Good morning! My daughter rec'd a 1099-B for distributions she took from her Mutual Fund. Does she need to complete a 1040? She has no other income for 2016. Thx!!

[phonaker]

Will this impact our ability to claim her on our taxes??

[MichaelMc · Accepted solution]

Whether your daughter will need to file her own federal income tax return for 2016 will depend on the amount and nature of that distribution.

If your child is not being claimed by you or anyone else as a dependent, she must file a federal tax return if her gross income is at least $10,350 for 2016.

If your child is being claimed as a dependent, she must file a return if any of the following apply.

1. Her unearned income was more than $1,050.
2. Her earned income was more than $6,300.
3. Her gross income was more than the larger of—
1. $1,050, or
2. Her earned income (up to $5,950) plus $350.

Finally, if your child has earnings from self-employment of $400 or more, she must file a tax return and pay self-employment tax (the employer's and employee's share of Social Security and Medicare taxes) on that income.

The answer to your question of whether you can still claim your daughter as a dependent, will still be determined by the five tests listed below. The amount of the mutual fund distribution and what she spent it on will control the issue of whether you provided over half of her support.

Generally, you can claim your child as a dependent if:

·      The child is a U.S. citizen or resident who lived with you over half the year;

·      The child is under age 19, or under age 24 if a full-time student;

·      You provide over half of their support;

·      The child is not claimed as a dependent by anyone else; and

·      The child is not filing a joint return.