Other children unearned income (form 8615 line 7)

[Fantaki1]

I have 3 minor children and they all have realized unearned income slightly above $2200 in 2020.  As some of the income is from capital gains, I have to file tax returns for them.   TurboTax desktop edition does not ask about the other children or the parents taxes, until the return is reviewed at the end, and then it asks to enter taxable income for the parents.  

However the form 8615 itself asks on line 7 to enter the total of line 5 for all other children.   TT does not pick this up as an error.  The IRS instructions for form 8615 do not mention line 7!!   Do I just enter the information on the form and hope that TT will come up with the correct calculations?   Is there a way to link the parents and the children's returns?

[rjs]

In each child's tax return, type "child's income" (without the quotes) in the Search box, then click the link that says "Jump to child's income." It will walk you through entering all the information for Form 8615.

There is no way to link the parents' return to the children's returns. You have to enter the information manually in each child's return.

[jakeh]

Does this mean the unearned income (in this case unemployment benefits) of ALL the dependents/children will be factored in with each child's return (in form 8615) ? 

And since they are not "linked" to the parent's return (nor each other's), would that mean it is being double or triple counted?

[rjs]

@jakeh  The tax is calculated on the total unearned income of all the children. But then the total tax is divided up among the children in proportion to their individual incomes. The same calculation of the total tax is shown on each child's tax return, but each child's income is taxed only once.

[jakeh]

wonderful!, thank you for your quick reply.

One more quick question:

My first depended is college age and will be filing separately for reasons of the 1099G unearned income received. If my second dependent who had unearned (unemployment) income and 1099G as well was under 18 in 2020, will i also need to file him separately or does that have to go into my return?

[rjs]

@jakeh 

You cannot report your child's unemployment income on your tax return. Any child who had unemployment income, and is required to file a tax return, has to file his or her own separate tax return.

Make sure that each child's tax return indicates that he or she can be claimed as a dependent.

[jakeh]

@rjs 

ok thanks again. I was asking because as I starting a new turbo tax filing for him, I came upon a page stating that if he is under 18 his unearned earnings may have to be filed under his parents if he had no other income.

However, I am proceeding with his own separate filing.

[rjs]

@jakeh  The wording on that page in TurboTax is incorrect. You are never required to report a child's income on the parent's return. It is an option in certain cases, but never required.

[jakeh]

@rjs 
thank you again very much, you have been very helpful, and i truly appreciate it.

one final question, do California state returns need to be filed for my two dependents who only happened to have the unearned (California) unemployment income, with no other earned income or W2 for 2020?

[jakeh]

@rjs would you have an answer for me regarding the CA state filing (asked above)?

[DawnC]

Generally, you must file a California income tax return if you’re a resident, part-year resident, or nonresident and:

• Are required to file a federal return
• Receive income from a source in California
• Have income above a certain amount

@jakeh - See Do you need to file? from CA - FTB

Filing requirements - See this chart for CA