my wife know try to call earlier in the day -- however, getting her to make any phone call is hard, her health is really not good these days.

I did create a new return for my daughter and it ended up being $0 tax liability. It didn't count her SSA income as taxable, and then she got a $1250 deduction, so with $1749 in income, that came down to $524, and zero tax. Even though TurboTax gives you 5 free filings, looks like I have to mail her return in.

However, when I opened up Pennsylvania, she's owing $55. Meanwhile, I'm getting a lot back in Pennsylvania because of the 529 contributions I made.