Required to file?

Forum|Forum|3 years ago
October 26, 2022
1 reply
23 views

My college student had w-2 income ($4188), interest ($135) and taxable scholarships ($5145) less than standard deduction. I’m confused by wording that says scholarships are a hybrid-unearned and earned. Tax return says $0. My daughter is my dependent and IRS is asking for her Form 8962. Dependents don’t file Form 8962 if not required to file? So, she isn’t required in any way to file taxes, correct?

Best answer by KochuK

Hi taxissues2021, thank you for the event questions

Please refer to IRS Pub 501, page 4, Table 2. 2021 Filing Requirements for Dependents.

https://www.irs.gov/pub/irs-pdf/p501.pdf

It defines "unearned income includes taxable interest, ordinary dividends, and capital gain distributions. It also includes unemployment compensation, taxable social security benefits, pensions, annuities, and distributions of unearned income from a trust. Earned income includes salaries, wages, tips, professional fees, and taxable scholarship and fellowship grants. Gross income is the total of your unearned and earned income."

For Single dependents, the three conditions:

1. Her unearned income interest income $135 is no more than $1,100.

2. Her earned income is no more than $12,550 (W-2 $4,188 + taxable scholarship $5,145).

3. Her gross income is no more than $12,550.

Based on the above, your dependent does not have a filing requirement.

IRS Topic No. 421 Scholarships, Fellowship Grants, and Other Grants classifies scholarship as "Tax-Free" or "Taxable" rather than "unearned" or "earned" income.

https://www.irs.gov/taxtopics/tc421

Lastly, the Form 8962 instructions clearly states "Who Must File" "TIP" - If you are claimed as a dependent on another person's tax return, the person who claims you will file Form 8962 to take the PTC and, if necessary, repay excess APTC for your coverage. You do not need to file Form 8962.

https://www.irs.gov/instructions/i8962

Hope the above helps.

KochuKAnswer

Level 7

Hi taxissues2021, thank you for the event questions

Please refer to IRS Pub 501, page 4, Table 2. 2021 Filing Requirements for Dependents.

https://www.irs.gov/pub/irs-pdf/p501.pdf

It defines "unearned income includes taxable interest, ordinary dividends, and capital gain distributions. It also includes unemployment compensation, taxable social security benefits, pensions, annuities, and distributions of unearned income from a trust. Earned income includes salaries, wages, tips, professional fees, and taxable scholarship and fellowship grants. Gross income is the total of your unearned and earned income."

For Single dependents, the three conditions:

1. Her unearned income interest income $135 is no more than $1,100.

2. Her earned income is no more than $12,550 (W-2 $4,188 + taxable scholarship $5,145).

3. Her gross income is no more than $12,550.

Based on the above, your dependent does not have a filing requirement.

IRS Topic No. 421 Scholarships, Fellowship Grants, and Other Grants classifies scholarship as "Tax-Free" or "Taxable" rather than "unearned" or "earned" income.

https://www.irs.gov/taxtopics/tc421

Lastly, the Form 8962 instructions clearly states "Who Must File" "TIP" - If you are claimed as a dependent on another person's tax return, the person who claims you will file Form 8962 to take the PTC and, if necessary, repay excess APTC for your coverage. You do not need to file Form 8962.

https://www.irs.gov/instructions/i8962

Hope the above helps.

**Say "Thanks" by clicking the thumb icon in a post. **Mark the post that answers your question by clicking on "Mark as Best Answer"

T

Taxissues2021Author

Level 2

Thank you so much for a great, concise answer to calm my nerves. So, sorry, one more question. I originally had my (parent) tax return correct and panicked with the IRS letter my daughter received stating “please provide a 1095-A and your 8962.” It made me doubt how I had done my tax return because I couldn’t understand why they would ask that of a dependent unless my tax return was wrong. So, I put her income on my Form 8962 amended return and made it wrong!😩 And to top it off I have a second dependent college student and amended his numbers, decreasing my AOTC, for his numbers to stay under what I thought was the $1100 unearned income amount. What do I do now that I’ve sent in an amended tax return that is wrong and original tax return was right? I can’t wait for your response so I can fix this mess! Thank you in advance for your response!!

KochuK

Level 7

If you mean you already sent in an amended return and want to cancel it, you, unfortunately, cannot cancel an amended tax return once it has been mailed to the IRS. However, you can amend an amendment by filling out another Form 1040X once the original amended return has been processed.

https://ttlc.intuit.com/community/after-you-file/discussion/please-tell-me-how-to-cancel-an-amended-tax-file/00/307619

Please give IRS ample time to process the 1st amendment. Then give TurboTax customer service a call to assist the 2nd amendment. It is highly likely that you need to do this by downloading the program software and tax data file into your local computer, which we are happy to guide you thru.

**Say "Thanks" by clicking the thumb icon in a post. **Mark the post that answers your question by clicking on "Mark as Best Answer"