Why do I have to fill out a Form 8615

[MaryM428]

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

Form 8615 Instructions

[PPD123]

But the first condition for completing an 8615 doesn't apply (see below); the only aspect of his taxes that puts him over $2200 is the 1099-NEC for work that he did.  This isn't unearned income and therefore since criterion #1 is not met, the 8615 shouldn't apply (all criteria must be met for the 8615 to be required.  It just seems like TurboTax is somehow categorizing the 1099-NEC as unearned income no matter where or how it is entered.

"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"

[LenaH]

Typically, a 1099-NEC will flow to a Schedule C (self-employment income). If it does not flow to a Schedule C, it usually goes to Other Income, which is a line on the return that could also reflect unearned income. In order to eliminate kiddie tax, you should have your child's 1099-NEC flow to a Schedule C. 

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 a 1099-NEC is entered without a corresponding Schedule C, then it is assumed to be unearned due to these guidelines for the purposes of calculating "kiddie tax".

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 can add a new business on this screen.

To confirm your 1099-NEC was linked to your Schedule C, please follow the instructions below:

1. Open your return.
2. Search for Sch C with the magnifying glass tool at the top of the page.
3. Click on the Jump to Sch C link at the top of the search results. 
4. On the page titled Your 2020 self-employed work summary, you should see your 1099-NEC listed with the corresponding amount. 
5. Click review next to the income from your 1099-NEC. 
6. Follow the on-screen instructions on the following pages. 

A Schedule C for your child's 1099-NEC will eliminate the kiddie tax. 

@PPD123

[lj1130]

Yes, agreed.  It seems that since Turbo Tax will not allow you to characterize the compensation as earned and avoid 8615, you are best to go the Schedule C route and pay self employment taxes (15.3%) on the earnings.  It's less than the kiddie tax and at least more commensurate with what the child was doing (earned income vs unearned investment income)  

[PPD123]

We had tried that but it ended up with requiring both SE tax AND having to complete an 8615.  Will try one more time to wipe all of the information, begin again, and follow the Schedule C route.

[CaptStone3]

Have the exact same problem.  I think the 1099-NEC miscoding as unearned income is the problem.  TURBOTAX NEEDS TO FIX IT.

[lj1130]

yes, I think they do need to fix it. I was given great advice (by Lena, I think) to answer "yes" when it says you have expenses to deduct...that should go the SE route and avoid the 8615

[PPD123]

We are using the Free File Program--could that be part of the issue?  When I click on the search hourglass, no search window comes up--it just takes me to a webpage with FAQs and a toll free number to call for help.

[PPD123]

Clearing the document, starting over, and completing the 1099-NEC as Business Income worked this time; it generated Self Employment tax due but no requirement for the Form 8615.

[lj1130]

Good, that is what I wound up doing and it seemed to work as well.

[saryinn]

I'm not clear with tax rules. I have 2 teenager  girls, living with me, receiving my benefits from SSA-1099. While

I file my 1040 income tax should I input a form 8615 somewhere if their Unearned income not to be added?

Please help!

[Cynthiad66]

You only need to file form 8615 If the child's unearned income is more than $2,200, use Form 8615 to figure the child's tax. For 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.

Please see the full instructions for Form 8615 in the link below:  IRS Instructions for Form 8615

[corriesmith99]

Hi - I'm a 22 year old dependent of my parents who has EARNED W-2 income from jobs worked last year. I do have a 1099-INT showing $45 in interest earned from a savings account. I receive the Zell Miller scholarship in Georgia, which covers full tuition each semester (~$5,400x2 for last year). This is automatically applied to my tuition at a state school. I am being required to fill out an 8615 form and on it, it says that I have $10,820 in UNEARNED income - this corresponds to the amount I received in scholarship money for 2020. 

Based on what I read on the IRS website, https://www.irs.gov/taxtopics/tc421, this scholarship is not taxable. I also gather that it does not count as income. Am I filling something out wrong? This has not happened in the past years I filed taxes in this same situation. I've checked multiple times and nothing I've said on TurboTax seems to indicate I received $10,800 of unearned income in the ways detailed earlier in this thread. 

Please help - I'm wracking my brain trying to understand this and not pay ~$1500 extra tax as indicated by this form. 

[AmyC]

You should not have 8615 on your return, delete it. That is for your child. See How to Delete.

A scholarship is taxable when it exceeds the tuition and required expenses. Room and board, spending money, etc would be taxable income.

Yours went to tuition directly so it would not be taxable income. You definitely have some entries not right. Is all of the information on your 1098-T? If so, you do not enter it again somewhere else.

We are glad to help, you may want to add a screenshot to help explain any more issues.

@corriesmith99

[ORblonde]

My son's total income (after the unemployment exemption) is just over $5000. This is Unemployment "unearned" income as well as some from a 1099-NEC. Without completing form 8615 he owes a reasonable amount (less than $1000) in taxes for both Fed & State. When completing form 8615, after adding my Capital Gains, the total tax owed jumps to almost $7000, which is more than his taxable income. Is this reality? Or is this a glitch of some kind?