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Is there Kiddie Tax- college student dependent child on parents return with $8,000 unemployment

JOHNNYCPA
Level 3

form 8615 only ask you if investment income is over $2,200. I answered No 

daughter is 19 years old a college student on parent's return.

she had $8,000 in unemployment   and $3000 in wages.

Is there kiddie tax? is unemployment uneraned income of kiddie tax?

Parents tax rate is 22%  and daughter rate is 10%

thanks john

 

 

 

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13 Replies 13
Just-Lisa-Now-
Level 15
Level 15

Any unearned income, not just investment income, is subject to kiddie tax.   The kiddie tax is on the kids return, with the 8615, you dont put the kids unemployment on the parents return.

Going to be a lot of teenagers that need to pay the piper this year.   They received lots of money they wouldnt normally have received and way more than they could have ever earned working in that period of time, so Im sure they can afford the taxes.


♪♫•*¨*•.¸¸♥Lisa♥¸¸.•*¨*•♫♪
JOHNNYCPA
Level 3

thanks Lisa

JOHNNYCPA
Level 3

proseries ( basic software) question is misleading on 8615 screen.  It states do you have investment income over $2,200 .  It should ask unearned income over $2,200.

Just-Lisa-Now-
Level 15
Level 15
Yes, the wording is bad. Generally unearned income by a teenager would be investment income, this 2020 unemployment situation just wasnt factored into the text on the screen.

♪♫•*¨*•.¸¸♥Lisa♥¸¸.•*¨*•♫♪
JOHNNYCPA
Level 3

maybe congress will change the law by excluding unemployment from the kiddie tax.

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Just-Lisa-Now-
Level 15
Level 15
Im not too optimistic that the unemployment bill thats out there will actually make it to law, but it sure would help lots of people with unemployment.

♪♫•*¨*•.¸¸♥Lisa♥¸¸.•*¨*•♫♪
JOHNNYCPA
Level 3

what bill?

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qbteachmt
Level 15

"what bill?"

Durbin's.

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Just-Lisa-Now-
Level 15
Level 15
sjrcpa
Level 15

They have bigger fish to fry - $1.9 billion trillion.


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BobKamman
Level 15

@sjrcpa "They have bigger fish to fry - $1.9 billion."

Well, actually, $1.9 trillion, but you're close.  

Unemployment is not the only problem when determining "unearned income."  It also includes pensions.  Many families entitled to military survivor pensions chose to divert this income to the kids because if paid as widow benefits, it would be reduced by VA benefits.  Or something like that. Then Congress changed the Kiddie Tax to make the rates the same as for trusts and estates, which hit the highest bracket in a short amount of time.  That didn't go over too well, so they changed it back to being taxed at the parental rate.  

I don't think it's mostly teen-agers who collected large sums of unemplooyment.  Most are the college kids in the 20-23 age range.  And I can remember clients who were full-time college students, 20 years ago, earning $20,000 up to $40,000 a year or more.  (In a couple cases, they were working on commission.)  The paltry $600 a week for a few months would not have matched their lost earnings. 

sjrcpa
Level 15

I was just coming back to correct that. Just a few zeroes.


ex-AllStar
qbteachmt
Level 15

"Is there kiddie tax? is unemployment uneraned income of kiddie tax?"

Yes. Yes.

Unemployment is treated the same as Investment earnings, in that it is Unearned.

Yes, some State's are making consideration for Unemployment.

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