Scholarships F0rm 11098-T

[briandsmith]

Again, my thanks.

Again, my thanks.

I have attached my calculations for form 8615, which is where I get the $8000+ number. I'm not sure I understand your example, particularly the $4000. Based on all this review of instructions etc, I agree that TT should ask those questions (it does on the CA return) but I have run it several times and it never does! That was why I told you it would let me E-file.

Forms 8615 & 3800  calculations
with parents data
Form 8615
Line1 childs unearned income	$28,873.00
Line2 Deduction	$2,600.00
Line3Line1-Line2	$26,273.00
Line 4 Childs taxable income from 1040	$14,273.00
Line5 Smaller of ln 3 or ln4	$14,273.00
Line6 Parents taxasble income	$92,905.00
Line7
Line 8 Add lns5, 6 and 7	$107,178.00
Line9 Tax on amount on line 8	$18,765.22
Line10 Parents tax	$10,603.00
Line11 Difference in tax ln9-ln10	$8,162.22
Line12a Add lines 5 and 7	$14,273.00
Line 12b  Divide line 5 by Line 12a	1.00
Line13 Line 11times Line 12b	$8,162.22
Line14 Line 4 minus Line5	$0.00
Line15 Tax on line 14	$0.00
Line16 Line 13 + Line15	$8,162.22
Line17 Tax on line 4	$1,481.00
Line18 Larger of line 16 or 17	$8,162.22
Line18 is Emmas tax	$8,162.00
Conclusion This is Emmas tax!
In 2023 it was3218.

[Hal_Al]

I'm not an expert on form 8615.

It appears that for line 10, you used the parents actual tax.  In TT, you are not asked for the line 10 amount. TT calculates it for you.  It's  $15,497 when line 9 is 18,765.

You may need to follow the instructions for line 9. https://www.irs.gov/pub/irs-pdf/i8615.pdf

To "play around" with TT, you need to use the download program. You can't do trial stuff in the online version. 

[briandsmith]

With due respect, Form 8615 line 10 asks for the tax from 1040 line 16 of parents' form, which is what I used. Line 9 is a tax calculated from tax tables per 8615 instructions based on the calculations above it. The form does not ask you to calculate the tax for line 9.

The value on my 8615 line 9 is currently 1473.

As to TT calculating the line 10 amount for me, it is blank on the form! The parent income is set at zero.

Is this correct, am I am not using TT correctly or does TT have a problem? Obviously, I would prefer it to be correct.

[Hal_Al]

As I said, I'm not that familiar with form 8615. I'm just digging in, because you have an interesting case.  You appear to be doing it right. But the result doesn't seem right. The kiddie tax is when the child's income is taxed at their parent’s marginal federal income tax rate.  $8162 / 14273 = 57%!!!! The parent's rate is 22%, at most.

I plugged your numbers into TurboTax  and TT is doing it differently, getting the results I expected. My advice: let TT do it. 

But, at this point, I'm stumped. So, I may not comment further. 

[briandsmith]

I agree, we probably have gone as far as we can. I thank you for your help and patience.

As far as answering TT's question of me - "did you get the answer etc", I'm not sure whether to say "yes" or "no". I think the question should have been "is it reality that a student should have to pay $8000. in federal tax and $1900. in CA tax on a $46000. scholarship"?

To me it seems excessive (it is over 20%) and was looking to see if others were "screaming" too?

Thank you for tolerating me.