My daughter graduated from college last year and was supposed to begin work at a company after graduation, pre COVID. Her contract was canceled due to COVID and received unemployment compensation. Since was living with us part of the year and a student for 5 months she would still be seen as a dependent. So, when I do her taxes it is triggering a kiddie tax, which seems odd for unemployment compensation. Is that correct, she would need to pay kiddie tax on it?
Unemployment income is classified as unearned income and an amount over $2,200 triggers the kiddie tax.
I had seen that but I can't get my brain around why unemployment compensation would be hit with the kiddie tax even though it is unearned income. Odd.
I have a daughter in the same boat. She had earned income in 2020 AND received unemployment compensation AND was a student for 5 months, but now has to file Form 8615??????? Makes no sense to me either. I think the "kiddie tax" form was implemented to handle investments put into kids' names, not their receipt of unemployment compensation!