Unemployment due to COVID unearned income?
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Surfing123
Returning Member

Unemployment due to COVID unearned income?

I'm not understanding why the IRS is considering unemployment payments due to COVID as unearned thus triggering the form 8615 for my child.  This is the most asinine rule and is very frustrating.  The poor kid barely makes any money and now his unemployment is getting taxed at a higher rate?  He already had taxes taken out of the payments.  I'm at a loss. Are there any exceptions that anyone knows of?

5 Replies
Bsch4477
Level 15

Unemployment due to COVID unearned income?

By definition unemployment income is unearned income. 

ColeenD3
Employee Tax Expert

Unemployment due to COVID unearned income?

No. There is no exception. If your child meets the qualifications, they must file the return.

 

Form 8615 must be filed for any child who meets all of the following conditions.

  1. The child had more than $2,200 of unearned income.
  2. The child is required to file a tax return.
  3. The child either:
  1. Was under age 18 at the end of 2020,
  2. Was age 18 at the end of 2020 and didn’t have earned income that was more than half of the child's support, or
  3. Was a full-time student at least age 19 and under age 24 at the end of 2020 and didn’t have earned income that was more than half of the child's support.
    (Earned income is defined later. Support is defined below.)
  1. At least one of the child's parents was alive at the end of 2020.
  2. The child doesn’t file a joint return for 2020.
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mpatkelley
Returning Member

Unemployment due to COVID unearned income?

To jump on this question, my son is already filing a tax return (has been for the past few years).  My question is, why does his tax bill jump because he became unemployed due to the pandemic?

 

Is there some exception in terms of calculating the so-called "kiddie tax" for unemployment for children who can provide a 2019 return to show they had been earning the income prior to the pandemic shutdown?

macuser_22
Level 15

Unemployment due to COVID unearned income?

2019 has nothing to do with 2020.


https://www.irs.gov/pub/irs-pdf/i8615.pdf

Who Must File
Form 8615 must be filed for anyone who meets all of the
following conditions.
1. You had more than $2,100 of unearned income.
2. You are required to file a tax return.
3. You were either:
a. Under age 18 at the end of 2020,
b. Age 18 at the end of 2020 and didn’t have earned income
that was more than half of your support, or
c. A full-time student at least age 19 and under age 24 at the
end of 2020 and didn’t have earned income that was more than
half of your support.
(Earned income is defined later. Support is defined below.)
4. At least one of your parents was alive at the end of 2020.
5. You don’t file a joint return for 2020.


**Disclaimer: This post is for discussion purposes only and is NOT tax advice. The author takes no responsibility for the accuracy of any information in this post.**
Irene2805
Expert Alumni

Unemployment due to COVID unearned income?

macuser_22 outlines the requirements for filing Form 8615 above.  Unemployment compensation is considered by the the IRS as "unearned income."

 

For more information, please see the Instructions for Form 8615.

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