Dependent received unemployment

Forum|Forum|5 years ago
March 16, 2021
3 replies
50 views

My daughter had earned income of $1500 and unemployment of $15k. If claimed as a dependent, her unemployment is taxed at me tax rate instead of hers. Correct? It makes a huge difference if she is not claimed as a dependent. Can you clarify and discuss legal loop holes for the question on her Turbo-Tax: Did you provide over half of your own support with earned income?

xmasbaby0

Level 15

Yes----you are getting hit by the kiddie tax. But wait to file her return because the law just changed for how much of the unemployment is taxable.

https://ttlc.intuit.com/community/tax-topics/help/how-will-the-stimulus-package-impact-me/01/1393859#U1393859

You are among millions who have now been affected by a mid-tax season change in the tax law. Patience will be necessary.

TurboTax will update the software for the unemployment but there is no timeline yet.

If you have not e-filed yet—-wait. And if you already e-filed and want to amend for this—WAIT.

https://ttlc.intuit.com/community/tax-topics/help/how-do-i-get-the-new-unemployment-benefits-if-i-ve-already-filed-my-taxes/00/2081053

Please read this very recent news from the IRS:

https://www.irs.gov/newsroom/irs-statement-american-rescue-plan-act-of-2021

KIDDIE TAX

https://ttlc.intuit.com/questions/1900671-what-is-the-kiddie-tax

**Disclaimer: Every effort has been made to offer the most correct information possible. The poster disclaims any legal responsibility for the accuracy of the information that is contained in this post.**

Critter-3

Level 15

First her unemployment does not go on the parents return. And unemployment is not earned income. So if the dependent is under the age of 19 or under the age of 24 and a full-time student, then their income is immaterial as long as they were not self-supporting. I doubt any child can be self-supporting on that little income.

cloudywithachance

Level 4

As others mentioned, your daughter is subject to the “Kiddie Tax”. The requirement for who needs to file Form 8615 are listed under the Who Must File section here: https://www.irs.gov/instructions/i8615

It actually doesn’t matter whether you claim her as a dependent or support her, it’s if she under 18, or if she’s 18 (or 19-24 and full timr student) and doesn’t have enough earned income to cover half of her support (whether or not she used that earned income to help support herself).

My daughter is in the same situation, and based on what I’ve read about how the new exclusion of the first $10,200 of unemployment income from tax, it should help those subject to the kiddie tax a lot. So wait for TurboTax to implement. The remaining UI will still be taxed at parents’ rate but better than the full amount.