Dependent Tax Return - why does he owe $$$

Forum|Forum|4 years ago
March 13, 2022
2 replies
21 views

My son's AGI is 15k. But he "owes" both federal and NJ.

Why?

Is this because his non-W2 wages were above a certain amount? He collected unemployment and earned income paid under a 1099B/1099DIV/1099MISC.

Line 1 5k

Line 7 2k

LIne 8 7k

SweetieJean

Alumni - Champ

earned income paid under a 1099B/1099DIV/1099MISC

Please clarify. Earned income is not reported on those forms. Do you mean unearned income?

How old is your dependent? The Kiddie Tax might be coming into play.

bkneipherAuthor

Level 2

I don't know what the difference is between "earned" and "unearned"? I just know he received 1099s

He is 19

DoninGA

Level 15

@bkneipher wrote:

I don't know what the difference is between "earned" and "unearned"? I just know he received 1099s

He is 19

Unearned income is income from interest, dividends or capital gains from investment sales. Earned income is from wages received from an employer reported on a W-2 or income earned from self-employment reported on a 1099-NEC, 1099-K or cash.

If he has income reported on Form 1099-INT, 1099-DIV or 1099-B that income would be unearned income.

Hal_Al

Level 15

Q. My son's AGI is 15k. But he "owes". Why?

A. Why do you think otherwise?

The maximum standard deduction is $12,550. 15,000 - 12,550 = $2450 taxable income.

But, dependents don't always get the full $12,550 standard deduction. A dependent's standard deduction is the greater of $1100 or his earned income + $350, but no more than $12,550. Based on the numbers you provided, he gets a standard deduction of $5350. 15,000 - 5350 = $9650 taxable income. The $2000 long term capital gain will be taxed at 0%.

Follow the flow on form 1040. The tax calculation for the amount on line 16 will be shown on the "Qualified dividends and capital gains worksheet.