Form 8615 Miscalculation?

[akalb18]

I'm a 20 year old, full time student and a dependent with unearned income exceeding $2500 from scholarship refunds. I filled out form 8615 and filed through TurboTax before the IRS rejected my return for errors related to form 8615. TurboTax updated their 8615 form and when I attempt to correct my error, it is now asking me more questions about my parents income. Upon answering these questions, my federal refund drops from $2480 to owing $1745.

Specifically, the amount changes when I enter my parent's net long term capital gains amount (~ $48,000).

I'm confused because I barely exceed the $2500 threshold (my unearned income is $2543) and it results in over a $4000 difference in taxes, which would be paying more than all of my unearned income back. I can't even figure out how the tax could possibly be calculated at that amount.

If anyone knows what is wrong, or how TurboTax is calculating the tax on unearned income I would greatly appreciate help/advice.

[KrisD15]

The Scholarship income would be treated as EARNED income and your Standard deduction should be your earned income plus 400.

If the only income you need to claim is the scholarship, you should owe no tax. 

How are you entering the taxable scholarship? 

Enter the amount under

Deductions & Credits

EDUCATION

Expenses and Scholarships

Tell the program you don't have a 1098-T, that you have an exception, don't enter any expenses, enter the excess scholarship on the screen that asks if you received a scholarship you have not yet reported.  

If there is more to the story, such as additional income, continue your question.

[akalb18]

Thanks for the response! There is more to the story in terms of income -- I made around $32,000 in income from two jobs. As far as I understand, this still shouldn't yield a tax as high as it does currently. If it matters, I originally entered my 1098-T information during the education deduction section.

[AmyC]

The income calculation is tricky with the Form 8615 and several worksheets that go with it. Instructions for Form 8615 and Form 8615. After much, you come to Line 13 which shows:

Figuring the Child's Tax

The final step in figuring the child’s tax is to determine the larger of:

1. The total of:

a. The child’s share of the tentative tax based on the parent's

tax rate, plus

b. The tax on the child’s taxable income in excess of net

unearned income, figured at the child’s tax rate; or

2. The tax on the child’s taxable income, figured at the child’s tax

rate.

This is the child’s tax. It is figured on Form 8615, lines 14 through

18.

Since we can't see all the worksheets, I suggest you preview your tax return and look at Form 8615 and its worksheets to determine how it calculated the answer. If your parents are high income and your income is being taxed at their rate, it could cause this tax difference.

To see your forms:

• In desktop, switch to Forms Mode. 
• For online, see How do I preview my TurboTax Online return before filing?

[BadgerPDX]

I am familiar with at least one current bug with Form 8615. Here is a community page about it:

https://ttlc.intuit.com/community/taxes/discussion/turbotax-2023-bug-with-form-8615-schedule-d-works...

It's possible this is related to your issue. The resulting large jump in tax due when filling out 8615 is consistent with what is seen with this bug, but I'm sure there are many other reasons for a tax jump other than this bug.