Why do I have to fill out a Form 8615

[greenroom42]

I’m filing single and am not able to be claimed why do I still need to fill this form out ?

[JohnW152]

You must have entered some data into the TurboTax program that indicated you meet the filing requirements for Form 8615. 

It's not necessary that you be claimed on someone else’s return for the form to be required.

According to the IRS's Instructions for Form 8615,

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:

a. Was under age 18 at the end of 2020,

b. 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

c. 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.)

4. At least one of the child's parents was alive at the end of 2020.

5. The child doesn’t file a joint return for 2020.

For these rules, the term “child” includes a legally adopted child and a stepchild. These rules apply whether or not the child is a dependent. These rules don’t apply if neither of the child’s parents were living at the end of the year.

[scm84]

I claim my son as a dependent as he's still a fulltime student but he does not have any unearned income.  Turbotax is insisting that he fill out the form 8615.  What would trigger that?  Could it be his 1099-NEC?  He's being paid as a non-employee but it is earned income as he is working to earn it.  

[LenaH]

If TurboTax is adding Form 8615 to your son's return, then he is being subject to kiddie tax.  This would mean that he would have had to have more than $2,200 of unearned income, which includes unemployment compensation. In addition, kiddie tax applies whether or not you are a dependent of your parents.

Form 8615, Tax for Certain Children Who Have Unearned Income, is required when a child 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.
4. At least one of the child's parents was alive at the end of 2020.
5. The child doesn’t file a joint return for 2020.

For more information, please see What is the 2020 Kiddie Tax?

@scm84

[scm84]

Thank you for the quick return, but he did not have over $2200 of unearned income.  Is the income on a 1099-NEC considered unearned?  He's effectively being paid as a contracted employee but he is working for the income.  He had $0 in unearned income - no unemployment income, nothing but wages and his 1099-NEC.

[LenaH]

No. Has the 1099-NEC been entered as self-employment income on a Schedule C? Please make sure it is entered correctly and answer all of the questions that follow the input of the 1099-NEC. 

To assign your 1099-NEC to a Schedule C, please follow the steps below: 

1. Open your return.
2. Search for 1099-NEC with the magnifying glass tool at the top of the page.
3. Click on the Jump to 1099-NEC link at the top of the search results. 
4. Click Edit next to your 1099-NEC.
5. On the page titled Guess what? You can deduct expenses for the example work choose Yes, I have expenses to deduct.
6. On the page titled Self-employed 1099-NEC Income select the Schedule C you are inputting this income for. If this is a new Schedule C for this year, you can add a new business on this screen.

@scm84

[lj1130]

I have the same issue as the previous person.  My son earned W2 income from a few seasonal jobs and received a 1099-NEC from two other jobs where he worked from home.  I would consider all of his income to be earned & would not suspect to have to file Form 8615.  I wasn't aware that we'd need to call this self employment income though, as if he now has his own business?  Doing so immediately creates a Schedule C for which all answers aren't readily known and his tax liability jumps by an exact 15.3% of those earnings - equaling the self employment tax.  All good? 

[LenaH]

Yes. The self-employment tax rate is 15.3%. The rate consists of two parts: 12.4% for social security and 2.9% for Medicare. However, he will get a credit of half his self-employment tax, which represents the employer-equivalent portion of his self-employment tax. 

For tax purposes, self-employment income includes any part-time businesses or "side work" performed in which you are in business for yourself, rather than another person. You are also considered self-employed if you engage in business-like activities where you intend to make a profit.

If you do not think he is considered self-employed, you can have his 1099-NEC's flow to Other Income. It is important to note that if it is considered Other Income, he will not be able to deduct any expenses that relate to his 1099-NEC income. 

If you want his 1099-NEC's flow to Other Income (and not be classified as self-employed), please follow the instructions below:  

1. Open the tax return.
2. Search for 1099-NEC with the magnifying glass tool at the top of the page.
3. Click on the Jump to 1099-NEC link at the top of the search results. 
4. Click Edit next to your 1099-NEC. 
5. Continue past the data entered. 
6. On the page Guess what? You can deduct expenses for the example work, answer No, I don't have expenses related to this income. 
7. The amount from your 1099-NEC will flow to Other Income. 

@lj1130

[lj1130]

Thank you for the quick response.  I don't actually consider him self employed and these two were merely summer jobs while home from university and no permanent.  When I do treat these as Other Income, the Self Employment tax (15.3%) goes away, but then it continues to make me fill out form 8615 as if the income is unearned investment income.  It then asks for my details for purposes of the kiddie tax as if I am sheltering investment income and I'm not...its his 1099 earned income.  Is there a remedy here?  

[JamesG1]

What income did your son receive?  Was there anything other than W-2 and the 1099-NEC?

Unearned Income for purposes of Form 8615

Unearned income includes all taxable income other than earned income.  Unearned income includes taxable interest, ordinary dividends, capital gains (including capital gain distributions), rents, royalties, etc. It also includes taxable social security benefits, pension and annuity income, taxable scholarship and fellowship grants not reported on Form W-2, unemployment compensation, alimony, and income (other than earned income) received as the beneficiary of a trust.

Who Must File Form

IRS 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:
• a. Was under age 18 at the end of 2020,
• b. 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
• c. 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.

[lj1130]

No there was not any other income  than the W-2 and 1099-NEC.  He had a capital gain of under $1; nothing else that would be considered unearned and certainly not $2,200 if investment income.  As many times as I delete the form, it continues to present itself - unless I go the Schedule C route.

[JamesG1]

@lj1130

That's helpful.  Thanks for the info update.

The IRS default position is that IRS Form 1099-NEC box 1 income is self-employment income and should be reported on IRS 1040 Schedule C Profit and Loss From Business. 

For 2020, the IRS revived Form 1099-NEC to report this specific income rather than use IRS Form 1099-MISC box 7.

If the income is reported on Schedule C, there may be some deductible expenses to reduce the tax burden.  See this TurboTax Help.

Hope this helps.

[lj1130]

Thanks JamesG1.  Both you and Lena H have been helpful.  From what I gather, we essentially have two options, neither of which allows us to treat the income as earned in a similar way that we would with a W-2.  We can either go the Schedule C route and pay the requisite 15.3% employment tax (odd for a 22 year old who technically isn't self employed running his own business) and look to deduct what ever is appropriate...or we treat it as Other Income and are seemingly forced to fill out form 8615 as if it is unearned investment income.  In the latter case, the parent's tax details are brought into the mix and the liability rises..  Both seem a poor reflection of the ultimate reality, but if forced to choose between the two, I would lean towards the Schedule C argument, especially if there's no wiggle room with 8615.

[DianeW777]

Yes. The option that would be best is the Schedule C, for three reasons. 

1. Your son doing side work is considered self-employment (Forms 1099-NEC).  It is nonemployee compensation and by design is considered self-employment regardless of the amount of work or money earned. 
2. There is no 'wiggle room' on Form 8615.  Unearned income, which is not the case for your son, is going to be taxed at the parent's rate.
3. Any expenses necessary to produce this income is allowed to be used to arrive at the net profit.  Only the net profit will be subject to income tax and self-employment tax.

Self-employment has no special tax advantages that would eliminate reporting it as such at any age.

• IRS Topic 554: Self-employment Tax

[PPD123]

It seems this issue may be related to a glitch in the TurboTax software.  We have a similar situation--son who made money while also a student, received a 1095-NEC for the work that was done, and limited interest income )<$100).  In TurboTax in demographics and other areas, all questions related to the requirements for when someone needs to complete an 8615 are asked except the question about unearned income > $2200.  No matter where the 1099-NEC information is entered--we have tried as part of Business income (self-employment) as noted, or under 1099-MISC and other Common Income, or as Miscellaneous income--it generates the need to complete an 8615. 

On the review form, there is a section called Child 18-23 Smart Worksheet, with a check "Yes" to the following question:  "Was the child either 18 years old or a full-time student age 19 to 23 with unearned income more than $2,200 and their earned income did not exceed one-half of their support?"

This specific question never appears in questions asked earlier in TurboTax and the answer ("Yes") must be derived from other data that had been entered.  It must somehow code the 1099-NEC as "unearned income" no matter where or how it is entered into TurboTax.

We have cleared the entire form, reentered data, and seem to be unable to escape the requirement to complete an 8615 even though there is no unearned income > $2200.