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Filing Form 1040x

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Filing Form 1040x

Filing form 1040x Publication 929 - Main Content Table of Contents Part 1. Filing form 1040x Rules for All Dependents Filing RequirementsEarned Income Only Unearned Income Only Both Earned and Unearned Income Other Filing Requirements Should a Return Be Filed Even If Not Required? Responsibility for Child's ReturnThird party designee. Filing form 1040x Designated as representative. Filing form 1040x IRS notice. Filing form 1040x Standard DeductionStandard Deduction of Zero Dependent's Own Exemption Withholding From WagesExceptions. Filing form 1040x Part 2. Filing form 1040x Tax on Unearned Income of Certain ChildrenWhich Parent's Return To Use Parent's Election To Report Child's Interest and DividendsEffect of Making the Election Figuring Child's Income Figuring Additional Tax Tax for Certain Children Who Have Unearned IncomeProviding Parental Information (Form 8615, Lines A–C) Step 1. Filing form 1040x Figuring the Child's Net Unearned Income (Form 8615, Part I) Step 2. Filing form 1040x Figuring a Tentative Tax at the Parent's Tax Rate (Form 8615, Part II) Step 3. Filing form 1040x Figuring the Child's Tax (Form 8615, Part III) Alternative Minimum Tax Illustrated Example Part 1. Filing form 1040x Rules for All Dependents This part of the publication discusses the filing requirements for dependents, who is responsible for a child's return, how to figure a dependent's standard deduction and exemption (if any), and whether a dependent can claim exemption from federal income tax withholding. Filing form 1040x Filing Requirements Whether a dependent has to file a return generally depends on the amount of the dependent's earned and unearned income and whether the dependent is married, is age 65 or older, or is blind. Filing form 1040x A dependent may have to file a return even if his or her income is less than the amount that would normally require a return. Filing form 1040x See Other Filing Requirements, later. Filing form 1040x The following sections apply to dependents with: Earned income only, Unearned income only, and Both earned and unearned income. Filing form 1040x  To find out whether a dependent must file, read the section that applies, or use Table 1. Filing form 1040x Earned Income Only A dependent whose gross income is only earned income must file a return if the gross income is more than the amount listed in the following table. Filing form 1040x Marital Status Amount Single   Under 65 and not blind $6,100 Either 65 or older or blind $7,600 65 or older and blind $9,100 Married*   Under 65 and not blind $6,100 Either 65 or older or blind $7,300 65 or older and blind $8,500 *If a dependent's spouse itemizes deductions on a separate return, the dependent must file a return if the dependent has $5 or more of gross income (earned and/or unearned). Filing form 1040x Example. Filing form 1040x William is 16. Filing form 1040x His mother claims an exemption for him on her income tax return. Filing form 1040x He worked part time on weekends during the school year and full time during the summer. Filing form 1040x He earned $7,000 in wages. Filing form 1040x He did not have any unearned income. Filing form 1040x He must file a tax return because he has earned income only and his gross income is more than $6,100. Filing form 1040x If he is blind, he does not have to file a return because his gross income is not more than $7,600. Filing form 1040x Unearned Income Only A dependent whose gross income is only unearned income must file a return if the gross income is more than the amount listed in the following table. Filing form 1040x Marital Status Amount Single   Under 65 and not blind $1,000 Either 65 or older or blind $2,500 65 or older and blind $4,000 Married*   Under 65 and not blind $1,000 Either 65 or older or blind $2,200 65 or older and blind $3,400 *If a dependent's spouse itemizes deductions on a separate return, the dependent must file a return if the dependent has $5 or more of gross income (earned and/or unearned). Filing form 1040x Example. Filing form 1040x Sarah is 18 and single. Filing form 1040x Her parents can claim an exemption for her on their income tax return. Filing form 1040x She received $1,970 of taxable interest and dividend income. Filing form 1040x She did not work during the year. Filing form 1040x She must file a tax return because she has unearned income only and her gross income is more than $1,000. Filing form 1040x If she is blind, she does not have to file a return because she has unearned income only and her gross income is not more than $2,500. Filing form 1040x Election to report child's unearned income on parent's return. Filing form 1040x   A parent of a child under age 19 (or under age 24 if a full-time student) may be able to elect to include the child's interest and dividend income on the parent's return. Filing form 1040x See Parent's Election To Report Child's Interest and Dividends in Part 2. Filing form 1040x If the parent makes this election, the child does not have to file a return. Filing form 1040x Both Earned and Unearned Income A dependent who has both earned and unearned income generally must file a return if the dependent's gross income is more than line 5 of the following worksheet. Filing form 1040x Filing Requirement Worksheet for Most Dependents 1. Filing form 1040x Enter dependent's earned income plus $350     2. Filing form 1040x Minimum amount   $1,000 3. Filing form 1040x Compare lines 1 and 2. Filing form 1040x Enter the larger amount     4. Filing form 1040x Maximum amount   6,100 5. Filing form 1040x Compare lines 3 and 4. Filing form 1040x Enter the smaller amount     6. Filing form 1040x Enter the dependent's gross income. Filing form 1040x If line 6 is more than line 5, the dependent must file an income tax return. Filing form 1040x If the dependent is married and his or her spouse itemizes deductions on a separate return, the dependent must file an income tax return if line 6 is $5 or more. Filing form 1040x       Table 1. Filing form 1040x 2013 Filing Requirements for Dependents If your parent (or someone else) can claim you as a dependent, use this table to see if you must file a return. Filing form 1040x   See the definitions of “dependent,”“earned income,”“unearned income,” and “gross income” in the Glossary. Filing form 1040x   Single dependents—Were you either age 65 or older or blind?     No. Filing form 1040x You must file a return if any of the following apply. Filing form 1040x       Your unearned income was over $1,000. Filing form 1040x Your earned income was over $6,100. Filing form 1040x Your gross income was more than the larger of—       $1,000, or Your earned income (up to $5,750) plus $350. Filing form 1040x         Yes. Filing form 1040x You must file a return if any of the following apply. Filing form 1040x     Your unearned income was over $2,500 ($4,000 if 65 or older and blind), Your earned income was over $7,600 ($9,100 if 65 or older and blind), Your gross income was more than the larger of—       $2,500 ($4,000 if 65 or older and blind), or Your earned income (up to $5,750) plus $1,850 ($3,350 if 65 or older and blind). Filing form 1040x       Married dependents—Were you either age 65 or older or blind?     No. Filing form 1040x You must file a return if any of the following apply. Filing form 1040x       Your gross income was at least $5 and your spouse files a separate return and itemizes deductions. Filing form 1040x Your unearned income was over $1,000. Filing form 1040x Your earned income was over $6,100. Filing form 1040x Your gross income was more than the larger of—       $1,000, or Your earned income (up to $5,750) plus $350. Filing form 1040x       Yes. Filing form 1040x You must file a return if any of the following apply. Filing form 1040x       Your gross income was at least $5 and your spouse files a separate return and itemizes deductions. Filing form 1040x Your unearned income was over $2,200 ($3,400 if 65 or older and blind), Your earned income was over $7,300 ($8,500 if 65 or older and blind), Your gross income was more than the larger of—       $2,200 ($3,400 if 65 or older and blind), or Your earned income (up to $5,750) plus $1,550 ($2,750 if 65 or older and blind). Filing form 1040x       Example 1. Filing form 1040x Joe is 20, single, not blind, and a full-time college student. Filing form 1040x He does not provide more than half of his own support, and his parents claim an exemption for him on their income tax return. Filing form 1040x He received $200 taxable interest income and earned $2,750 from a part-time job. Filing form 1040x He does not have to file a tax return because his gross income of $2,950 ($200 interest plus $2,750 in wages) is not more than $3,100, the amount on line 5 of his filled-in Filing Requirement Worksheet for Most Dependents (shown next). Filing form 1040x Filled-in Example 1 Filing Requirement Worksheet  for Most Dependents 1. Filing form 1040x Enter dependent's earned income plus $350   $ 3,100 2. Filing form 1040x Minimum amount   1,000 3. Filing form 1040x Compare lines 1 and 2. Filing form 1040x Enter the larger amount   3,100 4. Filing form 1040x Maximum amount   6,100 5. Filing form 1040x Compare lines 3 and 4. Filing form 1040x Enter the smaller amount   3,100 6. Filing form 1040x Enter the dependent's gross income. Filing form 1040x If line 6 is more than line 5, the dependent must file an income tax return. Filing form 1040x If the dependent is married and his or her spouse itemizes deductions on a separate return, the dependent must file an income tax return if line 6 is $5 or more. Filing form 1040x   $ 2,950   Example 2. Filing form 1040x The facts are the same as in Example 1 except that Joe had $600 taxable interest income. Filing form 1040x He must file a tax return because his gross income of $3,350 ($600 interest plus $2,750 wages) is more than $3,100, the amount on line 5 of his filled-in worksheet (shown next). Filing form 1040x Filled-in Example 2 Filing Requirement Worksheet for Most Dependents 1. Filing form 1040x Enter dependent's earned income plus $350   $ 3,100 2. Filing form 1040x Minimum amount   1,000 3. Filing form 1040x Compare lines 1 and 2. Filing form 1040x Enter the larger amount   3,100 4. Filing form 1040x Maximum amount   6,100 5. Filing form 1040x Compare lines 3 and 4. Filing form 1040x Enter the smaller amount   3,100 6. Filing form 1040x Enter the dependent's gross income. Filing form 1040x If line 6 is more than line 5, the dependent must file an income tax return. Filing form 1040x If the dependent is married and his or her spouse itemizes deductions on a separate return, the dependent must file an income tax return if line 6 is $5 or more. Filing form 1040x   $ 3,350   Age 65 or older or blind. Filing form 1040x A dependent who is age 65 or older or blind must file a return if his or her gross income is more than line 7 of the following worksheet. Filing form 1040x Filing Requirement Worksheet  for Dependents Who Are Age 65 or Older or Blind 1. Filing form 1040x Enter dependent's earned income plus $350     2. Filing form 1040x Minimum amount   $1,000 3. Filing form 1040x Compare lines 1 and 2. Filing form 1040x Enter the larger amount     4. Filing form 1040x Maximum amount   6,100 5. Filing form 1040x Compare lines 3 and 4. Filing form 1040x Enter the smaller amount     6. Filing form 1040x Enter the amount from the following table that applies to the dependent       Marital Status Amount     Single         Either 65 or older or blind $1,500       65 or older and blind $3,000     Married         Either 65 or older or blind $1,200       65 or older and blind $2,400   7. Filing form 1040x Add lines 5 and 6. Filing form 1040x Enter the total     8. Filing form 1040x Enter the dependent's gross income. Filing form 1040x If line 8 is more than line 7, the dependent must file an income tax return. Filing form 1040x If the dependent is married and his or her spouse itemizes deductions on a separate return, the dependent must file an income tax return if line 8 is $5 or more     Example 3. Filing form 1040x The facts are the same as in Example 2 except that Joe is also blind. Filing form 1040x He does not have to file a return because his gross income of $3,350 is not more than $4,600, the amount on line 7 of his filled-in Filing Requirement Worksheet for Dependents Who Are Age 65 or Older or Blind (shown next). Filing form 1040x   Filled-in Example 3 Filing Requirement Worksheet  for Dependents Who Are Age 65 or Older or Blind 1. Filing form 1040x Enter dependent's earned income plus $350   $3,100 2. Filing form 1040x Minimum amount   1,000 3. Filing form 1040x Compare lines 1 and 2. Filing form 1040x Enter the larger amount   3,100 4. Filing form 1040x Maximum amount   6,100 5. Filing form 1040x Compare lines 3 and 4. Filing form 1040x Enter the smaller amount   3,100 6. Filing form 1040x Enter the amount from the following table that applies to the dependent   1,500   Marital Status Amount     Single         Either 65 or older or blind $1,500       65 or older and blind $3,000     Married         Either 65 or older or blind $1,200       65 or older and blind $2,400   7. Filing form 1040x Add lines 5 and 6. Filing form 1040x Enter the total   4,600 8. Filing form 1040x Enter the dependent's gross income. Filing form 1040x If line 8 is more than line 7, the dependent must file an income tax return. Filing form 1040x If the dependent is married and his or her spouse itemizes deductions on a separate return, the dependent must file an income tax return if line 8 is $5 or more   $3,350 Other Filing Requirements Some dependents may have to file a tax return even if their income is less than the amount that would normally require them to file a return. Filing form 1040x A dependent must file a tax return if he or she owes any other taxes, such as: Social security and Medicare taxes on tips not reported to his or her employer or on wages received from an employer who did not withhold these taxes, Uncollected social security and Medicare or railroad retirement taxes on tips reported to his or her employer or on group-term life insurance, Alternative minimum tax, Additional tax on a health savings account from Form 8889, Part III, Recapture taxes, such as the tax from recapture of an education credit, or Additional tax on a qualified plan, including an individual retirement arrangement (IRA), or other tax-favored account. Filing form 1040x But if the dependent is filing a return only because of this tax, the dependent can file Form 5329 by itself. Filing form 1040x A dependent must also file a tax return if he or she: Had wages of $108. Filing form 1040x 28 or more from a church or qualified church-controlled organization that is exempt from employer social security and Medicare taxes, or Had net earnings from self-employment of at least $400. Filing form 1040x Spouse itemizes. Filing form 1040x   A dependent must file a return if the dependent's spouse itemizes deductions on a separate return and the dependent has $5 or more of gross income (earned and/or unearned). Filing form 1040x Should a Return Be Filed Even If Not Required? Even if a dependent does not meet any of the filing requirements discussed earlier, he or she should file a tax return if either of the following applies. Filing form 1040x Income tax was withheld from his or her income. Filing form 1040x He or she qualifies for the earned income credit, additional child tax credit, health coverage tax credit, or refundable American opportunity education credit. Filing form 1040x See the tax return instructions to find out who qualifies for these credits. Filing form 1040x  By filing a return, the dependent can get a refund. Filing form 1040x Responsibility for Child's Return Generally, a child is responsible for filing his or her own tax return and for paying any tax, penalties, or interest on that return. Filing form 1040x If a child cannot file his or her own return for any reason, such as age, the child's parent, guardian, or other legally responsible person must file it for the child. Filing form 1040x Signing the child's return. Filing form 1040x   If the child cannot sign his or her return, a parent or guardian must sign the child's name followed by the words “By (signature), parent (or guardian) for minor child. Filing form 1040x ” Authority of parent or guardian. Filing form 1040x   A parent or guardian who signs a return on a child's behalf can deal with the IRS on all matters connected with the return. Filing form 1040x   In general, a parent or guardian who does not sign the child's return can only provide information concerning the child's return and pay the child's tax. Filing form 1040x That parent or guardian is not entitled to receive information from the IRS or legally bind the child to a tax liability arising from the return. Filing form 1040x Third party designee. Filing form 1040x   A child's parent or guardian who does not sign the child's return may be authorized, as a third party designee, to discuss the processing of the return with the IRS as well as provide information concerning the return. Filing form 1040x The child or the person signing the return on the child's behalf must check the “Yes” box in the “Third Party Designee” area of the return and name the parent or guardian as the designee. Filing form 1040x   If designated, a parent or guardian can respond to certain IRS notices and receive information about the processing of the return and the status of a refund or payment. Filing form 1040x This designation does not authorize the parent or guardian to receive any refund check, bind the child to any tax liability, or otherwise represent the child before the IRS. Filing form 1040x See the return instructions for more information. Filing form 1040x Designated as representative. Filing form 1040x   A parent or guardian who does not sign the child's return may be designated as the child's representative by the child or the person signing the return on the child's behalf. Filing form 1040x Form 2848, Power of Attorney and Declaration of Representative, is used to designate a child's representative. Filing form 1040x See Publication 947, Practice Before the IRS and Power of Attorney, for more information. Filing form 1040x   If designated, a parent or guardian can receive information about the child's return but cannot legally bind the child to a tax liability unless authorized to do so by the law of the state in which the child lives. Filing form 1040x IRS notice. Filing form 1040x   If you or the child receives a notice from the IRS concerning the child's return or tax liability, you should immediately inform the IRS that the notice concerns a child. Filing form 1040x The notice will show who to contact. Filing form 1040x The IRS will try to resolve the matter with the parent(s) or guardian(s) of the child consistent with their authority. Filing form 1040x Child's earnings. Filing form 1040x   For federal income tax purposes, amounts a child earns by performing services are included in the gross income of the child and not the gross income of the parent. Filing form 1040x This is true even if, under state law, the parent has the right to the earnings and may actually have received them. Filing form 1040x If the child does not pay the tax due on this income, the parent may be liable for the tax. Filing form 1040x Child's expenses. Filing form 1040x   Deductions for payments that are made out of a child's earnings are the child's, even if the payments are made by the parent. Filing form 1040x Example. Filing form 1040x You made payments on your child's behalf that are deductible as a business expense and a charitable contribution. Filing form 1040x You made the payments out of your child's earnings. Filing form 1040x These items can be deducted only on the child's return. Filing form 1040x Standard Deduction The standard deduction for an individual who can be claimed as a dependent on another person's tax return is generally limited to the larger of: $1,000, or The individual's earned income plus $350, but not more than the regular standard deduction (generally $6,100). Filing form 1040x However, the standard deduction may be higher for a dependent who: Is 65 or older, or Is blind. Filing form 1040x Certain dependents cannot claim any standard deduction. Filing form 1040x See Standard Deduction of Zero , later. Filing form 1040x Worksheet 1. Filing form 1040x   Use Worksheet 1 to figure the dependent's standard deduction. Filing form 1040x Worksheet 1. Filing form 1040x Standard Deduction Worksheet for Dependents Use this worksheet only if someone else can claim you (or your spouse, if filing jointly) as a dependent. Filing form 1040x If you were 65 or older and/or blind, check the correct number of boxes below. Filing form 1040x Put the total number of boxes checked in box c and go to line 1. Filing form 1040x a. Filing form 1040x You 65 or older   Blind   b. Filing form 1040x Your spouse, if claiming  spouse's exemption 65 or older   Blind   c. Filing form 1040x Total boxes checked         1. Filing form 1040x Enter your earned income (defined below) plus $350. Filing form 1040x If none, enter -0-. Filing form 1040x 1. Filing form 1040x     2. Filing form 1040x Minimum amount. Filing form 1040x   2. Filing form 1040x $1,000   3. Filing form 1040x Compare lines 1 and 2. Filing form 1040x Enter the larger of the two amounts here. Filing form 1040x 3. Filing form 1040x     4. Filing form 1040x Enter on line 4 the amount shown below for your filing status. Filing form 1040x       Single or Married filing separately—$6,100 Married filing jointly—$12,200 Head of household—$8,950 4. Filing form 1040x     5. Filing form 1040x Standard deduction. Filing form 1040x         a. Filing form 1040x Compare lines 3 and 4. Filing form 1040x Enter the smaller amount here. Filing form 1040x If under 65 and not blind, stop here. Filing form 1040x This is your standard deduction. Filing form 1040x Otherwise, go on to line 5b. Filing form 1040x 5a. Filing form 1040x     b. Filing form 1040x If 65 or older or blind, multiply $1,500 ($1,200 if married) by the number in box c above. Filing form 1040x Enter the result here. Filing form 1040x 5b. Filing form 1040x     c. Filing form 1040x Add lines 5a and 5b. Filing form 1040x This is your standard deduction for 2013. Filing form 1040x 5c. Filing form 1040x     Earned income includes wages, salaries, tips, professional fees, and other compensation received for personal services you performed. Filing form 1040x It also includes any amount received as a scholarship that you must include in income. Filing form 1040x   Example 1. Filing form 1040x Michael is single, age 15, and not blind. Filing form 1040x His parents can claim him as a dependent on their tax return. Filing form 1040x He has taxable interest income of $800 and wages of $150. Filing form 1040x He enters $500 (his earned income plus $350) on line 1 of Worksheet 1. Filing form 1040x On line 3, he enters $1,000, the larger of $500 or $1,000. Filing form 1040x Michael enters $6,100 on line 4. Filing form 1040x On line 5a, he enters $1,000, the smaller of $1,000 or $6,100. Filing form 1040x His standard deduction is $1,000. Filing form 1040x Example 2. Filing form 1040x Judy, a full-time student, is single, age 22, and not blind. Filing form 1040x Her parents can claim her as a dependent on their tax return. Filing form 1040x She has dividend income of $275 and wages of $2,500. Filing form 1040x She enters $2,850 (her earned income plus $350) on line 1 of Worksheet 1. Filing form 1040x On line 3, she enters $2,850, the larger of $2,850 or $1,000. Filing form 1040x She enters $6,100 on line 4. Filing form 1040x On line 5a, she enters $2,850 (the smaller of $2,850 or $6,100) as her standard deduction. Filing form 1040x Example 3. Filing form 1040x Amy, who is single, is claimed as a dependent on her parents' tax return. Filing form 1040x She is 18 years old and blind. Filing form 1040x She has taxable interest income of $1,000 and wages of $2,000. Filing form 1040x She enters $2,350 (her earned income plus $350) on line 1 of Worksheet 1. Filing form 1040x She enters $2,350 (the larger of $2,350 or $1,000) on line 3, $6,100 on line 4, and $2,350 (the smaller of $2,350 or $6,100) on line 5a. Filing form 1040x Because Amy is blind, she checks the box for blindness and enters “1” in box c at the top of Worksheet 1. Filing form 1040x She enters $1,500 (the number in box c times $1,500) on line 5b. Filing form 1040x Her standard deduction on line 5c is $3,850 ($2,350 + $1,500). Filing form 1040x Standard Deduction of Zero The standard deduction for the following dependents is zero. Filing form 1040x A married dependent filing a separate return whose spouse itemizes deductions. Filing form 1040x A dependent who files a return for a period of less than 12 months due to a change in his or her annual accounting period. Filing form 1040x A nonresident or dual-status alien dependent, unless the dependent is married to a U. Filing form 1040x S. Filing form 1040x citizen or resident alien at the end of the year and chooses to be treated as a U. Filing form 1040x S. Filing form 1040x resident for the year. Filing form 1040x See Publication 519, U. Filing form 1040x S. Filing form 1040x Tax Guide for Aliens, for information on making this choice. Filing form 1040x Example. Filing form 1040x Jennifer, who is a dependent of her parents, is entitled to file a joint return with her husband. Filing form 1040x However, her husband elects to file a separate return and itemize his deductions. Filing form 1040x Because he itemizes, Jennifer's standard deduction on her return is zero. Filing form 1040x She can, however, itemize any of her allowable deductions. Filing form 1040x Dependent's Own Exemption A person who can be claimed as a dependent on another taxpayer's return cannot claim his or her own exemption. Filing form 1040x This is true even if the other taxpayer does not actually claim the exemption. Filing form 1040x Example. Filing form 1040x James and Barbara can claim their child, Ben, as a dependent on their return. Filing form 1040x Ben is a college student who works during the summer and must file a tax return. Filing form 1040x Ben cannot claim his own exemption on his return. Filing form 1040x This is true even if James and Barbara do not claim him as a dependent on their return. Filing form 1040x Withholding From Wages Employers generally withhold federal income tax, social security tax, and Medicare tax from an employee's wages. Filing form 1040x If the employee claims exemption from withholding on Form W-4, the employer will not withhold federal income tax. Filing form 1040x The exemption from withholding does not apply to social security and Medicare taxes. Filing form 1040x Conditions for exemption from withholding. Filing form 1040x   An employee can claim exemption from withholding for 2014 only if he or she meets both of the following conditions. Filing form 1040x For 2013, the employee had a right to a refund of all federal income tax withheld because he or she had no tax liability. Filing form 1040x For 2014, the employee expects a refund of all federal income tax withheld because he or she expects to have no tax liability. Filing form 1040x Dependents. Filing form 1040x   An employee who is a dependent ordinarily cannot claim exemption from withholding if both of the following are true. Filing form 1040x The employee's gross income will be more than $1,000, the minimum standard deduction for 2014. Filing form 1040x The employee's unearned income will be more than $350. Filing form 1040x Exceptions. Filing form 1040x   An employee may be able to claim exemption from withholding even if the employee is a dependent, if the employee: Is age 65 or older, Is blind, or Will claim on his or her 2014 tax return: Adjustments to income, Tax credits, or Itemized deductions. Filing form 1040x The above exceptions do not apply to supplemental wages greater than $1,000,000. Filing form 1040x For more information, see Exemption From Withholding in chapter 1 of Publication 505. Filing form 1040x Example. Filing form 1040x Guy is 17 and a student. Filing form 1040x During the summer he works part time at a grocery store. Filing form 1040x He expects to earn about $1,200 this year. Filing form 1040x He also worked at the store last summer and received a refund of all his withheld income tax because he did not have a tax liability. Filing form 1040x The only other income he expects during the year is $375 interest on a savings account. Filing form 1040x He expects that his parents will be able to claim him as a dependent on their tax return. Filing form 1040x He is not blind and will not claim adjustments to income, itemized deductions, a higher standard deduction, or tax credits on his return. Filing form 1040x Guy cannot claim exemption from withholding when he fills out Form W-4 because his parents will be able to claim him as a dependent, his gross income will be more than $1,000 (the minimum standard deduction amount) and his unearned income will be more than $350. Filing form 1040x Claiming exemption from withholding. Filing form 1040x    To claim exemption from withholding, an employee must enter “Exempt” in the space provided on Form W-4, line 7. Filing form 1040x The employee must complete the rest of the form, as explained in the form instructions, and give it to his or her employer. Filing form 1040x Renewing an exemption from withholding. Filing form 1040x   An exemption from withholding is good for only one year. Filing form 1040x An employee must file a new Form W-4 by February 15 each year to continue the exemption. Filing form 1040x Part 2. Filing form 1040x Tax on Unearned Income of Certain Children The two rules that follow may affect the tax on the unearned income of certain children. Filing form 1040x If the child's interest and dividend income (including capital gain distributions) total less than $10,000, the child's parent may be able to choose to include that income on the parent's return rather than file a return for the child. Filing form 1040x (See Parent's Election To Report Child's Interest and Dividends , later. Filing form 1040x ) If the child's interest, dividends, and other unearned income total more than $2,000, part of that income may be taxed at the parent's tax rate instead of the child's tax rate. Filing form 1040x (See Tax for Certain Children Who Have Unearned Income , later. Filing form 1040x ) For these rules, the term “child” includes a legally adopted child and a stepchild. Filing form 1040x These rules apply whether or not the child is a dependent. Filing form 1040x These rules do not apply if neither of the child's parents were living at the end of the year. Filing form 1040x Which Parent's Return To Use If a child's parents are married to each other and file a joint return, use the joint return to figure the tax on the child's unearned income. Filing form 1040x The tax rate and other return information from that return are used to figure the child's tax as explained later under Tax for Certain Children Who Have Unearned Income . Filing form 1040x Parents Who Do Not File a Joint Return For parents who do not file a joint return, the following discussions explain which parent's tax return must be used to figure the tax. Filing form 1040x Only the parent whose tax return is used can make the election described under Parent's Election To Report Child's Interest and Dividends . Filing form 1040x Parents are married. Filing form 1040x   If the child's parents file separate returns, use the return of the parent with the greater taxable income. Filing form 1040x Parents not living together. Filing form 1040x   If the child's parents are married to each other but not living together, and the parent with whom the child lives (the custodial parent) is considered unmarried, use the return of the custodial parent. Filing form 1040x If the custodial parent is not considered unmarried, use the return of the parent with the greater taxable income. Filing form 1040x   For an explanation of when a married person living apart from his or her spouse is considered unmarried, see Head of Household in Publication 501. Filing form 1040x Parents are divorced. Filing form 1040x   If the child's parents are divorced or legally separated, and the parent who had custody of the child for the greater part of the year (the custodial parent) has not remarried, use the return of the custodial parent. Filing form 1040x Custodial parent remarried. Filing form 1040x   If the custodial parent has remarried, the stepparent (rather than the noncustodial parent) is treated as the child's other parent. Filing form 1040x Therefore, if the custodial parent and the stepparent file a joint return, use that joint return. Filing form 1040x Do not use the return of the noncustodial parent. Filing form 1040x   If the custodial parent and the stepparent are married, but file separate returns, use the return of the one with the greater taxable income. Filing form 1040x If the custodial parent and the stepparent are married but not living together, the earlier discussion under Parents not living together applies. Filing form 1040x Parents never married. Filing form 1040x   If a child's parents have never been married to each other, but lived together all year, use the return of the parent with the greater taxable income. Filing form 1040x If the parents did not live together all year, the rules explained earlier under Parents are divorced apply. Filing form 1040x Widowed parent remarried. Filing form 1040x   If a widow or widower remarries, the new spouse is treated as the child's other parent. Filing form 1040x The rules explained earlier under Custodial parent remarried apply. Filing form 1040x Parent's Election To Report Child's Interest and Dividends You may be able to elect to include your child's interest and dividend income (including capital gain distributions) on your tax return. Filing form 1040x If you do, your child will not have to file a return. Filing form 1040x You can make this election only if all the following conditions are met. Filing form 1040x Your child was under age 19 (or under age 24 if a full-time student) at the end of the year. Filing form 1040x Your child had income only from interest and dividends (including capital gain distributions and Alaska Permanent Fund dividends). Filing form 1040x The child's gross income was less than $10,000. Filing form 1040x The child is required to file a return unless you make this election. Filing form 1040x The child does not file a joint return for the year. Filing form 1040x No estimated tax payment was made for the year, and no overpayment from the previous year (or from any amended return) was applied to this year under your child's name and social security number. Filing form 1040x No federal income tax was withheld from your child's income under the backup withholding rules. Filing form 1040x You are the parent whose return must be used when applying the special tax rules for children. Filing form 1040x (See Which Parent's Return To Use , earlier. Filing form 1040x ) These conditions are also shown in Figure 1. Filing form 1040x Certain January 1 birthdays. Filing form 1040x   A child born on January 1, 1995, is considered to be age 19 at the end of 2013. Filing form 1040x You cannot make this election for such a child unless the child was a full-time student. Filing form 1040x   A child born on January 1, 1990, is considered to be age 24 at the end of 2013. Filing form 1040x You cannot make this election for such a child. Filing form 1040x How to make the election. Filing form 1040x    Make the election by attaching Form 8814 to your Form 1040 or Form 1040NR. Filing form 1040x (If you make this election, you cannot file Form 1040A or Form 1040EZ. Filing form 1040x ) Attach a separate Form 8814 for each child for whom you make the election. Filing form 1040x You can make the election for one or more children and not for others. Filing form 1040x Effect of Making the Election The federal income tax on your child's income may be more if you make the Form 8814 election. Filing form 1040x Rate may be higher. Filing form 1040x   If your child received qualified dividends or capital gain distributions, you may pay up to $100 more tax if you make this election instead of filing a separate tax return for the child. Filing form 1040x This is because the tax rate on the child's income between $1,000 and $2,000 is 10% if you make this election. Filing form 1040x However, if you file a separate return for the child, the tax rate may be as low as 0% (zero percent) because of the preferential tax rates for qualified dividends and capital gain distributions. Filing form 1040x Deductions you cannot take. Filing form 1040x   By making the Form 8814 election, you cannot take any of the following deductions that the child would be entitled to on his or her return. Filing form 1040x The additional standard deduction if the child is blind. Filing form 1040x The deduction for a penalty on an early withdrawal of your child's savings. Filing form 1040x Itemized deductions (such as your child's investment expenses or charitable contributions). Filing form 1040x Figure 1. Filing form 1040x Can You Include Your Child's Income On Your Tax Return? Please click here for the text description of the image. Filing form 1040x Figure 1. Filing form 1040x Can You Include Your Child's Income On Your Tax Return? Deductible investment interest. Filing form 1040x   If you use Form 8814, your child's unearned income is considered your unearned income. Filing form 1040x To figure the limit on your deductible investment interest, add the child's unearned income to yours. Filing form 1040x However, if your child received qualified dividends, capital gain distributions, or Alaska Permanent Fund dividends, see chapter 3 of Publication 550 for information about how to figure the limit. Filing form 1040x Alternative minimum tax. Filing form 1040x    If your child received tax-exempt interest (or exempt-interest dividends paid by a regulated investment company) from certain private activity bonds, you must determine if that interest is a tax preference item for alternative minimum tax (AMT) purposes. Filing form 1040x If it is, you must include it with your own tax preference items when figuring your AMT. Filing form 1040x See Form 6251, Alternative Minimum Tax—Individuals, and its instructions for details. Filing form 1040x Reduced deductions or credits. Filing form 1040x   If you use Form 8814, your increased adjusted gross income may reduce certain deductions or credits on your return, including the following. Filing form 1040x Deduction for contributions to a traditional individual retirement arrangement (IRA). Filing form 1040x Deduction for student loan interest. Filing form 1040x Itemized deductions for medical expenses, casualty and theft losses, and certain miscellaneous expenses. Filing form 1040x Credit for child and dependent care expenses. Filing form 1040x Child tax credit. Filing form 1040x Education tax credits. Filing form 1040x Earned income credit. Filing form 1040x Penalty for underpayment of estimated tax. Filing form 1040x   If you make this election for 2013 and did not have enough tax withheld or pay enough estimated tax to cover the tax you owe, you may be subject to a penalty. Filing form 1040x If you plan to make this election for 2014, you may need to increase your federal income tax withholding or your estimated tax payments to avoid the penalty. Filing form 1040x Get Publication 505 for more information. Filing form 1040x Figuring Child's Income Use Form 8814, Part I, to figure your child's interest and dividend income to report on your return. Filing form 1040x Only the amount over $2,000 is added to your income. Filing form 1040x The amount over $2,000 is shown on Form 8814, line 6. Filing form 1040x Unless the child's income includes qualified dividends or capital gain distributions (discussed next), the same amount is shown on Form 8814, line 12. Filing form 1040x Include the amount from Form 8814, line 12, on Form 1040 or Form 1040NR, line 21. Filing form 1040x If you file more than one Form 8814, include the total amounts from line 12 of all your Forms 8814 on Form 1040 or Form 1040NR, line 21. Filing form 1040x On the dotted line next to line 21, enter “Form 8814” and the total of the Form 8814, line 12 amounts. Filing form 1040x Note. Filing form 1040x The tax on the first $2,000 is figured on Form 8814, Part II. Filing form 1040x See Figuring Additional Tax , later. Filing form 1040x Qualified dividends. Filing form 1040x   Enter on Form 8814, line 2a, any ordinary dividends your child received. Filing form 1040x This amount may include qualified dividends. Filing form 1040x Qualified dividends are those dividends reported on Form 1040, line 9b, or Form 1040NR, line 10b, and are eligible for lower tax rates that apply to a net capital gain. Filing form 1040x For detailed information about qualified dividends, see Publication 550. Filing form 1040x   If your child received qualified dividends, the amount of these dividends that is added to your income must be reported on Form 1040, lines 9a and 9b, or Form 1040NR, lines 10a and 10b. Filing form 1040x You do not include these dividends on Form 8814, line 12, or on line 21 of Form 1040 or Form 1040NR. Filing form 1040x   Enter the child's qualified dividends on Form 8814, line 2b. Filing form 1040x But do not include this amount on Form 1040, lines 9a and 9b, or Form 1040NR, lines 10a and 10b. Filing form 1040x Instead, include the amount from Form 8814, line 9, on Form 1040, lines 9a and 9b, or Form 1040NR, lines 10a and 10b. Filing form 1040x (The amount on Form 8814, line 9, may be less than the amount on Form 8814, line 2b, because lines 7 through 12 of the form divide the $2,000 base amount on Form 8814, line 5, between the child's qualified dividends, capital gain distributions, and other interest and dividend income, reducing each of those amounts. Filing form 1040x ) Capital gain distributions. Filing form 1040x   Enter on Form 8814, line 3, any capital gain distributions your child received. Filing form 1040x The amount of these distributions that is added to your income must be reported on Schedule D (Form 1040), line 13, or, if you are not required to file Schedule D, on Form 1040, line 13, or Form 1040NR, line 14. Filing form 1040x You do not include it on Form 8814, line 12, or on line 21 of Form 1040 or Form 1040NR. Filing form 1040x   Include the amount from Form 8814, line 10, on Schedule D, line 13; Form 1040, line 13; or Form 1040NR, line 14, whichever applies. Filing form 1040x (The amount on Form 8814, line 10, may be less than the amount on Form 8814, line 3, because lines 7 through 12 of the form divide the $2,000 base amount on Form 8814, line 5, between the child's qualified dividends, capital gain distributions, and other interest and dividend income, reducing each of those amounts. Filing form 1040x ) Collectibles (28% rate) gain. Filing form 1040x    If any of the child's capital gain distributions are reported on Form 1099-DIV as collectibles (28% rate) gain, you must determine how much to also include on line 4 of the 28% Rate Gain Worksheet, in the instructions for Schedule D, line 18. Filing form 1040x Multiply the child's capital gain distribution included on Schedule D, line 13, by a fraction. Filing form 1040x The numerator is the part of the child's total capital gain distribution that is collectibles (28% rate) gain. Filing form 1040x The denominator is the child's total capital gain distribution. Filing form 1040x Enter the result on line 4 of the 28% Rate Gain Worksheet. Filing form 1040x Unrecaptured section 1250 gain. Filing form 1040x   If any of the child's capital gain distributions are reported on Form 1099-DIV as unrecaptured section 1250 gain, you must determine how much to include on line 11 of the Unrecaptured Section 1250 Gain Worksheet in the instructions for Schedule D, line 19. Filing form 1040x Multiply the child's capital gain distribution included on Schedule D, line 13, by a fraction. Filing form 1040x The numerator is the part of the child's total capital gain distribution that is unrecaptured section 1250 gain. Filing form 1040x The denominator is the child's total capital gain distribution. Filing form 1040x Enter the result on the Unrecaptured Section 1250 Gain Worksheet, line 11. Filing form 1040x Section 1202 gain. Filing form 1040x   If any of the child's capital gain distributions are reported as section 1202 gain (gain on qualified small business stock) on Form 1099-DIV, part or all of that gain may be eligible for the section 1202 exclusion. Filing form 1040x (For information about the exclusion, see chapter 4 of Publication 550. Filing form 1040x ) To figure that part, multiply the child's capital gain distribution included on Schedule D, line 13, by a fraction. Filing form 1040x The numerator is the part of the child's total capital gain distribution that is section 1202 gain. Filing form 1040x The denominator is the child's total capital gain distribution. Filing form 1040x Your section 1202 exclusion is generally 50% of the result, but may be subject to a limit. Filing form 1040x In some cases, the exclusion is more than 50%. Filing form 1040x See the instructions for Schedule D for details and information on how to report the exclusion amount. Filing form 1040x Example. Filing form 1040x Fred is 6 years old. Filing form 1040x In 2013, he received dividend income of $2,100, which included $1,575 of ordinary dividends and a $525 capital gain distribution from a mutual fund. Filing form 1040x (None of the distributions were reported on Form 1099-DIV as unrecaptured section 1250 gain, section 1202 gain, or collectibles (28% rate) gain. Filing form 1040x ) All of the ordinary dividends are qualified dividends. Filing form 1040x He has no other income and is not subject to backup withholding. Filing form 1040x No estimated tax payments were made under his name and social security number. Filing form 1040x Fred's parents elect to include Fred's income on their tax return instead of filing a return for him. Filing form 1040x They figure the amount to report on Form 1040, lines 9a and 9b, the amount to report on their Schedule D, line 13, and the amount to report on Form 1040, line 21, as follows. Filing form 1040x They leave lines 1a and 1b of Form 8814 blank because Fred does not have any interest income. Filing form 1040x They enter his ordinary dividends of $1,575 on lines 2a and 2b because all of Fred's ordinary dividends are qualified dividends. Filing form 1040x They enter the amount of Fred's capital gain distributions, $525, on line 3. Filing form 1040x Next, they add the amounts on lines 1a, 2a, and 3 and enter the result, $2,100, on line 4. Filing form 1040x They subtract the base amount on line 5, $2,000, from the amount on line 4, $2,100, and enter the result, $100, on line 6. Filing form 1040x This is the total amount from Form 8814 to be reported on their return. Filing form 1040x Next, they figure how much of this amount is qualified dividends and how much is capital gain distributions. Filing form 1040x They divide the amount on line 2b, $1,575, by the amount on line 4, $2,100. Filing form 1040x They enter the result, . Filing form 1040x 75, on line 7. Filing form 1040x They divide the amount on line 3, $525, by the amount on line 4, $2,100. Filing form 1040x They enter the result, . Filing form 1040x 25, on line 8. Filing form 1040x They multiply the amount on line 6, $100, by the decimal on line 7, . Filing form 1040x 75, and enter the result, $75, on line 9. Filing form 1040x They multiply the amount on line 6, $100, by the decimal on line 8, . Filing form 1040x 25, and enter the result, $25, on line 10. Filing form 1040x They include the amount from line 9, $75, on lines 9a and 9b of their Form 1040 and enter “Form 8814 – $75” on the dotted lines next to lines 9a and 9b. Filing form 1040x They include the amount from line 10, $25, on line 13 of their Schedule D (Form 1040) and enter “Form 8814 – $25” on the dotted line next to Schedule D, line 13. Filing form 1040x They enter $100 ($75 + $25) on line 11 and -0- ($100 – $100) on line 12. Filing form 1040x Because the amount on line 12 is -0-, they do not include any amount from Form 8814 on their Form 1040, line 21. Filing form 1040x Figuring Additional Tax Use Form 8814, Part II, to figure the tax on the $2,000 of your child's interest and dividends that you do not include in your income. Filing form 1040x This tax is added to the tax figured on your income. Filing form 1040x This additional tax is the smaller of: 10% x (your child's gross income − $1,000), or $100. Filing form 1040x Include the amount from line 15 of all your Forms 8814 in the total on Form 1040, line 44, or Form 1040NR, line 42. Filing form 1040x Check box a on Form 1040, line 44, or Form 1040NR, line 42. Filing form 1040x Tax for Certain Children Who Have Unearned Income If a child's interest, dividends, and other unearned income total more than $2,000, part of that income may be taxed at the parent's tax rate instead of the child's tax rate. Filing form 1040x If the parent does not or cannot choose to include the child's income on the parent's return, use Form 8615 to figure the child's tax. Filing form 1040x Attach the completed form to the child's Form 1040, Form 1040A, or Form 1040NR. Filing form 1040x When Form 8615 must be filed. Filing form 1040x   Form 8615 must be filed for a child if all of the following statements are true. Filing form 1040x The child's unearned income was more than $2,000. Filing form 1040x The child is required to file a return for 2013. Filing form 1040x The child either: Was under age 18 at the end of the year, Was age 18 at the end of the year and did not have earned income that was more than half of his or her support, or Was over age 18 and under age 24 at the end of the year, was a full-time student, and did not have earned income that was more than half of his or her support. Filing form 1040x At least one of the child's parents was alive at the end of 2013. Filing form 1040x The child does not file a joint return for 2013. Filing form 1040x These conditions are also shown in Figure 2. Filing form 1040x Certain January 1 birthdays. Filing form 1040x   Use the following chart to determine whether certain children with January 1 birthdays meet condition 3 under When Form 8615 must be filed. Filing form 1040x IF a child was born on. Filing form 1040x . Filing form 1040x . Filing form 1040x THEN, at the end of 2013, the child is considered to be. Filing form 1040x . Filing form 1040x . Filing form 1040x January 1, 1996 18* January 1, 1995 19** January 1, 1990 24*** *This child is not under age 18. Filing form 1040x The child meets condition 3 only if the child did not have earned income that was more than half of the child's support. Filing form 1040x  **This child meets condition 3 only if the child was a full-time student who did not have earned income that was more than half of the child's support. Filing form 1040x  ***Do not use Form 8615 for this child. Filing form 1040x Figure 2. Filing form 1040x Do You Have To Use Form 8615 To Figure Your Child's Tax? Please click here for the text description of the image. Filing form 1040x Figure 2. Filing form 1040x Do You Have To Use Form 8615 To Figure Your Child's Tax? Providing Parental Information (Form 8615, Lines A–C) On Form 8615, lines A and B, enter the parent's name and social security number. Filing form 1040x (If the parents filed a joint return, enter the name and social security number listed first on the joint return. Filing form 1040x ) On line C, check the box for the parent's filing status. Filing form 1040x See Which Parent's Return To Use, earlier, for information on which parent's return information must be used on Form 8615. Filing form 1040x Parent with different tax year. Filing form 1040x   If the parent and the child do not have the same tax year, complete Form 8615 using the information on the parent's return for the tax year that ends in the child's tax year. Filing form 1040x Example. Filing form 1040x Kimberly must use her mother's tax and taxable income to complete her Form 8615 for calendar year 2013 (January 1 – December 31). Filing form 1040x Kimberly's mother files her tax return on a fiscal year basis (July 1 – June 30). Filing form 1040x Kimberly must use the information on her mother's return for the tax year ending June 30, 2013, to complete her 2013 Form 8615. Filing form 1040x Parent's return information not known timely. Filing form 1040x   If the information needed from the parent's return is not known by the time the child's return is due (usually April 15), you can file the return using estimates. Filing form 1040x   You can use any reasonable estimate. Filing form 1040x This includes using information from last year's return. Filing form 1040x If you use an estimated amount on Form 8615, enter “Estimated” on the line next to the amount. Filing form 1040x   When you get the correct information, file an amended return on Form 1040X, Amended U. Filing form 1040x S. Filing form 1040x Individual Income Tax Return. Filing form 1040x Extension of time to file. Filing form 1040x   Instead of using estimates, you can get an automatic 6-month extension of time to file if, by the date your return is due, you file Form 4868, Application for Automatic Extension of Time To File U. Filing form 1040x S. Filing form 1040x Individual Income Tax Return. Filing form 1040x See the instructions for Form 4868 for details. Filing form 1040x    An extension of time to file is not an extension of time to pay. Filing form 1040x You must make an accurate estimate of the tax for 2013. Filing form 1040x If you do not pay the full amount due by the regular due date, the child will owe interest and may also be charged penalties. Filing form 1040x See Form 4868 and its instructions. Filing form 1040x Parent's return information not available. Filing form 1040x   If a child cannot get the required information about his or her parent's tax return, the child (or the child's legal representative) can request the necessary information from the Internal Revenue Service (IRS). Filing form 1040x How to request. Filing form 1040x   After the end of the tax year, send a signed, written request for the information to the Internal Revenue Service Center where the parent's return will be filed. Filing form 1040x (The IRS cannot process a request received before the end of the tax year. Filing form 1040x )    You should also consider getting an extension of time to file the child's return, because there may be a delay in getting the requested information. Filing form 1040x   The request must contain all of the following. Filing form 1040x A statement that you are making the request to comply with section 1(g) of the Internal Revenue Code and that you have tried to get the information from the parent. Filing form 1040x Proof of the child's age (for example, a copy of the child's birth certificate). Filing form 1040x Evidence the child has more than $2,000 of unearned income (for example, a copy of the child's prior year tax return or copies of Forms 1099 for the current year). Filing form 1040x The name, address, social security number (if known), and filing status (if known) of the parent whose information is to be shown on Form 8615. Filing form 1040x    A child's legal representative making the request should include a copy of his or her Power of Attorney, such as Form 2848, or proof of legal guardianship. Filing form 1040x Step 1. Filing form 1040x Figuring the Child's Net Unearned Income (Form 8615, Part I) The first step in figuring a child's tax using Form 8615 is to figure the child's net unearned income. Filing form 1040x To do that, use Form 8615, Part I. Filing form 1040x Line 1 (Unearned Income) If the child had no earned income, enter on this line the adjusted gross income shown on the child's return. Filing form 1040x Adjusted gross income is shown on Form 1040, line 38; Form 1040A, line 22; or Form 1040NR, line 37. Filing form 1040x Form 1040EZ and Form 1040NR-EZ cannot be used if Form 8615 must be filed. Filing form 1040x If the child had earned income, figure the amount to enter on Form 8615, line 1, by using the worksheet in the instructions for the form. Filing form 1040x However, use the following worksheet if: the child has excluded any foreign earned income, deducted a loss from self-employment, or has a net operating loss from another year. Filing form 1040x Alternate Worksheet for Form 8615, Line 1 A. Filing form 1040x Enter the amount from the child's Form 1040, line 22, or Form 1040NR, line 23   B. Filing form 1040x Enter the total of any net loss  from self-employment, any net operating loss deduction, any foreign earned income exclusion, and any foreign housing exclusion from the child's Form 1040 or Form 1040NR. Filing form 1040x Enter this total as a positive number (greater than zero)   C. Filing form 1040x Add line A and line B and  enter the total   D. Filing form 1040x Enter the child's earned income plus any amount from the child's Form 1040, line 30, or the child's Form 1040NR, line 30     Generally, the child's earned income is the total of the amounts reported on Form 1040, lines 7, 12, and 18 (if line 12 or 18 is a loss, use zero) or Form 1040NR, lines 8, 13, and 19 (if line 13 or 19 is a loss, use zero)   E. Filing form 1040x Subtract line D from line C. Filing form 1040x Enter the result here and on Form 8615, line 1   Unearned income defined. Filing form 1040x   Unearned income is generally all income other than salaries, wages, and other amounts received as pay for work actually performed. Filing form 1040x It includes taxable interest, dividends, capital gains (including capital gain distributions), the taxable part of social security and pension payments, certain distributions from trusts, and unemployment compensation. Filing form 1040x Unearned income includes amounts produced by assets the child obtained with earned income (such as interest on a savings account into which the child deposited wages). Filing form 1040x Nontaxable income. Filing form 1040x   For this purpose, unearned income includes only amounts the child must include in gross income. Filing form 1040x Nontaxable unearned income, such as tax-exempt interest and the nontaxable part of social security and pension payments, is not included. Filing form 1040x Capital loss. Filing form 1040x   A child's capital losses are taken into account in figuring the child's unearned income. Filing form 1040x Capital losses are first applied against capital gains. Filing form 1040x If the capital losses are more than the capital gains, the difference (up to $3,000) is subtracted from the child's interest, dividends, and other unearned income. Filing form 1040x Any difference over $3,000 is carried to the next year. Filing form 1040x Income from property received as a gift. Filing form 1040x   A child's unearned income includes all income produced by property belonging to the child. Filing form 1040x This is true even if the property was transferred to the child, regardless of when the property was transferred or purchased or who transferred it. Filing form 1040x   A child's unearned income includes income produced by property given as a gift to the child. Filing form 1040x This includes gifts to the child from grandparents or any other person and gifts made under the Uniform Gift to Minors Act. Filing form 1040x Example. Filing form 1040x Amanda Black, age 13, received the following income. Filing form 1040x Dividends—$800 Wages—$2,100 Taxable interest—$1,200 Tax-exempt interest—$100 Capital gains—$300 Capital losses—($200) The dividends were qualified dividends on stock given to her by her grandparents. Filing form 1040x Amanda's unearned income is $2,100. Filing form 1040x This is the total of the dividends ($800), taxable interest ($1,200), and capital gains reduced by capital losses ($300 − $200 = $100). Filing form 1040x Her wages are earned (not unearned) income because they are received for work actually performed. Filing form 1040x Her tax-exempt interest is not included because it is nontaxable. Filing form 1040x Trust income. Filing form 1040x   If a child is the beneficiary of a trust, distributions of taxable interest, dividends, capital gains, and other unearned income from the trust are unearned income to the child. Filing form 1040x   However, taxable distributions from a qualified disability trust are considered earned income for the purposes of completing Form 8615. Filing form 1040x See the Form 8615 instructions for details. Filing form 1040x Adjustment to income. Filing form 1040x   In figuring the amount to enter on line 1, the child's unearned income is reduced by any penalty on the early withdrawal of savings. Filing form 1040x Line 2 (Deductions) If the child does not itemize deductions on Schedule A (Form 1040 or Form 1040NR), enter $2,000 on line 2. Filing form 1040x If the child itemizes deductions, enter on line 2 the larger of: $1,000 plus the portion of the child's itemized deductions on Schedule A (Form 1040), line 29 (or Schedule A (Form 1040NR), line 15), that are directly connected with the production of the unearned income entered on line 1, or $2,000. Filing form 1040x Directly connected. Filing form 1040x   Itemized deductions are directly connected with the production of unearned income if they are for expenses paid to produce or collect taxable income or to manage, conserve, or maintain property held for producing income. Filing form 1040x These expenses include custodian fees and service charges, service fees to collect taxable interest and dividends, and certain investment counsel fees. Filing form 1040x    These expenses are added to certain other miscellaneous itemized deductions on Schedule A (Form 1040). Filing form 1040x Only the amount greater than 2% of the child's adjusted gross income can be deducted. Filing form 1040x See Publication 529, Miscellaneous Deductions, for more information. Filing form 1040x Example 1. Filing form 1040x Roger, age 12, has unearned income of $8,000, no other income, no adjustments to income, and itemized deductions of $300 (net of the 2%-of-adjusted-gross-income limit) that are directly connected with his unearned income. Filing form 1040x His adjusted gross income is $8,000, which is entered on Form 1040, line 38, and on Form 8615, line 1. Filing form 1040x Roger enters $2,000 on line 2 because that is more than the total of $1,000 plus his directly-connected itemized deductions of $300. Filing form 1040x Example 2. Filing form 1040x Eleanor, age 8, has unearned income of $16,000 and an early withdrawal penalty of $100. Filing form 1040x She has no other income. Filing form 1040x She has itemized deductions of $1,050 (net of the 2%-of-adjusted-gross-income limit) that are directly connected with the production of her unearned income. Filing form 1040x Her adjusted gross income, entered on line 1, is $15,900 ($16,000 − $100). Filing form 1040x The amount on line 2 is $2,050. Filing form 1040x This is the larger of: $1,000 plus the $1,050 of directly connected itemized deductions, or $2,000. Filing form 1040x Line 3 Subtract line 2 from line 1 and enter the result on this line. Filing form 1040x If zero or less, do not complete the rest of the form. Filing form 1040x However, you must still attach Form 8615 to the child's tax return. Filing form 1040x Figure the tax on the child's taxable income in the normal manner. Filing form 1040x Line 4 (Child's Taxable Income) Enter on line 4 the child's taxable income from Form 1040, line 43; Form 1040A, line 27; or Form 1040NR, line 41. Filing form 1040x Child files Form 2555 or 2555-EZ. Filing form 1040x   If the child files Form 2555 or 2555-EZ to claim the foreign earned income exclusion, housing exclusion, or housing deduction, the Foreign Earned Income Tax Worksheet (in the Form 1040 instructions) is used to figure the child's tax. Filing form 1040x Enter the amount from line 3 of the Foreign Earned Income Tax Worksheet as the child's taxable income on Form 8615, line 4. Filing form 1040x Line 5 (Net Unearned Income) A child's net unearned income cannot be more than his or her taxable income. Filing form 1040x Enter on Form 8615, line 5, the smaller of line 3 or line 4. Filing form 1040x This is the child's net unearned income. Filing form 1040x If zero or less, do not complete the rest of the form. Filing form 1040x However, you must still attach Form 8615 to the child's tax return. Filing form 1040x Figure the tax on the child's taxable income in the normal manner. Filing form 1040x Step 2. Filing form 1040x Figuring a Tentative Tax at the Parent's Tax Rate (Form 8615, Part II) The next step in completing Form 8615 is to figure a tentative tax on the child's net unearned income at the parent's tax rate. Filing form 1040x The tentative tax at the parent's tax rate is the difference between the tax on the parent's taxable income figured with the child's net unearned income (plus the net unearned income of any other child whose Form 8615 includes the tax return information of that parent) and the tax figured without it. Filing form 1040x When figuring the tentative tax at the parent's tax rate on Form 8615, do not refigure any of the exclusions, deductions, or credits on the parent's return because of the child's net unearned income. Filing form 1040x For example, do not refigure the medical expense deduction. Filing form 1040x Figure the tentative tax on Form 8615, lines 6 through 13. Filing form 1040x Line 6 (Parent's Taxable Income) Enter on line 6 the amount from the parent's Form 1040, line 43; Form 1040A, line 27; Form 1040EZ, line 6; Form 1040NR, line 41; or Form 1040NR-EZ, line 14. Filing form 1040x If the parent's taxable income is zero or less, enter zero on line 6. Filing form 1040x Parent files Form 2555 or 2555-EZ. Filing form 1040x   If the parent files Form 2555 or 2555-EZ to claim the foreign earned income exclusion, housing exclusion, or housing deduction, the Foreign Earned Income Tax Worksheet in the Form 1040 instructions is used to figure the parent's tax. Filing form 1040x Enter the amount from line 3 of the Foreign Earned Income Tax Worksheet as the parent's taxable income, on line 6 of Form 8615. Filing form 1040x Line 7 (Net Unearned Income of Other Children) If the tax return information of the parent is also used on any other child's Form 8615, enter on line 7 the total of the amounts from line 5 of all the other children's Forms 8615. Filing form 1040x Do not include the amount from line 5 of the Form 8615 being completed. Filing form 1040x (The term “other child” means any other child whose Form 8615 uses the tax information of the parent identified on Lines A and B of Form 8615. Filing form 1040x ) Example. Filing form 1040x Paul and Jane Persimmon have three children, Sharon, Jerry, and Mike, who must attach Form 8615 to their tax returns. Filing form 1040x The children's net unearned income amounts on line 5 of their Forms 8615 are: Sharon—$800 Jerry—$600 Mike—$1,000 Line 7 of Sharon's Form 8615 will show $1,600, the total of the amounts on line 5 of Jerry's and Mike's Forms 8615. Filing form 1040x Line 7 of Jerry's Form 8615 will show $1,800 ($800 + $1,000). Filing form 1040x Line 7 of Mike's Form 8615 will show $1,400 ($800 + $600). Filing form 1040x Other children's information not available. Filing form 1040x   If the net unearned income of the other children is not available when the return is due, either file the return using estimates or get an extension of time to file. Filing form 1040x Estimates and extensions are discussed earlier under Providing Parental Information (Form 8615, Lines A–C) . Filing form 1040x Line 8 (Parent's Taxable Income Plus Children's Net Unearned Income) Enter on this line the total of lines 5, 6, and 7. Filing form 1040x You must determine the amount of net capital gain and qualified dividends included on this line before completing Form 8615, line 9. Filing form 1040x Net capital gain. Filing form 1040x   Net capital gain is the smaller of the gain, if any, on Schedule D (Form 1040), line 15, or the gain, if any, on Schedule D, line 16. Filing form 1040x If Schedule D is not required, it is the amount on Form 1040, line 13; Form 1040A, line 10; or Form 1040NR, line 14. Filing form 1040x Qualified dividends. Filing form 1040x   Qualified dividends are those dividends reported on line 9b of Form 1040 or Form 1040A, or line 10b of Form 1040NR. Filing form 1040x Net capital gain and qualified dividends on line 8. Filing form 1040x   If neither the child, nor the parent, nor any other child has net capital gain, the net capital gain on line 8 is zero. Filing form 1040x   If neither the child, nor the parent, nor any other child has qualified dividends, the amount of qualified dividends on line 8 is zero. Filing form 1040x   If the child, parent, or any other child has net capital gain, figure the amount of net capital gain included on line 8 by adding together the net capital gain amounts included on lines 5, 6, and 7 of Form 8615. Filing form 1040x   If the child, parent, or any other child has qualified dividends, figure the amount of qualified dividends included on line 8 by adding together the qualified dividend amounts included on lines 5, 6, and 7. Filing form 1040x   Use the instructions for Form 8615, line 8, including the appropriate Line 5 Worksheet, to find these amounts. Filing form 1040x See the instructions for Form 8615 for more details. Filing form 1040x Note. Filing form 1040x The amount of any net capital gain or qualified dividends is not separately reported on line 8. Filing form 1040x It is  needed, however, when figuring the tax on line 9. Filing form 1040x Line 9 (Tax on Parent's Taxable Income Plus Children's Net Unearned Income) Figure the tax on the amount on line 8 using the Tax Table, the Tax Computation Worksheet, the Qualified Dividends and Capital Gain Tax Worksheet (in the Form 1040, 1040A, or 1040NR instructions), the Schedule D Tax Worksheet (in the Schedule D instructions), or Schedule J (Form 1040), as follows. Filing form 1040x If line 8 does not include any net capital gain or qualified dividends, use the Tax Table or Tax Computation Worksheet to figure this tax. Filing form 1040x But if Schedule J, Income Averaging for Farmers and Fishermen, is used to figure the tax on the parent's return, use it to figure this tax. Filing form 1040x If line 8 includes any net capital gain or qualified dividends, use the Qualified Dividends and Capital Gain Tax Worksheet to figure this tax. Filing form 1040x For details, see the instructions for Form 8615, line 9. Filing form 1040x However, if the child, parent, or any other child has 28% rate gain or unrecaptured section 1250 gain, use the Schedule D Tax Worksheet. Filing form 1040x But if Schedule J is used to figure the tax on the parent's return, use it to figure this tax. Filing form 1040x Child files Form 2555 or 2555-EZ. Filing form 1040x   If line 8 includes any net capital gain or qualified dividends and the child, or any other child filing Form 8615, also files Form 2555 or 2555-EZ, use Using the Schedule D Tax Worksheet for line 9 tax, next, to figure the line 9 tax. Filing form 1040x Using the Schedule D Tax Worksheet for line 9 tax. Filing form 1040x    Use the Schedule D Tax Worksheet (in the Schedule D instructions) to figure the line 9 tax on Form 8615 if the child, parent, or any other child has unrecaptured section 1250 gain or 28% rate gain. Filing form 1040x If you must use the Schedule D Tax Worksheet, first complete any Schedule D and any actual Schedule D Tax Worksheet required for the child, parent, or any other child. Filing form 1040x Then figure the line 9 tax using another Schedule D Tax Worksheet. Filing form 1040x (Do not attach this Schedule D Tax Worksheet to the child's return. Filing form 1040x )   Complete this Schedule D Tax Worksheet as follows. Filing form 1040x On line 1, enter the amount from Form 8615, line 8. Filing form 1040x On line 2, enter the qualified dividends included on Form 8615, line 8. Filing form 1040x (See the earlier discussion for line 8. Filing form 1040x ) On line 3, enter the total of the amounts, if any, on line 4g of all Forms 4952 filed by the child, parent, or any other child. Filing form 1040x On line 4, enter the total of the amounts, if any, on line 4e of all Forms 4952 filed by the child, parent, or any other child. Filing form 1040x If applicable, include instead the smaller amount entered on the dotted line next to line 4e. Filing form 1040x On lines 5 and 6, follow the worksheet instructions. Filing form 1040x On line 7, enter the net capital gain included on Form 8615, line 8. Filing form 1040x (See the earlier discussion for line 8. Filing form 1040x ) On lines 8 through 10, follow the worksheet instructions. Filing form 1040x On line 11, enter zero if neither the child, nor the parent, nor any other child has unrecaptured section 1250 gain (Schedule D, line 19) or 28% rate gain (Schedule D, line 18). Filing form 1040x Otherwise, enter the amount of unrecaptured section 1250 gain and 28% rate gain included in the net capital gain on line 8 of Form 8615. Filing form 1040x Figure these amounts as explained later under Figuring unrecaptured section 1250 gain (line 11) and Figuring 28% rate gain (line 11). Filing form 1040x If the Foreign Earned Income Tax Worksheet was used to figure the parent's tax or the tax of any child, go to step 10 below. Filing form 1040x Otherwise, skip steps 10, 11, and 12 below, and go to step 13. Filing form 1040x Determine whether there is a line 8 capital gain excess as follows. Filing form 1040x Add the amounts on line 2 of all Foreign Earned Income Tax Worksheets completed by the parent or any child for whom Form 8615 is filed. Filing form 1040x (But for each child do not add more than the excess, if any, of the amount on line 5 of the child's Form 8615 over the child's taxable income on Form 1040, line 43; Form 1040A, line 27; or Form 1040NR, line 41. Filing form 1040x ) Subtract (a) from the amount on line 1 of this Schedule D Tax Worksheet. Filing form 1040x Subtract (b) from the amount on line 10 of this Schedule D Tax Worksheet. Filing form 1040x If the result is more than zero, that amount is the line 8 capital gain excess. Filing form 1040x If the result is zero or less, there is no line 8 capital gain excess. Filing form 1040x If there is no line 8 capital gain excess, skip step 12 below and go to step 13. Filing form 1040x If there is a line 8 capital gain excess, complete a second Schedule D Tax Worksheet as instructed above and in step 13, but in its entirety and with the following additional modifications. Filing form 1040x (These modifications are to be made only for purposes of filling out this additional Schedule D Tax Worksheet. Filing form 1040x ) Reduce the amount you would otherwise enter on line 9 (but not below zero) by the line 8 capital gain excess. Filing form 1040x Reduce the amount you would otherwise enter on line 6 (but not below zero) by any of the line 8 capital gain excess not used in (a) above. Filing form 1040x If the child, parent, or any other child has 28% rate gain, reduce the amount you would otherwise enter on line 8 of Worksheet 1 for Line 11 of the Schedule D Tax Worksheet – 28% Rate Gain (Line 9 Tax), shown later, (but not below zero) by the line 8 capital gain excess, and refigure the amount on line 11 of this Schedule D Tax Worksheet. Filing form 1040x If the child, parent, or any other child has unrecaptured section 1250 gain, reduce the amount you would otherwise enter on line 8 of Worksheet 2 for Line 11 of the Schedule D Tax Worksheet – Unrecaptured Section 1250 Gain (Line 9 Tax) (but not below zero) by the line 8 capital gain excess not used in 12(c), and refigure the amount on line 11 of this Schedule D Tax Worksheet. Filing form 1040x Complete lines 12 through 45 following the worksheet instructions. Filing form 1040x Use the parent's filing status to complete lines 15, 42, and 44. Filing form 1040x Enter the amount from line 45 of this Schedule D Tax Worksheet on Form 8615, line 9, and check the box on that line
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Funeral Planning Checklist

  • Plan ahead.
  • Shop around and compare prices in advance.
  • Ask for a price list.
  • Resist pressure.
  • Avoid emotional overspending.
  • Recognize your rights.
  • Apply the smart shopping techniques you'd use for other major purchases.

Planning a Funeral

One of the most expensive purchases many consumers will ever make is the arrangement of a funeral. A traditional burial, including a casket and vault, costs about $7,000. Extras such as flowers, obituary notices, cards, and limousines can add thousands of dollars more. At such a highly emotional time, many people are easily swayed to believe that their decisions reflect how they feel about the deceased and wind up spending more than necessary.

Most funeral providers are professionals who work to serve their clients' needs and best interests. Unfortunately, some do not. They may take advantage of clients by insisting on unnecessary services, marking up prices and overcharging. That's why there is a federal law, called the Funeral Rule, which regulates the actions of funeral directors, homes and services.

Comparison shopping, either in person or by phone, can save you money and is much easier when done in advance. Many funeral homes will also send you a price list by mail, but this is not required by law.

If you have a problem concerning funeral matters, it's best to try to resolve it first with the funeral director. If you are dissatisfied, the Funeral Consumer's Alliance may be able to advise you on how best to resolve your issue. You can also contact your state or local consumer protection agencies; or the Funeral Service Consumer Assistance Program at 1-800-662-7666. Most states have a licensing board that regulates the funeral industry. You can contact the board in your state for information or help.

Many funeral providers offer a variety of package plans that include products and services that are most commonly sold. Keep in mind, you are not obligated to buy a package plan; you have the right to buy the individual products and services you prefer. As outlined by the Funeral Rule:

  • You have the right to choose the funeral goods and services you want (with some exceptions).
  • The funeral provider must state this "Rule" in writing on the general price list.
  • If state or local law requires you to buy any particular item, the funeral provider must disclose it on the price list, with a reference to the specific law.
  • The funeral provider may not refuse, or charge a fee, to handle a casket that you bought elsewhere.
  • A funeral provider that offers cremations must make alternative containers available.

Planning ahead is the best way to make informed decisions about funeral arrangements. An advanced plan also spares your family from having to make choices while grieving and under time constraints. Every family is different, and funeral arrangements are influenced by religious and cultural traditions, budgets and personal preferences.

You are not legally required to use a funeral home to plan and conduct a funeral. But most people find that the services of a professional funeral home make it easier.

Prepaying for a Funeral

Millions of Americans have entered into contracts to prearrange their funerals and prepay some or all of the expenses involved. Various states have laws to help ensure that these advance payments are available to pay for the funeral products and services when they're needed; however, protections vary widely from state to state. Some state laws require the funeral home or cemetery to place a percentage of the prepayment in a state-regulated trust or to purchase a life insurance policy with the death benefits assigned to the funeral home or cemetery.

The Filing Form 1040x

Filing form 1040x 3. Filing form 1040x   Gifts Table of Contents If you give gifts in the course of your trade or business, you can deduct all or part of the cost. Filing form 1040x This chapter explains the limits and rules for deducting the costs of gifts. Filing form 1040x $25 limit. Filing form 1040x   You can deduct no more than $25 for business gifts you give directly or indirectly to each person during your tax year. Filing form 1040x A gift to a company that is intended for the eventual personal use or benefit of a particular person or a limited class of people will be considered an indirect gift to that particular person or to the individuals within that class of people who receive the gift. Filing form 1040x   If you give a gift to a member of a customer's family, the gift is generally considered to be an indirect gift to the customer. Filing form 1040x This rule does not apply if you have a bona fide, independent business connection with that family member and the gift is not intended for the customer's eventual use. Filing form 1040x   If you and your spouse both give gifts, both of you are treated as one taxpayer. Filing form 1040x It does not matter whether you have separate businesses, are separately employed, or whether each of you has an independent connection with the recipient. Filing form 1040x If a partnership gives gifts, the partnership and the partners are treated as one taxpayer. Filing form 1040x Example. Filing form 1040x Bob Jones sells products to Local Company. Filing form 1040x He and his wife, Jan, gave Local Company three gourmet gift baskets to thank them for their business. Filing form 1040x They paid $80 for each gift basket, or $240 total. Filing form 1040x Three of Local Company's executives took the gift baskets home for their families' use. Filing form 1040x Bob and Jan have no independent business relationship with any of the executives' other family members. Filing form 1040x They can deduct a total of $75 ($25 limit × 3) for the gift baskets. Filing form 1040x Incidental costs. Filing form 1040x   Incidental costs, such as engraving on jewelry, or packaging, insuring, and mailing, are generally not included in determining the cost of a gift for purposes of the $25 limit. Filing form 1040x   A cost is incidental only if it does not add substantial value to the gift. Filing form 1040x For example, the cost of gift wrapping is an incidental cost. Filing form 1040x However, the purchase of an ornamental basket for packaging fruit is not an incidental cost if the value of the basket is substantial compared to the value of the fruit. Filing form 1040x Exceptions. Filing form 1040x   The following items are not considered gifts for purposes of the $25 limit. Filing form 1040x An item that costs $4 or less and: Has your name clearly and permanently imprinted on the gift, and Is one of a number of identical items you widely distribute. Filing form 1040x Examples include pens, desk sets, and plastic bags and cases. Filing form 1040x Signs, display racks, or other promotional material to be used on the business premises of the recipient. Filing form 1040x    Figure B. Filing form 1040x When Are Transportation Expenses Deductible? Most employees and self-employed persons can use this chart. Filing form 1040x (Do not use this chart if your home is your principal place of business. Filing form 1040x See Office in the home . Filing form 1040x ) Please click here for the text description of the image. Filing form 1040x Figure B. Filing form 1040x When Are Local Transportation Expenses Deductible?TAs for Figure B are: Reg 1. Filing form 1040x 162-1(a); RR 55–109; RR 94–47 Gift or entertainment. Filing form 1040x   Any item that might be considered either a gift or entertainment generally will be considered entertainment. Filing form 1040x However, if you give a customer packaged food or beverages you intend the customer to use at a later date, treat it as a gift. Filing form 1040x    If you give a customer tickets to a theater performance or sporting event and you do not go with the customer to the performance or event, you have a choice. Filing form 1040x You can treat the cost of the tickets as either a gift expense or an entertainment expense, whichever is to your advantage. Filing form 1040x   You can change your treatment of the tickets at a later date by filing an amended return. Filing form 1040x Generally, an amended return must be filed within 3 years from the date the original return was filed or within 2 years from the time the tax was paid, whichever is later. Filing form 1040x    If you go with the customer to the event, you must treat the cost of the tickets as an entertainment expense. Filing form 1040x You cannot choose, in this case, to treat the cost of the tickets as a gift expense. Filing form 1040x Prev  Up  Next   Home   More Online Publications