Minor + RMD = Need to File?

[MacTigger]

If a minor (15) is now getting an RMD (about 5k) from an inherited IRA, do I need to file a tax return for him?

Thanks.

Mac

[MayaD]

Is it distribution from traditional or Roth IRA?

In case of Traditional IRA, RMDs are taxed and, in the case of children under age 18 (or full-time students under age 24), they are taxed at a parent's usually higher rate.

Roth IRAs are a bit different, distributions from inherited Roth IRAs are tax-free. However, the beneficiary will still have to deplete the account within ten years after becoming an adult.

Typically, a child's tax rate is much lower than a parent's tax rate due to having much less income. However, certain types of income, including inherited traditional IRAs, are subject to the kiddie tax, are taxed at the parent's highest tax rate after a certain threshold amount ($2,200 in 2021). This applies to children who are under 18, or, if the child is a full-time student, children under 24. 

[MacTigger]

So, do I need to file a tax return for this child, in the child's name?

If taxes are owed, I suppose I would pay the taxes out of my own pocket, as the RMD amount is sitting in an investment account that I don't want to touch.

Thanks.

Mac

[MacTigger]

It is from a regular IRA.

[RaifH]

Yes, if the taxable amount is over $1,100, you are required to file a tax return for your child.

Any amount above $2,200 is taxed at your marginal tax rate, rather than your child's. This is calculated on Form 8615. For the form to calculate correctly, you will need to enter your taxable income, meaning it is probably easier if you complete your tax return before your child's. 

[MacTigger]

If my ex is the one who claims our son as a dependent, is the tax rate on our son's RMD income based on what she earns (which is half of what I earn), or what I earn?

Thanks again.

Mac

[MinhT1]

If your son is your ex-spouse's dependent, then for the kiddie tax, the parent's tax rate is based on her income alone.

[MacTigger]

Thanks.

Is there any reason why my ex could not just use form 8814, and add it to her return, instead of having to file an entire separate return for our son?

Mac

[MinhT1]

Your spouse cannot file form 8814 and add his income to her return as one of the conditions for electing to file form 8814 is that: The child’s only income was from interest and dividends, including capital gain distributions and Alaska Permanent Fund dividends.

As this condition is not satisfied, form 8814 cannot be used.

Please see these instructions for form 8814.

[MacTigger]

I see.

Because it is a "Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc", not DIV, INT, or capital gains money.

So, I guess I would start a new tax return, for the child, in turbotax, and just go from there?

Thanks.

Mac

[ColeenD3 · Accepted solution]

Yes. You begin a new return for him. While you can use your own email address, you would need a new user name for him.

[SweetieJean]

State tax filing requirements may be different.