Source: https://www.scribd.com/document/545999/US-Internal-Revenue-Service-p929-1998
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US Internal Revenue Service: p929--1998 | Alternative Minimum Tax | Withholding Tax
Investment income of child under age 14. If a child's investment income is more than a certain amount, part of it may be taxed at the parents' rate. This amount has increased from $1,300 in 1997 to $1,400 in 1998. See Tax for Children Under Age 14 Who Have Investment Income of More Than $1,400 in Part 2. Filing requirements. The amount of gross income that dependents can have during the year without having to file a return has increased. See Filing Requirements in Part 1 for more information. Standard deduction. The minimum standard deduction for dependents has increased from $650 in 1997 to $700 in 1998. The standard deduction for many dependents with earned income (wages, tips, etc.) has increased. See Standard Deduction in Part 1 for more information. Alternative minimum tax. The limit on the exemption amount for figuring the alternative minimum tax of a child filing Form 8615 has increased to the child's earned income plus $5,000. See Alternative Minimum Tax, in Part 2.
Parent's election to report child's interest and dividends. You may be able to elect to include your child's interest and dividends on your tax return. If you make this election, the child does not have to file a return. See Parent's Election To Report Child's Interest and Dividends in Part 2. Social security number (SSN). Dependents who are required to file a tax return must have an SSN. To apply for an SSN, Form SS-5 must be filed with the Social Security Administration. It usually takes about 2 weeks to get an SSN.
Example. Kim is 18 and single. Her parents can claim an exemption for her on their income tax return. She received $850 of taxable interest and dividend income. She did not work during the year. She must file a tax return because she has unearned income only and her total income of $850 is more than $700. If she were blind, she would not have to file a return because she has unearned income only and her total income is not more than $1,750.
Election to report child's unearned income on parent's return. A parent of a child under age 14 may be able to elect to include the child's interest and dividend income (including Alaska Permanent Fund dividends) on the parent's return. See Parent's Election To Report Child's Interest and Dividends in Part 2. If the parent makes this election, the child does not have to file a return.
Marital Status Amount Single Under 65 and not blind ............................ $4,250 Either 65 or older or blind ........................ $5,300 65 or older and blind ............................... $6,350 Married* Under 65 and not blind ............................ $3,550 Either 65 or older or blind ........................ $4,400 65 or older and blind ............................... $5,250 *If a dependent's spouse itemizes deductions on a separate return, the dependent must file a return if the dependent has at least $5 of gross income (earned and/or unearned).
1. Enter dependent's earned income plus $250. ....................................................... 2. Minimum amount ..................................... 3. Compare lines 1 and 2. Enter the larger amount .................................................... 4. Enter the appropriate amount from the following table ......................................... Marital Status Single Married Amount $4,250 $3,550 $700
Example. William is 16. His mother claims an exemption for him on her income tax return. He worked part time on weekends during the school year and full time during the summer. He earned $4,400 in wages. He did not have any unearned income. He must file a tax return because he has earned income only and his total income is more than $4,250. If he were blind, he would not have to file a return because his total income is not more than $5,300.
Table 1. 1998 Filing Requirements for Dependents
If you are a dependent of your parent (or someone else), use this table to see if you must file a return. See the definitions of “dependent”, “earned income”, and “unearned income” in the Glossary. Single dependents—Were you either age 65 or older or blind? No. You must file a return if any of the following apply. ● Your earned income was more than $4,250. ● Your unearned income was more than $700. ● Your gross income was more than The larger of: ● $700, or ● Your earned income (up to $4,000) plus $250. Yes. You must file a return if any of the following apply. ● Your earned income was over $5,300 ($6,350 if 65 or older and blind), ● Your unearned income was over $1,750 ($2,800 if 65 or over and blind), ● Your gross income was more than— The larger of: This amount: $700 or your earned income (up to $4,000) plus $250 PLUS $1,050 ($2,100 if 65 or older and blind)
Filled-in Example 1 for Joe Filing Requirement Worksheet for Most Dependents
1. Enter dependent's earned income plus $250. ....................................................... $2,750 2. Minimum amount ..................................... $700 3. Compare lines 1 and 2. Enter the larger amount .................................................... 2,750 4. Enter the appropriate amount from the following table ......................................... 4,250 Marital Status Single Married Amount $4,250 $3,550
Married dependents—Were you either age 65 or older or blind? No. You must file a return if either of the following apply. ● Your gross income was at least $5 and your spouse files a separate return and itemizes deductions. ● Your earned income was more than $3,550. ● Your unearned income was more than $700. ● Your gross income was more than The larger of: ● $700, or ● Your earned income (up to $3,300) plus $250. Yes. You must file a return if any of the following apply. ● Your earned income was over $4,400 ($5,250 if 65 or older and blind), ● Your unearned income was over $1,550 ($2,400 if 65 or over and blind), ● Your gross income was at least $5 and your spouse files a separate return and itemizes deductions. ● Your gross income was more than— The larger of: This amount: ● $700 or ● Your earned income (up to $3,300) plus $250 PLUS $850 ($1,700 if 65 or older and blind)
1. Enter dependent's earned income plus $250 ........................................................ 2. Minimum amount ..................................... 3. Compare lines 1 and 2. Enter the larger amount .................................................... 4. Enter the appropriate amount from the following table ......................................... Marital Status Single Married Amount $4,250 $3,550 $700
Example 3. The facts are the same as in Example 2 except that Joe is also blind. He would not have to file a return because his total income of $2,900 is not more than $3,800 (figured by filling in the Filing Requirement Worksheet for Dependents Who Are 65 or Older and/or Blind, as shown next).
1. Enter dependent's earned income plus $250 ........................................................ $2,750 2. Minimum amount ..................................... $700 3. Compare lines 1 and 2. Enter the larger amount .................................................... $2,750 4. Enter the appropriate amount from the following table ......................................... $4,250 Marital Status Single Married Amount $4,250 $3,550
Example 1. Joe is 20, single, and a fulltime college student. His parents provide most of his support and claim an exemption for him on their income tax return. He received $200 taxable interest income and earned $2,500 from a part-time job. He does not have to file a tax return because his total income of $2,700 ($200 interest plus $2,500 in wages) is not more than $2,750 (figured by filling in the Filing Requirement Worksheet for Most Dependents, as shown next).
5. Compare lines 3 and 4. Enter the smaller amount .................................................... $2,750
6. Enter the amount from the following table that applies to the dependent ................. $1,050 Marital Status Single Either 65 or older or blind 65 or older and blind Married Either 65 or older or blind 65 or older and blind Amount $1,050 $2,100 $850 $1,700
person's tax return is generally limited to the larger of: 1) $700, or 2) The individual's earned income plus $250, but not more than the regular standard deduction (generally $4,250). However, the standard deduction for a dependent who is 65 or older or blind may be higher. Certain dependents cannot claim any standard deduction. See Standard Deduction of Zero, later. Table 2. Table 2 is used to figure the dependent's standard deduction.
7. Add lines 5 and 6. Enter the total .......................................... $3,800 8. Enter the dependent's gross (total) income ........................................................ $2,900 If line 8 is more than line 7, the dependent must file an income tax return.
Example 1. Michael is single, 15, and not blind. His parents can claim him as a dependent on their tax return. He has taxable interest income of $800 and wages of $150. He enters his earned income plus $250 ($400), on line 1 of Table 2. On line 3, he enters $700, the larger of $400 and $700. Michael enters $4,250 on line 4. On line 5a, he enters $700, the smaller of $700 and $4,250. His standard deduction is $700. Example 2. Judy, a full-time student, is single, 22, and not blind. Her parents can claim her as a dependent on their tax return. She has dividend income of $275 and wages of $2,500. She enters her earned income plus $250 ($2,750) on line 1 of Table 2. On line 3, she enters $2,750, the larger of $2,750 and $700. She enters $4,250 on line 4. On line 5a, she enters $2,750 (the smaller of $2,750 and $4,250) as her standard deduction. Example 3. Amy, who is single, is claimed as a dependent on her parents' tax return. She is 18 and blind. She has taxable interest income of $1,000 and wages of $2,000. She enters her earned income plus $250 ($2,250) on line 1 of Table 2. She enters $2,250 (the larger of $2,250 and $700) on line 3, $4,250 on line 4, and $2,250 (the smaller of $2,250 or $4,250) on line 5a. Because Amy is blind, she checks the box for blindness and enters “1” in the box at the top of Table 2. She enters $1,050 on line 5b (number in the box x $1,050). Her standard deduction on line 5c is $3,300 ($2,250 + $1,050).
1) Received any advance earned income credit payments from his or her employers in 1998, 2) Had wages of $108.28 or more from a church or qualified church-controlled organization that is exempt from employer social security and Medicare taxes, or 3) Had net earnings from self-employment of at least $400. Spouse itemizes. A dependent must file a return if the dependent's spouse itemizes deductions on a separate return and the dependent has at least $5 of gross income (earned and/or unearned).
The standard deduction for the following dependents is zero. 1) A married dependent filing a separate return whose spouse itemizes deductions. 2) 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. 3) A nonresident or dual-status alien dependent.
Even if a dependent does not meet any of the filing requirements discussed earlier, he or she should file a tax return if one of the following applies. 1) Income tax was withheld from his or her pay. 2) He or she qualifies for the earned income credit. See Publication 596 for more information. By filing a return, the dependent can get a refund. Page 4
The standard deduction for an individual who can be claimed as a dependent on another
Example. Jennifer, who is a dependent of her parents, is entitled to file a joint return with her husband. However, her husband elects to file a separate return and itemize his deductions. Because he itemizes, Jennifer's standard deduction on her return is zero. She can, however, itemize any of her allowable deductions.
Use this worksheet ONLY if someone can claim you (or your spouse, if filing jointly) as a dependent. If you were 65 or older and/or blind, check the correct number of boxes below. Put the total number of boxes checked on line c and go to line 1. a. You 65 or older Blind b. Your spouse, if claiming 65 or older Blind spouse’s exemption c. Total boxes checked 1. Enter your earned income (defined below) plus $250. If none, go on to line 3. 2. Minimum amount. 3. Compare lines 1 and 2. Enter the larger of the two amounts here. 4. Enter on line 4 the amount shown below for your filing status. ● Single—$4,250 ● Married filing separate return—$3,550 ● Married filing jointly or qualifying widow(er) with dependent child—$7,100 ● Head of household—$6,250 5. Standard deduction. a. Compare lines 3 and 4. Enter the smaller amount here. If under 65 and not blind, stop here. This is your standard deduction. Otherwise, go on to line 5b. b. If 65 or older or blind, multiply $1,050 ($850 if married or qualifying widow(er) with dependent child) by the number on line c above. Enter the result here. c. Add lines 5a and 5b. This is your standard deduction for 1998. 4. 1. 2. 3. $700
Conditions for exemption from withholding. An employee can claim exemption from withholding for 1999 only if he or she meets both of the following conditions. 1) For 1998, the employee had a right to a refund of all federal income tax withheld because he or she had no tax liability. 2) For 1999, the employee expects a refund of all federal income tax withheld because he or she expects to have no tax liability. Dependents. An employee who is a dependent ordinarily cannot claim exemption from withholding if both of the following are true. 1) The employee's total income will be more than the minimum standard deduction amount, which is $700 for 1998. (This amount may be higher for 1999.) 2) The employee's unearned (investmenttype) income will be more than $250.
Exceptions. An employee who is 65 or older or blind or will claim adjustments to income, itemized deductions, or tax credits on his or her 1999 tax return, may be able to claim exemption from withholding even if the employee is a dependent. See the discussions in chapter 1 of Publication 505 under Exemption From Withholding for more information. Example. Guy is 17 and a student. During the summer he works part time at a grocery store. He expects to earn about $1,000 this year. 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. The only other income he expects during the year is $275 interest on a savings account. He expects to be claimed as a dependent on his parents' tax return. Guy is not blind and will not claim adjustments to income, itemized deductions, or tax credits on his return. He 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 total income will be more than the minimum standard deduction amount and his unearned income will be more than $250.
Note. If you are a nonresident or dualstatus alien who is married to a U.S. citizen or resident at the end of 1998, you may be able to choose to be treated as a U.S. resident for 1998. See Publication 519, U.S. Tax Guide for Aliens.
lege student who works during the summer and must file a tax return. James and Barbara claim Ben as a dependent on their tax return. Ben cannot claim his own exemption on his return. This is true even if James and Barbara do not claim Ben as a dependent.
A person who can be claimed as a dependent on another taxpayer's return cannot claim his or her own exemption. This is true even if the other taxpayer does not actually claim the exemption.
Employers generally withhold federal income tax, social security tax, and Medicare tax from an employee's wages. If the employee claims exemption from withholding on Form W–4, Employee's Withholding Allowance Certificate, the employer will not withhold federal income tax. The exemption from withholding does not apply to social security or Medicare taxes.
Example. James and Barbara have a child, Ben. Ben can be claimed as a dependent on their return. He is a full-time col-
Adjusted gross income Adjustments to income Alternative minimum tax Capital gain distribution Dependent Earned income Filing status Gross income Investment income Itemized deductions Net capital gain Net investment income Standard deduction Tax year Taxable income Unearned income Two special rules apply to the tax on certain investment income of a child under age 14: 1) If a child's interest, dividends, and other investment income total more than $1,400, part of that income may be taxed at the parent's tax rate instead of the child's tax rate (see Tax for Children Under Age 14 Who Have Investment Income of More Than $1,400, later). 2) A child's parent may be able to choose to include the child's interest and dividend income (including capital gain distributions) on the parent's return rather than file a return for the child (see Parent's Election To Report Child's Interest and Dividends, later). For these rules, the term “child” includes a legally adopted child and a stepchild. These rules apply whether or not the child is a dependent. These rules do not apply if: 1) The child is not required to file a tax return (see Filing Requirements in Part 1), or 2) Neither of the child's parents were living at the end of the tax year.
6) No federal income tax was taken out of your child's income under the backup withholding rules. 7) You are the parent whose return must be used when applying the special tax rules for children under 14. (See Which Parent's Return To Use, earlier.) These conditions are also shown in Figure 1.
How to make the election. Make the election by attaching Form 8814 to your Form 1040 or Form 1040NR. Attach a separate Form 8814 for each child for whom you make the election. You can make the election for one or more children and not for others. If you file Form 8814, you cannot file Form 1040A or Form 1040EZ.
The federal income tax on your child's income may be more if you make the Form 8814 election rather than file a return for the child. Rates may be higher. If you use Form 8814, the child's income may be taxed at a higher rate on your return than it would be on the child's own return. Deductions you cannot take. By making the Form 8814 election, you cannot take certain deductions the child would be entitled to on his or her return, as explained next. If you use Form 8814, you cannot take any of the following deductions that could have been taken on your child's return: 1) A higher standard deduction if your child was blind, 2) Deduction for penalty on early withdrawal of your child's savings, and 3) Itemized deductions (such as your child's investment expenses or charitable contributions).
You may be able to elect to include your child's interest and dividend income (including capital gain distributions) on your tax return. If you do, your child will not have to file a return. You can make this election for 1998 only if all the following conditions are met. 1) Your child was under age 14 on January 1, 1999. 2) Your child is required to file a return for 1998 unless you make this election. 3) Your child had income only from interest and dividends (including capital gain distributions and Alaska Permanent Fund dividends). 4) The dividend and interest income was less than $7,000. 5) No estimated tax payments were made for 1998 and no 1997 overpayment was applied to 1998 under your child's name and social security number.
Deductible investment interest. If you use Form 8814, your child's investment income is considered your investment income. To figure the limit on your deductible investment interest, add the investment income to yours. However, if your child received capital gain distributions or Alaska Permanent Fund dividends, see chapter 3 of Publication 550, Investment Income and Expenses, for information about how to figure the limit. Alternative minimum tax. If your child received tax-exempt interest from a private activity bond, you must determine if that interest is a tax preference item for alternative minimum tax (AMT) purposes. If it is, you must include it with your own tax preference items when figuring your AMT. For more information, get the instructions for Form 6251, Alternative Minimum Tax—Individuals. Reduced deductions or credits. If you use Form 8814, your increased adjusted gross income may reduce certain deductions or credits on your return, including the following:
1) Deduction for contributions to an individual retirement arrangement (IRA), 2) Itemized deductions for medical expenses, casualty and theft losses, and certain miscellaneous expenses, 3) Total itemized deductions,
4) Credit for child and dependent care expenses, 5) Personal exemptions, and 6) Earned income credit. Penalty for underpayment of estimated tax. If you make this election for 1998 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. If you plan to make this election for 1999, you may need to increase your federal income tax withholding or your estimated tax payments to avoid the penalty. Get Publication 505 for more information.
Start Here Was your child under age 14 on January 1, 1999? Yes No No
Is your child required to file a tax return in 1998 if you don’t make this election? Yes
Use Part I of Form 8814 to figure your child's interest and dividend income to report on your return. Only the amount over $1,400 is added to your income. This amount is shown on line 6 of Form 8814. Include this amount on line 21 of Form 1040 or Form 1040NR. In the space next to line 21, write “Form 8814.” If you file more than one Form 8814, include the total amounts from line 6 of all your Forms 8814 on line 21. Capital gain distributions. Enter on line 3 of Form 8814 any capital gain distributions your child received. Part of these distributions will be taxed separately on the parent's Schedule D (Form 1040). Use the following worksheet to figure the amount to report as capital gain distributions on Schedule D and the amount to report on Form 8814, line 6. Worksheet (Keep for your records)
1. 2. 3. 4. 5. 6. Enter amount from Form 8814, line 3 .. Enter amount from Form 8814, line 4 .. Divide line 1 by line 2 ........................... Base amount ......................................... Subtract line 4 from line 2 ..................... Multiply line 5 by the decimal on line 3. Enter the result here and on Schedule D, line 13, column (f) ............................ 7. Subtract line 6 from line 5. Enter the result here and on Form 8814, line 6 ...
Was the child’s only income interest and dividends (including capital gains distributions)? Yes
Did the child make any estimated tax payments for 1998? No
Did the child have an overpayment of tax on his or her 1997 return applied to the 1998 estimated tax? No
On the dotted line next to line 6, Form 8814, write “CGD” and the amount from line 7 of this worksheet. On the dotted line next to line 13, Schedule D, write “Form 8814” and the amount from line 6 of this worksheet. If any of the child's capital gain distributions are reported as 28% rate gain, you must determine how much to also include on Schedule D, line 13, column (g). Multiply the child's capital gain distribution included on line 13, column (f) by a fraction. The numerator is the part of the child's total capital gain distribution that is 28% rate gain. The denominator is the child's total capital gain distribution. If any of the child's capital gain distributions are reported as unrecaptured section 1250 gain, you must determine how much to include on Schedule D, line 25. Multiply the child's capital gain distribution included on line 13, column (f) by a fraction. The numerator is the part of the child's total capital gain distribution that is unrecaptured section 1250 gain. The denominator is the child's total capital gain distribution.
Example. Fred is 6 years old. In 1998, he received dividend income of $1,600, which included a $320 capital gain distribution from a mutual fund. (None of the distributions were reported as 28% gain.) He has no other income and is not subject to backup withholding. No estimated tax payments were made under his name and social security number.
Fred's parents elect to include Fred's income on their tax return instead of filing a return for him. They enter $1,280 on line 2 and $320 on line 3, Form 8814. $200 of Fred's income must be included as income on his parents' tax return ($1,600 gross income minus $1,400). They figure the amount to report on line 13, Schedule D and the amount to report on line 6, Form 8814, as follows: Page 7
1. 2. 3. 4. 5. 6. Enter amount from Form 8814, line 3 .. $320 Enter amount from Form 8814, line 4 .. $1,600 Divide line 1 by line 2 ........................... .20 Base amount ......................................... 1,400 Subtract line 4 from line 2 ..................... $200 Multiply line 5 by the decimal on line 3. Enter the result here and on Schedule D, line 13, column (f) ............................ $40 7. Subtract line 6 from line 5. Enter the result here and on Form 8814, line 6 ... $160
Fred's parents enter $160 on line 6 of Form 8814 and write “CGD–$40” on the dotted line next to line 6. They include the $160 on line 21 of their Form 1040 and write “Form 8814–$160” on the dotted line next to the total. On Schedule D they include $40 on line 13, column (f) and write “Form 8814–$40” on the dotted line next to this line. They do not include any part of the $40 in column (g) because none of the distribution was reported as 28% rate gain.
and 39 of her Form 1040 by $2,100. Linda is not claiming any deductions or credits that are affected by the increase to her income. Therefore, her revised taxable income on line 39 is $61,400 ($59,300 + $2,100). On Form 8814, Linda subtracts the $700 shown on line 7 from the $3,500 on line 4 and enters the result, $2,800, on line 8. Because that amount is not less than $700, she enters $105 on line 9. This is the tax on the first $1,400 of Philip's income, which Linda did not have to add to her income. She must add this additional tax to the tax figured on her revised taxable income. The tax on her $61,400 revised taxable income is $14,755. She adds $105, enters the $14,860 total on line 40 of Form 1040, and checks box a. Linda attaches Form 8814 to her Form 1040.
tax return on a fiscal year basis (July 1 – June 30). Kimberly must use the information on her mother's return for the tax year ending June 30, 1998, to complete her 1998 Form 8615. Estimated information. If the information needed from your return is not known by the time the child's return is due (usually April 15), you can file the return using estimates. You can use any reasonable estimate. This includes using information from last year's return. If you use an estimated amount on Form 8615, write “Estimated” on the line next to the amount. When you get the correct information, file an amended return on Form 1040X, Amended U.S. Individual Income Tax Return. Extension of time to file. Instead of using estimates, you may be able to get an automatic 4-month extension of time to file. To get the extension, you must file Form 4868, Application for Automatic Extension of Time To File U.S. Individual Income Tax Return. Calendar year taxpayers must file Form 4868 by April 15, 1999. If you file for an extension, you must file the child's return by August 16, 1999. An extension of time to file is not an extension of time to pay. You must make an accurate estimate of the tax for 1998. If you cannot pay the full amount due with Form 4868, you can still get the extension. You will owe interest on the unpaid amount. See Form 4868 and its instructions. Parent's return information not available. 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. How to request. A signed, written request for the information must be sent to the Internal Revenue Service Center where the parent's return will be filed. The request must contain all of the following. 1) 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. 2) Proof the child is under 14 years of age (for example, a copy of the child's birth certificate). 3) Evidence the child has more than $1,400 of unearned income (for example, a copy of the child's prior year tax return or copies of Forms 1099 for the current year). 4) 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. 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. The IRS cannot process the request before the end of the tax year. In fact, you should also consider getting an extension of time to file the child's return, because there may be a delay in getting the information.
Use Part II of Form 8814 to figure the tax on your child's interest and dividends you do not include in your income. This tax is added to the tax figured on your income. This additional tax is the smaller of: 1) 15% × (your child's gross income — $700), or 2) $105.00. Include the amount from line 9 of all your Forms 8814 in the total on line 40, Form 1040, or line 39, Form 1040NR. Check box a on Form 1040, line 40, or Form 1040NR, line 39.
Part of a child's 1998 investment income may be subject to tax at the parent's tax rate if: 1) The child was under age 14 on January 1, 1999, 2) The child's investment income was more than $1,400, and 3) The child is required to file a tax return for 1998.
David and Linda Parks are married and will file separate tax returns for 1998. Their only child, Philip, is 8. Philip received a Form 1099-INT showing $3,200 taxable interest income and a Form 1099-DIV showing $300 ordinary dividends. His parents decide to include that income on one of their returns so they will not have to file a return for Philip. First, David and Linda each figure their taxable income (Form 1040, line 39) without regard to Philip's income. David's taxable income is $41,700 and Linda's is $59,300. Because her taxable income is greater, Linda can elect to include Philip's income on her return. On Form 8814, Linda enters her name and social security number, then Philip's name and social security number. She enters Philip's taxable interest income, $3,200, on line 1a. Philip had no tax-exempt interest income, so she leaves line 1b blank. Linda enters Philip's ordinary dividends, $300, on line 2. Philip did not have any capital gain distributions, so she leaves line 3 blank. Linda adds lines 1a and 2 and enters the result, $3,500, on line 4. From that amount she subtracts the $1,400 base amount shown on line 5 and enters the result, $2,100, on line 6. This is the part of Philip's income that Linda must add to her income. Linda includes the $2,100 in the total on line 21 of her Form 1040 and in the space next to that line writes “Form 8814–$2,100.” Adding that amount to her income increases each of the amounts on lines 22, 33, 34, 37, Page 8
Figure 2 illustrates these requirements. If you do not or cannot choose to include the child's income on your return, figure the child's tax on Form 8615. Attach the form to the child's Form 1040, Form 1040A, or Form 1040NR. On Form 8615, enter your name and social security number and your child's name and social security number in the spaces provided. (If you filed a joint return, enter the name and social security number listed first on the joint return.) Check the box for your filing status. Then figure the child's tax on Form 8615 in these steps. 1. Figure the child's net investment income. 2. Figure a tentative tax on the net investment income based on the parent's tax rate. 3. Figure the child's tax.
Example. Kimberly must use her mother's tax and taxable income to complete her Form 8615 for calendar year 1998 (January 1 – December 31). Kimberly's mother files her
Caution: The Federal income tax on your child’s income, including capital gain distr ibutions, may be less if you file a separate tax retur n for the child instead of making this election. This is because you cannot take certain tax benefits that your child would be entitled to on his or her own retur n. For details, see Tax Benefits You May Not Take on the back.
The first step in figuring a child's tax using Form 8615 is to figure the child's net investment income. To do that, use Part I of Form 8615. For an example, see the Illustrated Part I of Form 8615. Line 1 (investment income). If the child had no earned income, enter the adjusted gross income shown on the child's return. Adjusted gross income is shown on line 33 of Form 1040; line 18 of Form 1040A; or line 33 of Form 1040NR. Form 1040EZ cannot be used if Form 8615 must be filed. If the child had earned income, figure the amount to enter on line 1 of Form 8615 by using the worksheet in the instructions for the form. However, use the following worksheet if the child has excluded any foreign earned income or deducted a loss from self-employment or a net operating loss from another year.
Alternate Worksheet for Line 1 of Form 8615 A. Enter the amount from the child's Form 1040, line 22 or Form 1040NR, line 23 B. 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 ......................... C. Add line A and line B and enter the total. Treat the amount on line B as positive (greater than zero) .................. D. Enter the child's earned income plus any deduction the child claims on line 30 of Form 1040 or Form 1040NR. 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. Subtract line D from line C. Enter the result here and on Form 8615, line 1 ..
Income from property received as a gift. A child's investment income includes all income produced by property belonging to the child. 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. A child's investment income includes income produced by property given as a gift to the child. This includes gifts to the child from grandparents or any other person and gifts made under the Uniform Gift to Minors Act. Example. Amanda Black, 13, received the following income:
income from the trust are investment income to the child. Adjustment to income. In figuring the amount to enter on line 1, the child's investment income is reduced by any penalty on the early withdrawal of savings. Line 2 (deductions). If the child does not itemize deductions on Schedule A (Form 1040 or Form 1040NR), enter $1,400 on line 2. If the child does itemize deductions, enter on line 2 the larger of: 1) $700 plus the child's itemized deductions on Schedule A (Form 1040 or Form 1040NR) that are directly connected with the production of the investment income, or 2) $1,400.
• Dividends—$600 • Wages—$2,100 • Taxable interest—$1,200 • Tax-exempt interest—$100 • Capital gains—$300 • Capital losses—($200)
Trust income. If a child is the beneficiary of a trust, distributions of taxable interest, dividends, capital gains, and other investment
Directly connected. Itemized deductions are directly connected with the production of investment income if they are for expenses paid to produce or collect taxable income or to manage, conserve, or maintain property held for producing income. These expenses include custodian fees and service charges, service fees to collect taxable interest and dividends, and certain investment counsel fees. These expenses are added to certain other miscellaneous deductions on Schedule A (Form 1040). Only the amount greater than 2% of the child's adjusted gross income can be deducted. See Publication 529, Miscellaneous Deductions, for more information.
Start Here No Was your child under age 14 on January 1, 1999? Yes
Investment income defined. Investment income is generally all income other than salaries, wages, and other amounts received as pay for work actually done. It includes taxable interest, dividends, capital gains, the taxable part of social security and pension payments, and certain distributions from trusts. Investment 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). Nontaxable income. For this purpose, investment income includes only amounts the child must include in total income. Nontaxable investment income, such as tax-exempt interest and the nontaxable part of social security and pension payments, is not included. Capital loss. A child's capital losses are taken into account in figuring the child's investment income. Capital losses are first applied against capital gains. If the capital losses are more than the capital gains, the difference (up to $3,000) is subtracted from the child's interest, dividends (including capital gain distributions), and other investment income. Any difference over $3,000 is carried to the next year.
Is your child required to file a tax return for 1998? Yes
Carla’s total income on Form 1040A, line 14, is $5,000. This total includes wages (earned income) of $600 reported on line 7. She has no itemized deductions. Carla’s taxable income on Form 1040A, line 24, is $4,150. Because Carla has earned income, the worksheet in the instructions is used to figure the amount on line 1 of Form 8615. Carla’s filled-in worksheet and Part I of her Form 8615, with lines 1 through 5 filled in, are shown here. Carla’s total income of $5,000 (as shown on line 14 of her Form 1040A) is entered on line 1 of the worksheet. Her earned income of $600 (her wages as shown on line 7 of her Form 1040A) is entered on line 2 of the worksheet. Line 3 is the result of subtracting $600 from $5,000. The amount from line 3 of the worksheet is entered on line 1 of Form 8615. Carla did not itemize deductions, so $1,400 is entered on line 2. Line 3 of Form 8615 is the result of subtracting $1,400 from $4,400. Carla’s taxable income of $4,150 (as shown on line 24 of her Form 1040A) is entered on line 4 of Form 8615. The smaller of $3,000 or $4,150 is entered on line 5. This is her net investment income. Worksheet (keep for your records) 1. Enter the amount from the child’s Form 1040, line 22; Form 1040A, line 14; or Form 1040NR, line 23, whichever applies 2. Enter the child’s earned income plus any deduction the child claims on Form 1040, line 30, or Form 1040NR, line 30, whichever applies 3. Subtract the amount on line 2 from the amount on line 1. Enter the result here and on Form 8615, line 1
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Example 1. Roger, 12, has investment income of $8,000, no other income, no adjustments to income, and itemized deductions of $300 that are directly connected with his investment income. His adjusted gross income is $8,000, which is entered on line 1. Line 2 is $1,400 because that is more than the sum of $700 and his directly-connected itemized deductions of $300. Example 2. Eleanor, 8, has investment income of $16,000 and an early withdrawal penalty of $100. She has no other income. She has itemized deductions of $1,050 that are directly connected with the production of her investment income. Her adjusted gross income, entered on line 1, is $15,900 ($16,000 − $100). Line 2 is $1,750. This is the larger of:
1) $700 plus the $1,050 of directly connected itemized deductions, or 2) $1,400. Eleanor's net investment income is $14,150 ($15,900 − $1,750). Line 3. If line 2 equals or is more than line 1, do not complete the rest of the form. However, you must still attach Form 8615 to the child's tax return. Figure the tax on the child's taxable income in the normal manner. Line 4 (child's taxable income). Enter on line 4 the child's taxable income from Form 1040, line 39; Form 1040A, line 24; or Form 1040NR, line 38. Line 5 (net investment income). A child's net investment income cannot be more than his or her taxable income. Enter on line 5 the
smaller of line 3 or line 4 of Form 8615. This is the child's net investment income.
The next step in completing Form 8615 is to figure a tentative tax on the child's net investment income at the parent's tax rate. The tentative tax is the difference between the tax on the parent's taxable income figured with the child's net investment income and the tax figured without it. Figure the tentative tax on lines 6 through 13. For an example, see Illustrated Part II of Form 8615. When figuring the tentative tax, do not refigure any of the exclusions, deductions, or credits on the parent's return because of the child's net investment income. For example, do not refigure the medical expense deduction. Line 6 (parent's taxable income). Enter on line 6 the amount from the parent's Form 1040, line 39; Form 1040A, line 24; Form 1040EZ, line 6; TeleFile Tax Record, line J; Form 1040NR, line 38; or Form 1040NR–EZ, line 14. If the parent's taxable income is less than zero, enter zero on line 6. Line 7 (net investment 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 amounts from line 5 of all the other children's Forms 8615. Do not include the amount from line 5 of the Form 8615 being completed.
Example. Paul and Jane Persimmon have three children, Sharon, Jerry, and Mike, who must attach Form 8615 to their tax returns. The children's net investment income amounts on line 5 of their Forms 8615 are:
Line 8. The method you will use to figure the tax entered on line 9 depends on whether there is any net capital gain included in the total on line 8. If there is net capital gain on line 5, 6, or 7, then there is also net capital gain on line 8. Net capital gain is the excess of net longterm capital gain over net short-term capital loss. For 1998, this is the smaller of the gain on line 16 or the gain on line 17 of Schedule D (Form 1040). Use the following discussions to find the amounts of net capital gain on lines 5, 6, and Page 11
Enter the parent’s taxable income from Form 1040, line 39; Form 1040A, line 24; Form 1040EZ, line 6; TeleFile Tax Record, line J; Form 1040NR, line 38; or Form 1040NR-EZ, line 14. If less than zero, enter -0Enter the total net investment income, if any, from Forms 8615, line 5, of all other children of the parent identified above. Do not include the amount from line 5 above Add lines 5, 6, and 7 Enter the tax on line 8 based on the parent’s filing status. See instructions. If Schedule D or J (Form 1040) is used to figure the tax, check here
Enter the parent’s tax from Form 1040, line 40; Form 1040A, line 25; Form 1040EZ, line 10; TeleFile Tax Record, line J; Form 1040NR, line 39; or Form 1040NR-EZ, line 15. If any tax is from Form 4972, see instructions. If Schedule D or J (Form 1040) is used to figure the tax, check here
Subtract line 10 from line 9 and enter the result. If line 7 is blank, enter on line 13 the amount from line 11 and go to Part III 12a 3,800 12a Add lines 5 and 7 b Divide line 5 by line 12a. Enter the result as a decimal (rounded to three places) 13 Multiply line 11 by line 12b
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A. Enter the child's net capital gain .............. B. Enter the child's itemized deductions directly connected with the production of the child's net capital gain .............................. C. Subtract line B from line A ....................... D. Enter the amount from line 1 of the child's Form 8615 ................................................ E. Divide line A by line D (but do not enter more than 1) .............................................
7 included on line 8. You will need these amounts to figure the tax to enter on line 9. Net capital gain on line 5. Use one of the Line 5 Worksheets below to figure the net capital gain from line 5 included on line 8. Use the following worksheet to figure the net capital gain included on line 5 of the child's Form 8615 if that line is the same as line 3 and line 2 is $1,400.
D. If the child can claim his or her own exemption, enter $2,700*. Otherwise, enter zero .......................................................... E. If the child itemized deductions, enter the child's itemized deductions not directly connected with the production of the child's net capital gain. Otherwise, enter the child's standard deduction ................. F. Add lines D and E .................................... G. Enter the child's adjusted gross income (line 33 of the child's Form 1040) ............ H. Divide line A by line G (but do not enter more than 1) ............................................. I. Multiply line F by line H ............................ J. Subtract line I from line C. Enter the result here (but do not enter more than the amount on line 5 of Form 8615). This is the net capital gain included on line 5. .... * If you enter more than $124,500 on line G, see Deduction for Exemptions Worksheet—Line 38 in the Form 1040 instructions for the amount to enter on line D.
A. Enter the child's net capital gain .............. B. Enter the amount from line 1 of the child's Form 8615 ................................................ C. Divide line A by line B (but do not enter more than 1) ............................................. D. Multiply $1,400 by the result on line C ..... E. Subtract line D from line A. Enter the result here (but do not enter more than the amount on line 5 of Form 8615). This is the net capital gain included on line 5 . .........
F. Multiply $700 by line E ............................. G. Subtract line F from line C. Enter the result here (but do not enter more than the amount on line 5 of Form 8615). This is the net capital gain included on line 5. ....
Use the following worksheet only if line 5 of the child's Form 8615 is the same as line 3 and line 2 is more than $1,400.
Net capital gain on line 6. If net capital gain is included on line 6 of Form 8615, the net capital gain from that line included on line 8 is the smaller of the gain on line 16 or line 17 of the parent's Schedule D. Do not attach the parent's Schedule D to the child's return. Net capital gain on line 7. If net capital gain is included on line 7 of Form 8615, the net capital gain from that line included on line 8 must be figured by using a Line 5 Worksheet, explained earlier. Since the amount on line 7 is the total of the net investment income of the parent's other children who must file Form 8615, you will have to fill out a Line 5 Worksheet for each of those children who has
a net capital gain on line 5 of his or her own Form 8615. Do not attach a copy of any of the other children's Form 8615 to this child's return. Net capital gain on line 8. The net capital gain included on line 8 is the sum of the net capital gains figured on lines 5, 6, and 7.
(Each other child's net capital gain from bottom line of line 5 worksheet ÷ That child's total net capital gain from line A of line 5 worksheet) × That child's line 25, Schedule D. The parent's line 25, Schedule D.
Line 9 (tax on parent's taxable income plus children's net investment income). Figure the tax on line 9 in one of the following ways.
8) Complete lines 26 through 54 of Schedule D (worksheet). Enter the amount from line 54 of Schedule D (worksheet) on line 9 of Form 8615 and check the box. Do not attach this worksheet to the child's return. Completing Line 9 Schedule J Worksheet. If Schedule J is used to figure the parent's tax on Form 1040, use another Schedule J as a worksheet to figure the tax to enter on line 9 of Form 8615. For purposes of this worksheet, use information from the parent's Schedule J. Complete this worksheet as follows: 1) On line 1 of Schedule J (worksheet), enter the amount from line 8 of Form 8615. 2) On line 2 of Schedule J (worksheet), enter the amount from the parent's Schedule J, line 2. 3) Complete lines 3 and 4 of Schedule J (worksheet). 4) On lines 5–16 of Schedule J (worksheet), enter the amounts from the parent's Schedule J, lines 5–16. 5) Complete line 17 of Schedule J (worksheet). 6) On lines 18–21 of Schedule J (worksheet), enter the amounts from the parent's Schedule J, lines 18–21. 7) Complete line 22 of Schedule J (worksheet). If the amount on this line is less than the tax figured from the Tax Table, Tax Rate Schedules, or Schedule D, enter this amount on line 9 of Form 8615. Do not attach this worksheet to the child's return. Line 10 (parent's tax). Enter on line 10 the amount from the parent's Form 1040, line 40; Form 1040A, line 25; Form 1040EZ, line 10; TeleFile Tax Record, line J; Form 1040NR, line 39; or Form 1040NR–EZ, line 15. Lines 12a and 12b (dividing the tentative tax). If line 7 is blank, skip lines 12a and 12b and enter the amount from line 11 on line 13. If an amount is entered on line 7, divide the tentative tax shown on line 11 among the children according to each child's share of the total net investment income. This is done on lines 12a, 12b, and 13. Add the amount on line 7 to the amount on line 5 and enter the total on line 12a. Divide the amount on line 5 by the amount on line 12a and enter the result, as a decimal, on line 12b.
• If net capital gain is not included in the
total on line 8, and line 8 is less than $100,000, use the Tax Table to figure the tax on line 9. If line 8 is $100,000 or more, use the Tax Rate Schedules.
• If net capital gain is included in the total
on line 8, complete the Line 9 Schedule D Worksheet.
• If Schedule J (Form 1040) is used to figure the parent's tax, complete the Line 9 Schedule J Worksheet.
Completing Line 9 Schedule D Worksheet. Use Part IV of another Schedule D as a worksheet to figure the tax to enter on line 9 of Form 8615. For purposes of this worksheet, use information from the parent and all the parent's children for whom Form 8615 is filed, but only for those showing net capital gain (excess of net long-term capital gain over net short-term capital loss). All Schedules D, Part IV, must be filled out before using this worksheet. Complete this worksheet as follows:
2) The tax on the child's taxable income, figured at the child's rate. This is the child's tax. It is figured on lines 14 through 18 of Form 8615. For an example, see Illustrated Part III of Form 8615. Line 14 (child's taxable income in excess of net investment income). Subtract line 5 from line 4 and enter the difference on line 14. If lines 4 and 5 are the same, enter zero on line 15 and enter the amount from line 13 on line 16. Line 15 (tax on excess of child's taxable income over child's net investment income). Figure the tax on line 15 in one of the following ways, depending on whether there is any net capital gain included in the total on line 14. No net capital gain on line 14. If net capital gain is not included in the total on line 14, and line 14 is less than $100,000, use the Tax Table to figure the tax on line 15. If line 14 is $100,000 or more, use the Tax Rate Schedules. Net capital gain on line 14. If net capital gain is included in the total on line 14, you must determine the amount of the net capital gain included on line 14 to compute the tax on line 15. Figure that amount by using the Line 5 Worksheet used to figure net capital gain included on line 5. Subtract the net capital gain included on line 5 (the amount on the last line of the worksheet) from the child's net capital gain (the amount on line A of that worksheet). The result is the amount of net capital gain included on line 14 of the child's Form 8615. Once you have determined the amount of net capital gain on line 14, use Part IV of another Schedule D as a worksheet to figure the tax to enter on line 15 of Form 8615. Complete this worksheet as follows: 1) On line 19 of Schedule D (worksheet), enter the amount from line 14 of Form 8615. 2) Leave line 20 of Schedule D (worksheet) blank. 3) Leave line 21 of Schedule D (worksheet) blank. Page 13
7) On line 25 of Schedule D (worksheet), add the following amounts: a) (The child's net capital gain from bottom line of line 5 worksheet ÷ The child's total net capital gain from line A of line 5 worksheet) × The child's line 25, Schedule D (actual).
Example. In the earlier example under Line 7 (net investment income of other children), Sharon's Form 8615 shows $1,600 on line 7. The amount entered on line 12a is $2,400, the total of the amounts on lines 5 and 7 ($800 + $1,600). The decimal on line 12b is .333, figured as follows and rounded to three places.
f s o 19981,040 a of 0, nge) Pro er 2 cha o tob ject t c
4) On line 22 of Schedule D (worksheet), enter the net capital gain included on line 14 of Form 8615. 5) Leave line 23 of Schedule D (worksheet) blank. 6) Subtract the amount figured in step 6a) under Completing Line 9 Schedule D Worksheet from the amount on the child's line 24, Schedule D (actual). Enter the result on line 24 of Schedule D (worksheet). 7) Subtract the amount figured in step 7a) under Completing Line 9 Schedule D Worksheet from the amount on the child's line 25, Schedule D (actual). Enter the result on line 25 of Schedule D (worksheet). 8) Complete lines 26 through 54 of Schedule D (worksheet). Enter the amount from line 54 of Schedule D (worksheet) on line 15 of Form 8615 and check the box. Do not attach this worksheet to the child's return. Line 16. Add lines 13 and 15 and enter the total on line 16. If lines 4 and 5 are the same, enter zero on line 15. Then enter the amount from line 13 on line 16. Line 17 (tax at child's rate). Figure the tax on the child's taxable income entered on line 4. Use the Tax Table for single status, Tax Rate Schedule X, or the child's Schedule D (actual), whichever applies. Enter the amount on line 17. If it is from Schedule D, check the box. Attach this Schedule D to the child's return. Line 18 (tax). Enter on line 18 the larger of line 16 or line 17. Also enter this amount on the child's Form 1040, line 40; Form 1040A,
line 25; or Form 1040NR, line 39. This is the child's tax.
A child may be subject to alternative minimum tax (AMT) if he or she has certain items given preferential treatment under the tax law. These items include accelerated depreciation and certain tax-exempt interest income. The AMT may apply if the child has passive activity losses or certain distributions from estates or trusts. For more information on who is liable for AMT and how to figure it, get Form 6251, Alternative Minimum Tax—Individuals. Limit on exemption amount. Ordinarily, single people can subtract a $33,750 exemption amount from their AMT taxable income. However, a child who files Form 8615 has a limited exemption amount. The child's exemption amount is limited to the child's earned income plus $5,000. Figure the child's allowable exemption amount on the worksheet in the instructions for line 22 of Form 6251.
This example shows how to fill out Forms 8615 and 1040A for Sara Brown. John and Laura Brown have one child, Sara. She is 13 and has $2,750 taxable interest and dividend income and $1,500 earned income. She does not itemize deductions. John and Laura file a joint return with John's name and social security number listed first. They claim three exemptions, including an exemption for Sara, on their return. Because she is under age 14 and has more than $1,400 investment income, part of her income may be subject to tax at her parents' rate. A completed Form 8615 must be attached to her return. Sara's father, John, fills out Sara's return.
John enters his name and social security number on Sara's Form 8615 because his name and number are listed first on the joint return he and Laura are filing. He checks the box for married filing jointly. He enters Sara's investment income, $2,750, on line 1. Sara does not itemize deductions, so John enters $1,400 on line 2. He enters $1,350 on line 3 ($2,750 − $1,400). Sara's taxable income, as shown on line 24 of her Form 1040A, is $2,500. This is her total income ($4,250) minus her standard deduction ($1,750). Her standard deduction is limited to the amount of her earned income plus $250. John enters $2,500 on line 4. John compares lines 3 and 4 and enters the smaller amount, $1,350, on line 5. John enters $48,000 on line 6. This is the taxable income from line 39 of their joint Form 1040 return. Sara is an only child, so line 7 is blank. He adds line 5 ($1,350), line 6 ($48,000), and line 7 and enters $49,350 on line 8. Using the column for married filing jointly in the Tax Table, John finds the tax on $49,350. He enters the tax, $8,320, on line 9. He enters $7,942 on line 10. This is the tax from line 40 of John and Laura's Form 1040. He enters $378 on line 11 ($8,320 − $7,942). Because line 7 is blank, John skips lines 12a and 12b and enters $378 on line 13. John subtracts line 5 ($1,350) from line 4 ($2,500) and enters the result, $1,150, on line 14. Using the column for single filing status in the Tax Table, John finds the tax on $1,150. He enters this tax, $174, on line 15. He adds lines 13 ($378) and 15 ($174) and enters $552, on line 16. Using the column for single filing status in the Tax Table, John finds the tax on $2,500 (line 4). He enters this tax, $377, on line 17. John compares lines 16 and 17 and enters the larger amount, $552, on line 18 of Sara's Form 8615. He also enters that amount on line 25 of Sara's Form 1040A. John also completes Schedule 1, Form 1040A (not shown here) for Sara.
Subtract line 10 from line 9 and enter the result. If line 7 is blank, enter on line 13 the amount from line 11 and go to Part III 12a 12a Add lines 5 and 7 b Divide line 5 by line 12a. Enter the result as a decimal (rounded to three places) 13 Multiply line 11 by line 12b
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49,350 8,320
7,942 378
Enter the tax on line 14 based on the child’s filing status. See instructions. If Schedule D or J (Form 1040) is used to figure the tax, check here Add lines 13 and 15 Enter the tax on line 4 based on the child’s filing status. See instructions. If Schedule D or J (Form 1040) is used to figure the tax, check here Enter the larger of line 16 or line 17 here and on Form 1040, line 40; Form 1040A, line 25; or Form 1040NR, line 39
It includes taxable interest, dividends, capital gains, rents, royalties, etc. It also includes pension and annuity income and income (other than earned income) received as the beneficiary of a trust.
For children under age 14, investment income over $1,400 is taxed at the parent’s rate if the parent’s rate is higher than the child’s rate. If the child’s investment income is more than $1,400, use this form to figure the child’s tax.
Generally, Form 8615 must be filed for any child who was under age 14 on January 1, 1999, had more than $1,400 of investment income, and is required to file a tax return. But if neither parent was alive on December 31, 1998, do not use Form 8615. Instead, figure the child’s tax in the normal manner.
Note: The parent may be able to elect to report the child’s interest and dividends on his or her return. If the parent makes this election, the child will not have to file a return or Form 8615. For more details, see Form 8814, Parents’ Election To Report Child’s Interest and Dividends.
As used on this form, “investment income” includes all taxable income other than earned income as defined on page 2. It
Incomplete Information for Parent
If the parent’s taxable income or filing status or the net investment income of the
√ Single Married filing joint return (even if only one had income) Married filing separate return. Enter spouse’s social security number above and full name here. Head of household (with qualifying person). (See page 20.) If the qualifying person is a child but not your dependent, enter this child’s name here. Qualifying widow(er) with dependent child (year spouse died 19 ). (See page 21.)
Yourself. If your parent (or someone else) can claim you as a dependent on his or her tax return, do not check box 6a. Spouse Dependents: (1) First name Last name (2) Dependent’s social security number (3) Dependent’s relationship to you (4) if qualified child for child tax credit (see page 22)
b If you are married filing separately and your spouse itemizes deductions, see page 30 and check here 20b Enter the standard deduction for your filing status. But see page 31 if you checked any box on line 20a or 20b OR if someone can claim you as a dependent. ● Single—$4,250 ● Married filing jointly or Qualifying widow(er)—$7,100 21 ● Head of household—$6,250 ● Married filing separately—$3,550 22 Subtract line 21 from line 19. If line 21 is more than line 19, enter -0-. 22 23 Multiply $2,700 by the total number of exemptions claimed on line 6d. 23 24 Subtract line 23 from line 22. If line 23 is more than line 22, enter -0-. This is your taxable income. 24 25 Find the tax on the amount on line 24 (see page 31). 25 26 Credit for child and dependent care expenses. Attach Schedule 2. 26 27 Credit for the elderly or the disabled. Attach Schedule 3. 27 28 Child tax credit (see page 32). 28 29 Education credits. Attach Form 8863. 29 30 Adoption credit. Attach Form 8839. 30 31 Add lines 26 through 30. These are your total credits. 31 32 Subtract line 31 from line 25. If line 31 is more than line 25, enter -0-. 32 33 Advance earned income credit payments from Form(s) W-2. 33 34 Add lines 32 and 33. This is your total tax. 34 35 Total Federal income tax withheld from 135 Forms W-2 and 1099. 35 36 1998 estimated tax payments and amount 300 applied from 1997 return. 36 37a Earned income credit. Attach Schedule EIC if you have a qualifying child. 37a b Nontaxable earned income: and type amount 38 Additional child tax credit. Attach Form 8812. 38 39 39 Add lines 35, 36, 37a, and 38. These are your total payments. 40 If line 39 is more than line 34, subtract line 34 from line 39. 40 This is the amount you overpaid. 41a 41a Amount of line 40 you want refunded to you. b Routing c Type: Checking Savings number d Account
2500 552
Under penalties of perjury, I declare that I have examined this return and accompanying schedules and statements, and to the best of my knowledge and belief, they are true, correct, and accurately list all amounts and sources of income I received during the tax year. Declaration of preparer (other than the taxpayer) is based on all information of which the preparer has any knowledge. Your signature Date Your occupation Daytime telephone number (optional)
Spouse’s signature. If joint return, BOTH must sign. Preparer’s signature Firm’s name (or yours if self-employed) and address
( Check if self-employed
) Preparer’s social security no.
Adjusted gross income– Gross income (defined later) minus adjustments to income (defined next). Adjustments to income– Deductions that are subtracted from gross income in figuring adjusted gross income. They include deductions for moving expenses, alimony paid, a penalty on early withdrawal of savings, and contributions to an individual retirement arrangement (IRA). Adjustments to income can be taken even if itemized deductions (defined later) are not claimed. Alternative minimum tax– A tax designed to collect at least a minimum amount of tax from taxpayers who benefit from the tax laws that give special treatment to certain kinds of income and allow deductions and credits for certain kinds of expenses. Capital gain distribution– An allocated amount paid to, or treated as paid to, a shareholder by a mutual fund, regulated investment company, or real estate investment trust from its net realized long-term capital gains. This amount is in addition to any ordinary dividend paid to the shareholder. You will receive a statement from the payer if this applies to you. Dependent– A person, other than the taxpayer or the taxpayer's spouse, for whom an exemption (defined later) can be claimed. You can generally claim an exemption for a dependent if the dependent: 1) Lives with or is related to you, 2) Is a U.S. citizen, U.S. resident, or a resident of Canada or Mexico, 3) Does not file a joint return, 4) Does not have $2,700 or more of gross (total) income (does not apply to your
child if under 19 or a student under 24), and 5) Is supported (generally more than 50%) by you. For more information, see Exemptions for Dependents in Publication 501. Earned income– Salaries, wages, tips, professional fees, and other amounts received as pay for work actually done. For purposes of determining a dependent's standard deduction, earned income also includes any part of a scholarship or fellowship grant that the dependent must include in his or her gross income. Exemption– An amount ($2,700 for 1998) that can be subtracted from income in figuring how much income will be taxed. Exemptions generally are allowed for the taxpayer, the taxpayer's spouse, and qualifying dependents. Filing status– The category (single, married filing joint return, married filing separate return, head of household, or qualifying widow(er) with dependent child) you fit into that determines such things as your filing requirement, your standard deduction, and your correct tax. These are the same categories listed on Forms 1040 and 1040A and shown in the headings of the Tax Table columns and the Tax Rate Schedules. For more information, see Filing Status in Publication 501. Gross income– All income from all sources (other than tax-exempt income) that must be included on your tax return. Investment income– See Unearned income. Itemized deductions– Deductions allowed on Schedule A (Form 1040) for medical and dental expenses, taxes, interest, charitable contributions, casualty and theft losses, and miscellaneous deductions. They are subtracted from adjusted gross income in figuring
taxable income. Itemized deductions cannot be claimed if the standard deduction is chosen. Net capital gain– The excess of net longterm capital gain over any net short-term capital loss. For 1998, this is the smaller of the gain on line 16 or the gain on line 17 of Schedule D (Form 1040), Capital Gains and Losses. Net investment income– The total of all investment income (other than tax-exempt income) reduced by the sum of the following: adjustments to income related to the investment income, plus the larger of: 1) $700 plus itemized deductions directly connected with producing the investment income, or 2) $1,400. Standard deduction– An amount (based on filing status, age, blindness, status as a dependent, and amount of earned income) that can be subtracted from adjusted gross income in figuring taxable income. The standard deduction is not used if itemized deductions are claimed. Tax year– Time period covered by a tax return. Usually this is January 1 to December 31, a calendar year, but taxpayers can elect a fiscal tax year with different beginning and ending dates. Taxable income– Gross income minus any adjustments to income, any allowable exemptions, and either itemized deductions or the standard deduction. Unearned income– This is income other than earned income. It is investment-type income and includes interest, dividends, and capital gains. Distributions of interest, dividends, capital gains, and other unearned income from a trust are also unearned income to a beneficiary of the trust.
Alternative minimum tax ........ 6, 14 Assistance (See More information) Standard deduction ................ 4 Earned .............................. 2, 18 Investment ............................ 10 Trust ..................................... 10 Unearned .......................... 2, 18 Investment income ............ 6, 8, 10 Child's return filed .................. 8 Parent's election to report ...... 6 Tax on child's ......................... 6
Earned income ...................... 2, 18 Exemption .................................... 5 Exemption from withholding ........ 5 Extension of time to file ............... 8
Tax help (See More information) Tax on child's investment income ............................. 6, 8, 14 Alternative minimum tax ....... 14 Child's return filed .................. 8 Parent's election to report the income ............................... 6 Trust, income from .................... 10 TTY/TDD information ................ 19
Filing requirements .................. 2, 4 65 or older or blind ................. 2 Spouse itemizes ..................... 4 Form: 6251 ..................................... 14 8615 ................................. 8, 14 8814 ....................................... 6 W–4 ........................................ 5 Free tax services ....................... 19
More information ....................... 19
Unearned income .................. 2, 18
Dependents: Exemption .............................. Exemption from withholding ... Filing requirements ................. Social security numbers ......... 5 5 2 1
Parent's election to report child's investment income ............. 6, 8 Election not made .................. 8 Parent's return ......................... 6, 8 Information for Form 8615 ..... 8 Which parent's return to use .. 6 Publications (See More information)
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