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SoCal_Blade
Level 2

Does my daughter need to file if she owns nothing (zero)?

My daughter had a small amount of taxable scholarship (about $2000 over tuition and fees and books and equipment). This is less than the standard deduction of course. So she owes $0. Does she still have to file a return for herself? If not, why doesn't TT say that? At the end of the process for her return it is telling me to go ahead and file but I don't think she needs to. She has no other income (earned or unearned). She does have a 529 and did use some funds to pay for qualified expenses but none of that was taxable. No other income other weird things - just a basic dependent college student :-). Thanks.

1 Best answer

Accepted Solutions
DawnC
Expert Alumni

Does my daughter need to file if she owns nothing (zero)?

She should file a return because her unearned income is more than $1100.  She doesn't have a tax liability, so there is no penalty, but she still has a filing requirement.  Even if you're a dependent, you'll generally need to file your own 2020 tax return if:

  • Your earned income (money you made by working) exceeds $12,400
  • Your unearned income (interest, dividends, capital gains, etc.) exceeds $1,100
  • Your business or self-employment net income (gross minus expenses) is at least $400
  • Your gross income (earned plus unearned) exceeds the larger of $1,100 or your earned income (up to $12,050) plus $350

You can use the IRS Free File via TurboTax for her return, it will be free no matter when you file it.   Create her own account for her return.    You have to use the link in the help article to start a return there instead of TurboTax.  

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8 Replies
LinaJ2020
Expert Alumni

Does my daughter need to file if she owns nothing (zero)?

It depends if she is your dependent on your return. 

 

If she is a dependent, she is required to file only if she meets any of the followings: 

  1. her earned income was more than $12,400  or 
  2. her gross income was more than the larger of $1,100 or earned income ( up to $12,050) plus $350 
  3. Her unearned income was more than $1,100

 

If she was not your dependent and if she was single, she doesn't need to file a US tax return if all of the following are true:

  • Under age 65
  • Single
  • Don't have any special circumstances that require you to file (like self-employment income)
  • Earn less than $12,400 (which is the 2020 standard deduction for a single taxpayer)

To read filing requirements, click here: 2020 Filing requirements

 

[Edited 2/26/2021 6:29 PM]

 

@SoCal_Blade

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SoCal_Blade
Level 2

Does my daughter need to file if she owns nothing (zero)?

Thanks for the quick reply. She is a dependent (full time student, doesn't support herself more than 50%, etc, etc).

 

So she has no "earned income" in terms of wages/tips (didn't work). She does have $2076 of taxable scholarship money (amount of scholarship over tuition/fees and qualified expenses). That is looked as "earned income" for determine standard deduction so her standard deduction ends up being $2076+$350= $2426.

Therefore, she has zero tax liability since her total taxable income is $2076 but her standard deduction is $2426.

 

I have seen that list of 3 things before but it is very confusing.. it says if her earned income is over $12,400 on #1 but then says if her earned income is over $1,100 on #3. So which is it? And when it says "earned income" on these 3 lines, does it mean wages/tips or does it also include taxable scholarship money like my daughter has? From my understanding it says they use taxable scholarship amounts as "earned income" only for determining the standard deduction. If someone had taxable scholarship money over $12,400 (the standard deduction) then it would actually be counted as unearned income for tax purposes. So I still don't know if she needs to file or not. 

SoCal_Blade
Level 2

Does my daughter need to file if she owns nothing (zero)?

I think I figured out a problem. Your reply had a typo in #3 I believe. It should read:

 

3. Her UNearned income was more than $1,100 (you said "earned" not "unearned").

 

So in this case she does not meet any of those 3 items as far as I can tell so she doesn't need to file. She does not have earned income over $12,400 or over $2426 (her taxable scholarship amt + $350) and she doesn't have unearned income over $1,100 (since her taxable scholarship is considered unearned income ONLY if it is above the standard deduction). Am I reading that correctly? You may want to edit your original post as well so others don't see it and get confused.

 

Thanks.

LinaJ2020
Expert Alumni

Does my daughter need to file if she owns nothing (zero)?

I edited my answer above.  Sorry for the confusion. 

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LinaJ2020
Expert Alumni

Does my daughter need to file if she owns nothing (zero)?

I have edited my answer above.  Sorry for the confusion. 

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SoCal_Blade
Level 2

Does my daughter need to file if she owns nothing (zero)?

Do you agree with my assessment then - that she doesn't need to file per my last post above?

DawnC
Expert Alumni

Does my daughter need to file if she owns nothing (zero)?

She should file a return because her unearned income is more than $1100.  She doesn't have a tax liability, so there is no penalty, but she still has a filing requirement.  Even if you're a dependent, you'll generally need to file your own 2020 tax return if:

  • Your earned income (money you made by working) exceeds $12,400
  • Your unearned income (interest, dividends, capital gains, etc.) exceeds $1,100
  • Your business or self-employment net income (gross minus expenses) is at least $400
  • Your gross income (earned plus unearned) exceeds the larger of $1,100 or your earned income (up to $12,050) plus $350

You can use the IRS Free File via TurboTax for her return, it will be free no matter when you file it.   Create her own account for her return.    You have to use the link in the help article to start a return there instead of TurboTax.  

**Say "Thanks" by clicking the thumb icon in a post
**Mark the post that answers your question by clicking on "Mark as Best Answer"

View solution in original post

SoCal_Blade
Level 2

Does my daughter need to file if she owns nothing (zero)?

Thank you for the clarification.

 

It is so confusing since you reach this income is considered earned in some places and unearned in other, and then if over standard deduction unearned, etc. I appreciate the tip on filing online. That will be nice as this should be a simple return to file.

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