If I have custodial E*trade accounts for grandchildren, do I report dividends--which are automatically reinvested or go unreported and minors don't file income tax?

Assuming that the accounts are associated with the children’s social security numbers they would only have to file a return if the amount of unearned income was more than $1,300. 

Reinvested dividends are income. But, you do not report the income on your tax return.  The child will have to file a tax return if the total investment income was more than $1300*. 

 

If his only income is from interest and dividends, Alaska PFD or capital gains distributions shown on a 1099-DIV, there is a provision for entering it on the parent's tax return, using form 8814. 
But, it is usually best for him to file a separate return, as qualified dividends and capital gain distributions could be taxed at a higher rate on the parent's return. **

 

*A dependent child must file a tax return for 2024 if he had any of the following:

1.          Total income (wages, salaries, taxable scholarship etc.) of more than $14,600.
2.          Unearned income (interest, dividends, capital gains, unemployment, taxable portion of 529 distribution) of more than $1300. 
3.          Unearned income over $450 and gross income of more than $1300.
4.          Household employee income (e.g. baby sitting, lawn mowing) over $2600 ($4,600 if under age 18)
5.          Other self employment income over $432, including money on a form 1099-NEC

**However, using Form 8814 may benefit a few parents who are not getting the full Child Tax Credit, as the credit will offset the total tax amount, including the child’s portion of the tax.

Even if they file a separate return for the child, the child’s unearned income over $2600 will be taxed at the parent’s tax rate and figured on form 8615. This is known as the "Kiddie Tax".