Owning some bitcoin and stock but sold them. Got a 1040 form, I have no income but can be claimed as a dependent. What do I do?

[Mtoledo101217]

I bought some stocks on CashApp on June 18, 2021, and sold them on October 21, 2022.  I also purchased some Bitcoin on Dec. 06, 2021, and sold them on October 21, 2022. I received a digital 1040 form, I have no income and am a single mother to two kids. I can get claimed on my parents' income tax though. What do I do? Can I file on my own with my dependents or not? 

[Anonymous_]

Stand by. I will page @Mike9241.

[GeorgeM777]

You can file your own tax return; however, you may not get any part of the child tax credit paid back to you because you stated that you have no income.  In order to get part of the child tax credit paid to you, you must have earned income of at least $2,500.  If you have no earned income, then you will not get the refundable part of the child tax credit.    

You stated that you have no income, but did you have a gain when you sold your stocks and Bitcoin?  If you have a gain from the stocks that you sold, or a gain from the Bitcoin that you sold, then you have to report that gain on your tax return. Such gains, if any, would be considered investment income. 

Your parents may be able to include such income on their return.  The general rule is that a parent can claim a dependent child's investment income on their own return up to a certain amount —above that, the child needs to file themselves. To claim a child’s income on a parent’s tax return, the child needs to be considered a qualifying child dependent of the parent.

A qualifying child has to meet at least four criteria:

• They must be your child or stepchild, or a brother, sister, stepsibling, or foster child. Descendants of these people also qualify, like your niece.
• They must have lived in your residence with you for more than half of the tax year.
• They must be under age 19 (24 if a full-time student) at the end of the tax year, or any age if permanently disabled.
• The child must not have provided more than half of her own financial support during the year.

In addition to being a qualifying child dependent, the child has to meet the following conditions:

• The child’s only income is from interest and dividends, including capital gains distributions and Alaska Permanent Fund dividends.
• The child’s gross income for 2022 is less than $11,500.
• The child is required to file a 2021 return.
• The child does not file a joint return for 2022.
• There were no estimated tax payments for the child for 2022 (including any overpayment of tax from the child’s 2021 return applied to 2022 estimated tax).
• There was no federal income tax withheld from the child’s income.

@Mtoledo101217

[Mike9241]

if your parents can claim you, you can not claim your children. if you don't meet the qualifying child tests, then for your parents to claim you and your children the qualifying relative tests must be met. one of these tests is that your gross income must be less than $4400. gross income includes capital gains but not losses from the sale of bitcoin and stocks.

[Mtoledo101217]

Okay, so what do I do if my parents decide to file before me? I don’t get the 1099-B form until February 15th. 

[ErnieS0]

Who files first doesn’t matter as long as you and your parents file correctly. Unless you made a lot of money selling crypto, you are probably still a dependent of your parents as are your children.

If your parents can claim you, then in Personal Info, 

• Check YES to Another taxpayer can claim me as a dependent on their tax return.
• Then YES or NO to And this person will claim me on their 2022 tax return.

If you claim yourself and your parents claim you as a dependent, the IRS will reject your return if you file first.

The IRS has an app to help you decide whether you are a dependent. Click on Whom May I Claim as a Dependent?

You may still have to file a tax return to report the money you made from crypto. 

The IRS taxes you on the difference between the sales price – selling expenses – what you paid. If you sold crypto for $1,000 that you paid $500 for, your taxable profit would be $500.