Incorrect Tax Amount Calculated by Turbo Tax

[shoozz]

I just completed my son's taxes with Turbo Tax. Taxable income is $7562.00. TT says the balance tax due is $1645.00 (18.99% tax rate. The IRS say the tax rate should be 10%. ($756.00). What am I missing? Included in his tax liability was $124.00 for qualified dividends.

Need help please. 

[ThomasM125]

I'm assuming your son is a minor.

If the income was unearned income, such as interest and dividends, it would typically be taxed at the parent's top marginal tax rate, which could be 22% as it appears to be.

If the income was self-employment income, it would be subject to a self-employment tax of about 15% in addition to the income tax. 

[shoozz]

Thank you for the response. He had only $124.00 of dividend income and $8470.00 in unemployment income. Why would his dividend income be charged at my tax rate. What does it have to do with me? It is his own brokerage account. The numbers still don't add up. ???

[shoozz]

My son is 20 yrs old.

[Mike9241]

did he get a w-2 or 1099-NEC/MISC?  if a 1099 then he owes an additional 15% on the net self-employment income

[shoozz]

No. He only received a 1099G (unemployment) and a 1099-DIV (dividends). I noticed that when going through the questions in Turbotax it did an error check and then brought me to the errors to fix. one was asking for his parents name and taxable income. Not sure why. Does that have any bearing on his tax rate? I just entered my daughters return. Same scenario (unemployment & dividends) with little less $$. Same tax rate - 18%. It should be 10%.

[shoozz]

I am thinking this has something to do with IRS Form 8615. Since she is considered a full-time student it triggers the questions about her parents income. 

Purpose of Form

For children under age 18 and certain older children described below in Who Must File, unearned income over $2,200 is taxed at the parent's rate if the parent's rate is higher than the child's. If the child's unearned income is more than $2,200, use Form 8615 to figure the child's tax.

Who Must File

Form 8615 must be filed for any child who meets all of the following conditions.

1. The child had more than $2,200 of unearned income.

2. The child is required to file a tax return.

3. The child either:

   1. Was under age 18 at the end of 2021,

   2. Was age 18 at the end of 2021 and didn’t have earned income that was more than half of the child's support, or

   3. Was a full-time student at least age 19 and under age 24 at the end of 2021 and didn’t have earned income that was more than half of the child's support.

4. At least one of the child's parents was alive at the end of 2021.

5. The child doesn’t file a joint return for 2021.