Form 8615

[corysdad]

The form is finally here!! YEA!! But i am confused  when I get to the page when it asks "would you like to calculate your tax based on pre-TCJA rules?" If I click no does that mean it will figure the tax on the new rule which is supposed to more favorable? When I do and continue a few pages later it comes to the page were it asks for "parents qualified dividends" and this amount should be on form 1040 line 9b of there 2019 tax return. Line 9 is for the standard deduction there is no line 9b the question also asks about capital gains. Could you please clarify which line of form 1040 I need to put in this field.

[LinaJ2020 · Accepted solution]

The Pre-TCJA rates are more favorable.  It taxed the unearned income based on the parent's tax rates instead of the trust and estates'. 

Form 1040 line 9b is an error and it's already been reported.  For qualified dividends on the parent's return, it should be line 3a if you have any. 

Here are the details:

Changes to Tax Rates on Children's Unearned Income

Historically, children's unearned income was taxed on the parent(s)' marginal tax rate.

In 2018, the Tax Cuts and Jobs Act (TCJA) provided for a change in the tax rate on children's unearned income from 2018 until 2025, so that the rate is based on the tax rate for estates and trusts.

Congress later became concerned that the TCJA unfairly increased the rate rates on children and young adults, including those who are survivors of deceased members of the military, emergency medical workers, and first responders.

Recent legislation effectively repeals that part of the TCJA and returns the tax rate on children's unearned income to the marginal tax rate of the parent(s), which is more favorable. This change is effective for 2020 and beyond, but you can choose to apply that rate to 2019 returns by making this election.

 

[xsd]

> The Pre-TCJA rates are more favorable.

Are they always more favorable?  I'm my case I see lower taxes on Form 8615, line 7 when I do not make the election.

[DianeC958]

If the TCJA rates are more favorable for you then you do not need to make the election.  When some of these changes are made it depends on your personal situation if you are better off to make the election or not.

[tmh6t81]

Why does my tax return keep getting rejected? I have elected to calculate at the new TCJA rules by answering "NO" to the question. I complete the return and for the second time (first after downloading updates on 3/20) it is rejected. Cause is the form 8615. Turbo Tax tells me to wait until 3/20 to download updates (completed).

[LinaJ2020]

You would have to keep trying, unfortunately.  Maybe wait till the end of the day, then do the update again. 

Are you using an online version or desktop?

• If you are using the TurboTax CD/Download software program, open the program, from the top, under Online, select Check for Updates.
• If you are using the online version, it's an automatic update when you sign in and out. 

[Gwaihir]

Using TTAX premier 2019.  I did the return for my students and initially selected "pre-tcja."  Yesterday (3/19) ttax gave me a $3482 tax for one student.  Today, after the update, it jumped that tax to 6214 (still saying pre-tcja).  But then I tried using tcja and it says 3089, even better than before.  

Can anyone tell whether the 8615 calculation after the 3/20 update is correct?  

[LinaJ2020]

The Form 8615 issue has been fixed. You just need to update your program and try to re-file it.  If you are using the TurboTax CD/Download software program, open the program, from the top, under Online, select Check for Updates.  If the software does not update after you have done the step, I would suggest you contact the customer service department at TurboTax contact and ask for a new software push. 

As far as the change in your taxes, it really depends if your parent is in a high tax bracket or if you have a lower amount of investment income.  Without seeing your return, I can't tell you why your federal tax has been decreased. 

But here is the reference:

Usually, the TCJA rate ( Estate and Trust rate) benefits you if your parent is in a higher tax bracket or you have a smaller amount of unearned income.  For example, if your parent's income is in $300,000, which is in the high-income tax bracket (~35%) and let say you have about $2,500 investment income.  The TCJA rate would benefit you more as you will be in the 10% or less.  See the images below. 

 

The 2019 rates and brackets were announced by the IRS in Rev. Proc. 2018-57 on Nov. 15, 2018.4

• $0 to $2,600 in income: 10% of taxable income
• $2,601 to $9,300 in income: $260 plus 24% of the amount over $2,600
• $9,301 to $12,750 in income: $1,868 plus 35% of the amount over $9,300
• Over $12,750 in income: $3,075.50 plus 37% of the amount over $12,750

The way how Kiddie Tax is calculated by using the Pre-TCJA rate:

First, add up the child’s net earned income and net unearned income. Then subtract the child’s standard deduction to arrive at taxable income. The portion of taxable income that consists of net earned income is taxed at the regular rates for a single taxpayer. The portion of taxable income that consists of net unearned income and that exceeds the unearned income threshold ($2,100 for 2018; $2,200 for 2019 and 2020) is subject to the Kiddie Tax and is taxed at the parent(s)’ marginal federal income tax rate. That rate can be as high as 37% for ordinary income and short-term gains and 20% for long-term gains and dividends. 

@Gwaihir

[Gwaihir]

Thank you!  I checked for updates, though, and it found nothing - called that number you gave me and she had me delete the 8615 and then redo it, but it still gives me the same numbers.  Should I just try again for updates in a day or two?  I'll go with whichever number is lower (TCJA or non), but I mostly want to make sure the calculation is being done correctly by the program.  

[LinaJ2020]

As of today, both the form and program have been updated.  You may just go with the one that gives you a higher refund or lower tax due.  

Or if you want somebody to look at your return to verify, I would suggest you consider our new product / features TurboTaxLive to file your 2019 taxes.  

To reach one of our tax professionals, in the TurboTax program, once you complete your taxes, before you file, you’ll be given the option for a final review of your return by one of our experts.  After they completed reviewing your return, they’ll inform you of any proposed changes.

Here are the instructions:

https://ttlc.intuit.com/community/choosing-a-product/help/what-is-turbotax-live/00/27191

@Gwaihir

[mgt7]

I am still unable to e-file my child's return using Form 8615 under the pre-TJCA rules. My online software (which is fully updated) says it has to be paper filed since we are using the pre-TCJA calculations.  Why????

[Jerry4301]

When asked for parent's taxable income the question refers to line11b on Form1040 (which is a 2019 Form 1040 Line for taxable income) doesn't it want the figures from Line 15 on 2020 Form 1040 "Taxable Income"?

[macuser_22]

---

@Jerry4301 wrote:

When asked for parent's taxable income the question refers to line11b on Form1040 (which is a 2019 Form 1040 Line for taxable income) doesn't it want the figures from Line 15 on 2020 Form 1040 "Taxable Income"?

---

Yes - that has been reported.  It is the 2020 1040 line 15.   The screen just has not been updated with the 2020 form line.