My 3 year old child has a UTMA in his name I manage that has generated capital gains and it is not showing any federal tax due on his own tax filing even if I enter a large capital gain (like $10,000 in gains). The state tax updates properly. It only starts showing federal tax if I enter he has a long term capital gain of over $45,000! I know this isn't correct given Kiddie Tax laws/rates.
When I started his filing I answered that he is being claimed as a dependent and I saw where he was only supposed to get a small standard deduction because of that. I suspect it assume I'm claiming his income on my own tax filing, but I can't find where to set that and it never asked me if I was. I would like his taxes to be on his own because his actual tax should be fairly low.
when a child has security sales the parent(s) can no longer report the child's income on their return. if the child's gross capital gains and other unearned income are more than $1100 (gains and losses can't be netted) then they have to file a return and include form 8615
now the goofy thing is that while a return for the child may be required based on the above criteria, there is no kiddie tax unless their unearned income is over $2200 - that's net capital gains, dividends and interest. if it is over $2200 then the parent(s) have to prepare their return because the kiddies tax is in effect and it's based in part on the parent(s) taxable income and tax.
Ok, so have to file it in child's name which was my plan. I still don't understand why turbo tax isn't reporting federal tax due unless I put in at least $45,000 gains.
I'll look at 8615, odd Turbo Tax didn't prompt me on that.