trust taxes

[roshana616]

both of my sons have trusts that they cannot access yet (too young) but the trusts have distributions

one of my son's has a job and files his taxes normally

the other son is not working yet (still at university)

the year end trust statements for both of them have capital gains distributions, dividends, interest, etc

do i file a separate return for each of them based on the trust?   how do i do this with turbotax?  can you get me started?

thanks!

ro

[ToddL99]

If they are both beneficiaries of trusts, they should each receive a Schedule K-1 from the trusts reporting their share of the trust's income (capital gains distributions, dividends, interest, etc.). They must report these K-1s on their own tax returns.

Report these K-1s in the Schedule K-1 interview of Business Investment and Estate/Trust Income under Personal Income/Wages and Income must report them on their own tax returns.

They can use the online version of TurboTax Premier; each one will have to establish their own account. If you choose to use a desktop version of TurboTax Premier, you can prepare as many returns as you like (but only e-file up to 5).

[roshana616]

when i use turbotax to file my son's taxes, i am getting hit with the "kiddie tax".

my son has all unearned income (div, int, etc) for 2020 and is within the kiddie tax age window.

but this trust was set up exclusively for him when my aunt passed away, why would i have to pay a "kiddie tax" penalty in this case?

am i doing something wrong in turbotax?

thanks

rob

[DianeW777]

Believe it or not the 'Kiddie tax' was actually changed and may likely be lower this year than last. You may not be doing anything wrong.

For 2018 and 2019, the Kiddie Tax was determined by the tax brackets and rates for trusts and estates. Here’s what those work out to:

• The first $2,600 (after the initial $2,200) is taxed at 10%
• The next $6,850 is taxed at 24%
• The next $3,500 is taxed at 35%
• Anything beyond that is taxed at 37%

However, the tax changes for 2020 now make the Kiddie Tax revert back to using the parental rates, instead of the rates for estates and trusts like in 2018 and 2019 above.

Remember that the Kiddie Tax only applies to unearned income in excess of $2,200. Here’s a step-by-step illustration of how a child with $15,000 of unearned income in 2020 would be taxed under the new law:

1. Regular tax rates apply to the first $2,200, which is exempt from the Kiddie Tax. The remaining $12,800 is subject to the Kiddie Tax.
2. The first $2,600 is taxed at 10%, leaving $10,200 to roll up to a higher rate.
3. $6,850 of the $10,200 is taxed at 24%, leaving $3,350.
4. The remaining $3,350 is taxed at 35%.

Use this link to confirm your entry and that you did everything correct: How to Report Kiddie Tax