Kiddie tax

[Breezy241]

Hello. I need advice. I received unemployment (I don't understand why this is even lumped with kiddie tax, utterly unacceptable) and my mom is refusing to give me her taxable income UNLESS she can claim me, which this year she can't. She's emphasized enough that I'm independent and can't fathom this extra information. She would rather believe H&R block over me and they have no idea what this tax even is. It's honestly putting too much stress on me and I can't deal with this. I don't feel like going through the hassle of requesting the information from the IRS because 1), she hasn't filed taxes yet and 2) their swamped. By the time they get it to me April 15th will pass on by.

If I just estimate her tax can the IRS fix it down the line if I overpay or underestimate? Can they just send me a bill for the remaining tax to pay if any? I already paid $2044 with the estimate alone, even though without it, it would've been $710. I intend to amend my taxes because of the unemployment exemption so I expect a refund back anyway.

Any closure is appreciated.

[Anonymous]

I hate to add to the family discord, but unless the person your mother is seeing at H&R Block is utterly incompetent and/or can't read (which I doubt is the case) they most certainly did NOT tell her that you would not need this information to pay taxes properly on your unemployment compensation.  (Yes, I am calling this BS.)  

Unemployment is clearly spelled out in plain English as one of the types of income upon which this tax is paid right in the form's instructions, under the definition of unearned income:  https://www.irs.gov/instructions/i8615#idm[phone number removed]152

You need that information in order to properly prepare your return.  However, if you can't get it, then yes estimate and the IRS can sort it out for you later. 

As for the matter of dependent/not a dependent, the IRS will be happy to decide for the both of you if she is entitled to claim you or not.  To get them involved, she claims you and you file stating you can't be claimed.  One of you will have to file by mail in this battle, though, and you'll both get letters from the IRS explaining the rules urging the one of you who didn't follow them to file an amended return.  

You could also check to see how the rules apply in your situation here: https://www.irs.gov/help/ita/whom-may-i-claim-as-a-dependent 

When that doesn't happen they start asking  for the proof, and whoever can prove his or her case gets to keep their refund as filed and the other one gets a big bill with interest and penalties tacked on.  

You need her income so that you can pay her higher tax rate on your unemployment.   She's not "helping" you by giving it to you, aside from helping you to comply with the law.  Show her the form, and its instructions and ask her what you need. If you are, in fact, qualified to be her dependent she doesn't need you to "let" her claim you and if you're not qualified she can't decide to just do it anyway.  

As an aside,  if you wait a week or so until the exemption for some of the unemployment compensation that passed last week is written into the software, you might save some money and frustration. 

[Breezy241]

That's what she told me on the phone, that the H&R guy said he's never heard of the kiddie tax and he asked someone else that question too. She has another tax women that said she doesn't need to give me her information unless she claims me. This is clear cut without the IRS involved, she cannot claim me this year. I think she just doesn't want to share her taxable income. 

I graduated may 2020 and moved out in April and have paid my own bills for the year. Because I didn't live at home for 6 months AND supported myself (she agreed that this is true); she can't claim me, but she thinks she can and that's fraud. I'm not lying on my taxes because she refuses to 'help me'.

I've literally tried to break this down to her, she looked up the form, she's NOT budging. I just told her forget it then. All I'm asking is can I just file with an estimate and the IRS fix it because I know they can make adjustments down the line and send me a bill, thats all I want to know. Someone said they can. My mom is a hardass and just isn't reasonable.

Plus I already filed so I intended to amend anyway because of the unemployment exemption.

[LCH36WFB]

If you are filing as a single,  independent person, why would you need your mother's taxable income?  As long as you provided at least one-half of your own living expenses you should qualify as an independent. (Check the rules to verify you qualify.)  The 'kiddie tax' is for dependent children whose income is taxed at their parents tax rate.  

[Anonymous]

True - if not a dependent AND over 18 for tax year 2020 , then it doesn't apply.  However, if you were a full-time student in 2020 you are your mother's dependent, like it or not, almost certainly. 

[Breezy241]

Dependency status doesn't matter for kiddie tax. Regardless if I choose either option the form still comes up. Mostly in relation to the support question because unemployment is unearned income, and it was a majority of my income for 2020. The question asks did I support myself with EARNED income for 2020. If I put yes the form goes away, if I put no the form comes up.

[Breezy241]

Dependency status doesn't matter for kiddie tax. It's based on age. Regardless if I choose either option the form still comes up. Mostly in relation to the support question because unemployment is unearned income, and it was a majority of my income for 2020. 

How can you say 'almost certainly' despite me already explaining my situation? I'm not a dependent for this tax year. Just because I was a full time student for 5 months of 2020 doesn't dictate that overall status. There are other rules that apply, which I explained.

[DawnC]

The IRS will work it out if you both claim your SSN on tax returns.   If you provided over half of your support, she can't claim you.   But if you did not provide half of your own support, she can claim you.  She doesn't have to provide more than half of your support if you did not.   To determine support, use this worksheet.  

Whether it's a child, a friend, or a relative you support, the term 'support' is generally defined as what you spend on a person to provide the basic necessities of life. While the specifics may be debatable in certain circles, here's what the IRS considers typical for the purposes of a tax return.

Support includes:
- Food
- Lodging (even if your mortgage is paid off)
- Clothing
- Education (including the GI bill)
- Medical and dental care (including insurance and supplementary Medicare premiums)
- Recreation
- Transportation and similar necessities

Support does not include:
- Life insurance premiums
- Funeral expenses
- Federal, state, or local income taxes or Social Security and Medicare taxes paid on a person's own income
- Scholarship grants
- Income made by a disabled person in a sheltered workshop

Generally, if this person provides more than half of his or her own support, you cannot claim him or her as a dependent.

Keep in mind, it doesn't matter where the money comes from to support a person - it just has to be yours. It can be taxable or nontaxable income like social security. You don't have to be working in order to support someone.

[Breezy241]

Please help me understand this,  because form 8615 comes up for this. And you say to "Keep in mind, it doesn't matter where the money comes from to support a person - it just has to be yours. It can be taxable or nontaxable income like social security. You don't have to be working in order to support someone."

Turbotax asks "did you support yourself with earned income for 2020?" 

If I say no the form comes up, if I say yes the form goes away. I had a savings and 4k in w2 income and 15k in unemployment. But because my unemployment is more than the earned I chose 'no' and it prompts the form. How can I even choose 'yes' to that question if I had significant unearned income despite it being my own? Because I'm under 24 it prompts the form. If I was 24 (or not a full time student) or had substantial earned income I wouldn't need to fill it out.

And the sad thing is there are other people in my exact situation too.

[DianeW777]

The wording may be confusing for you, but the intent is that you are independent and not a dependent of another person.  You would not be a dependent of another person based on the amount of income you had from your own sources (earned and unearned). An exception to that is if most of your money went into a savings account (and was not removed) which would show you did not spend that money on your own support.

Only then could someone else claim you as a dependent. If you are independent then you should respond 'yes' to the question when asked and the Form 8615 should not be present in your return if you are not a dependent on another tax return.

[fanfare]

if you do get your mom's info, she will be mad, and you will pay at her higher rate!

So you might as well answer the question to avoid the kiddie tax.

An audit is very unlikely.

[TaxNavigation]

Sorry to bother, but I am confused on how to file an 18 year old who has received unemployment up to around 30,000. I see some people say that a person is considered dependent no matter what the income is. However, based on your reply, it seems that a person can not be filed as dependent if they have too much unearned income from unemployment benefits. 

How should I filed an 18 year old under their married jointly parents? Would it be better to file them as independent or dependent?

Which would save more? 
Taking into account possible EIC, EITC, American Opportunity Credits, tax deductions, tax exemptions, and other possible credits or benefits?

Their parents’ income is around AGI is around 41200. 
Also would using the look back provision be better to help the unemployment money from causing ineligibility for tax benefits?

sorry for so many questions. I am really confused on how to help get the least tax due