Guardianship income

[Melk1949]

Guardianship income

State selected us to be legal guardians of 12 year old grandson in December of 2021. He gets a SS deposit monthly based on his fathers income. The direct deposit comes as “Payor [wifes name] for [grandson name]”. The initial payment included a massive back payment of four years income. It just sits in an insured interest account and we are trying not to use it on him but save it towards his college costs. 1) Do we need to claim in on are 2022 income taxes and if not 2) do we need to file income taxes for him in his name?

Thank you

[LarryL20]

Yes.  Your grandson may have to file a tax return on the amount received from Social Security (depending on how much the grandson received).  Your grandson should receive a Form SSA-1099 showing in box 3 the total social security benefits paid to you. Box 4 will show the amount of any benefits you repaid in 2021.  Since your grandson is single, the amount would have to exceed $25,000.  A worksheet to calculate if the amount would be taxable is in the 1040 Instructions on Page 31.

Since your grandson is under 18 years old and has unearned income, your grandson may be subject to the Kiddie Tax.  This tax requires the income to be taxed at potentially a higher tax rate.  Information about is the Kiddie Tax is at the following link:  Kiddie Tax Information 

[Hal_Al]

Social security payments to children.

 If the Social Security (SS) payments, including SS disability, were under his/her SS number (as they usually are), it does not get reported on your return. If it does need to be reported, it would go on his/her individual return. If that was his/her only income, it does not get reported at all. He does not normally need to file a tax return. 

SS is only taxable & reportable when added to sufficient other income. Social security only  becomes taxable, when his income, including 1/2 his social security, reaches $25,000.

The taxable portion, if any, of Social Security income is subject to the "KiddieTax".

There is special provision for lump sum payments for prevoius years.  If his total SSA-1099 is more than $50,000 (so that half his SS is more than $25,000), he will have to file a return.  But applying the special provision for lump sum payment, he will not pay any tax.  Essentially tax is calculated as if the money had been received in the proper (previous) years.