I am a 23 year old student and from CA. I did not earn any income but earned interest of $4027 in the form of interests and dividents from accounts that had mostly gifted money from parents (and a small bit from my past internships in 2018 and earlier than that for which I already filed taxes). Should I still file taxes for 2019? If so, will that be considered kiddie tax as I am not yet 24? Also, as I am unable to support myself, I will have to mark that my parents can claim me as dependent on their tax return. Thank you.
If your parents can claim you as a dependent (whether or not they actually do claim you), you are required to file a tax return because your "unearned" income (investment income) is over $1,100. The portion of your investment income over $2,200 will be subject to kiddie tax. Interest and dividends are investment income. It makes no difference where the money for your investments came from.
Thank you. I forgot to mention that my parents are claiming me as dependent as I am unable to support myself.
Thanks again. Some part of it was the money I earned from my past internships. Please confirm if that would be subject to kiddie tax as well.
If you got a W-2 for the money from the internship, or you got a 1099-MISC with the income in box 7, that would not be subject to kiddie tax. Either of those is earned income. Kiddie tax only applies to unearned income.
Note that you have to show all your income on your tax return, whether or not it's subject to kiddie tax.
Thanks a lot again! I tried to file taxes using TurboTax Freefile. After I entered all the info, TT showed message that form 8615 will be ready in few days. I guess TT figured that this is kiddie tax as I did not have any W2s but only interests and dividents from previous investments that my mom made for me.
Here is information you may find useful concerning Form 8615
If your child is younger than age 19 or a full-time student age 19-23, he or she must file a tax return for 2019 if he or she had any of the following:
- Unearned income (interest, dividends, capital gains, taxable scholarships, unemployment compensation) of more than $1,050.
- Earned income (wages, salaries, tips, and fees) of more than $12,200.
- Gross income (earned and unearned income) was more than the larger of:
$1,050 or earned income (up to $12,000) plus $350
TT FreeFile provided 8615 form. So as I try to fill it, I am given the option which says " Would you like to calculate your tax based on pre-TCJA rules?" On choosing that, I am asked for information about my parents and their tax return information.
1) Is it favorable to choose yes or no on this?
2) My mom hasn't yet finished filing her tax return (married filing separately). So should I wait until she finishes filing and fill that info in? I though kiddie tax wasn't based on parent's income, etc. since 2018, so does it actually depend on their tax bracket now?
Thanks a lot again, for educating me, as I am doing this for the first time.
The Tax Cuts and Jobs Act (TCJA) made substantial changes to the Kiddie Tax in 2018 through 2025. Instead of using the parent’s highest marginal rate, the Kiddie Tax is now determined by the tax brackets and rates for trusts and estates. Here’s what those work out to:
So, if you elect to you the pre-TCJA rules, your parent(s) income is needed. If you use the current rules, her income is not needed and your tax will be based on the data above. And whether or not it is a beneficial choice to make depends on her tax rates.
Thanks a lot! That was super helpful. I understand that if I choose pre-TCJA rules, then it should prompt me for parents information. So, I got back to the election and chose "No" for election to use pre-TCJA rules and it still prompts me for parents information, their income, etc. Please advise.
Also, when I chose "Fix state tax return" or "Fix Federal Tax Return", it says:
"Form 3800 : Line 10 must be entered: line 10:
10
Enter the parent's tax from Form 540, line 31. Form 540NR filers: use the Line 10 Smart Worksheet above. Do not include any tax from FTB 3803.
I am wondering why it asks for above, because I changed my choice to "No" for pre-TCJA rules.
Unfortunately because your unearned income (interest) is greater than $1100 you are required to file taxes. Without actually doing the return you won't know if you owe any money, but based on what you have shown so far it would not be much, if any. However, it is far better to file that to wait for the IRS to catch up with you, and they will. The small bit from the internships is also considered to be taxable income (just so you know to put that down as well).
Hi jimCafee, Thank you. I already understood that I have to file taxes and I am doing that. I am stuck on the 8615 questions I posted above.
DawnC, Thanks a lot again. I request your advice for above questions on TT asks me for parents info even though I chose No for that option. Thank you.
@cs216student wrote:
Thanks a lot! That was super helpful. I understand that if I choose pre-TCJA rules, then it should prompt me for parents information. So, I got back to the election and chose "No" for election to use pre-TCJA rules and it still prompts me for parents information, their income, etc. Please advise.
This is a bug in the interview, and it has been reported. However, when you choose No, even though it asks for parents' information, the software is correctly calculating the tax using the TCJA rules. It ignores the parents' information that you enter. So enter anything you like just to get through the questions.
I can't help you with the California problems. I don't know anything about it. I'll see if I can get someone else to help.