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Fillable 1040x

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Fillable 1040x

Fillable 1040x Publication 525 - Additional Material Prev  Up  Next   Home   More Online Publications
Print - Click this link to Print this page

Understanding your CP523 Notice

This notice informs you of our intent to terminate your installment agreement and seize (levy) your assets. You have defaulted on your agreement.

Printable samples of this notice (PDF)

Tax publications you may find useful

How to get help

Calling the 1-800 number listed on the top right corner of your notice is the fastest way to get your questions answered.

You can also authorize someone (such as an accountant) to contact the IRS on your behalf using this Power of Attorney and Declaration of Representative (Form 2848).

Or you may qualify for help from a Low Income Taxpayer Clinic.
 


What you need to do

  • Make your payment before your termination date to prevent your installment agreement from being terminated. Go to the payments page to make your payment or find out more about your payment options.
  • Contact the IRS right away to see if you can reinstate your agreement. You may have to pay a fee to reinstate it or you may have to pay any new tax liability in full.
  • Read your notice carefully — it explains what to do now that you have defaulted on your installment agreement.
  • If you don't respond, we will terminate your installment agreement and begin taking collection action, which can include filing a federal tax lien or seizing (levying) your wages and/or bank accounts

You may want to...


Answers to Common Questions

What is the notice telling me?
This notice is telling you that we intend to terminate your installment agreement and seize (levy) your wages and/or bank accounts if you take no action. The notice tells you why we are taking this action.

What do I have to do?
Contact us immediately at the toll-free number listed at the top right corner of the notice. We will discuss what you need to do to resolve this issue.

How much time do I have?
You should contact us as soon as possible but no later than 30 days from the date of the notice.

Who should I contact?
If you have any questions about the notice, call us at the number printed at the top of the notice. A customer service representative will assist you.

What if I don't agree with your action or have already taken corrective action?
If you don't agree with our reason for terminating your installment agreement, contact us at the number printed at the top of the notice. If after talking with us you still do not agree, you have the right to file an appeal and can request a hearing with the IRS Office of Appeals.

If you have already taken corrective action, you should still call us to make sure we have a record of your action so that we can reinstate your installment agreement.

Page Last Reviewed or Updated: 05-Mar-2014

The Fillable 1040x

Fillable 1040x Publication 929 - Main Content Table of Contents Part 1. Fillable 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. Fillable 1040x Designated as representative. Fillable 1040x IRS notice. Fillable 1040x Standard DeductionStandard Deduction of Zero Dependent's Own Exemption Withholding From WagesExceptions. Fillable 1040x Part 2. Fillable 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. Fillable 1040x Figuring the Child's Net Unearned Income (Form 8615, Part I) Step 2. Fillable 1040x Figuring a Tentative Tax at the Parent's Tax Rate (Form 8615, Part II) Step 3. Fillable 1040x Figuring the Child's Tax (Form 8615, Part III) Alternative Minimum Tax Illustrated Example Part 1. Fillable 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. Fillable 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. Fillable 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. Fillable 1040x See Other Filing Requirements, later. Fillable 1040x The following sections apply to dependents with: Earned income only, Unearned income only, and Both earned and unearned income. Fillable 1040x  To find out whether a dependent must file, read the section that applies, or use Table 1. Fillable 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. Fillable 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). Fillable 1040x Example. Fillable 1040x William is 16. Fillable 1040x His mother claims an exemption for him on her income tax return. Fillable 1040x He worked part time on weekends during the school year and full time during the summer. Fillable 1040x He earned $7,000 in wages. Fillable 1040x He did not have any unearned income. Fillable 1040x He must file a tax return because he has earned income only and his gross income is more than $6,100. Fillable 1040x If he is blind, he does not have to file a return because his gross income is not more than $7,600. Fillable 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. Fillable 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). Fillable 1040x Example. Fillable 1040x Sarah is 18 and single. Fillable 1040x Her parents can claim an exemption for her on their income tax return. Fillable 1040x She received $1,970 of taxable interest and dividend income. Fillable 1040x She did not work during the year. Fillable 1040x She must file a tax return because she has unearned income only and her gross income is more than $1,000. Fillable 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. Fillable 1040x Election to report child's unearned income on parent's return. Fillable 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. Fillable 1040x See Parent's Election To Report Child's Interest and Dividends in Part 2. Fillable 1040x If the parent makes this election, the child does not have to file a return. Fillable 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. Fillable 1040x Filing Requirement Worksheet for Most Dependents 1. Fillable 1040x Enter dependent's earned income plus $350     2. Fillable 1040x Minimum amount   $1,000 3. Fillable 1040x Compare lines 1 and 2. Fillable 1040x Enter the larger amount     4. Fillable 1040x Maximum amount   6,100 5. Fillable 1040x Compare lines 3 and 4. Fillable 1040x Enter the smaller amount     6. Fillable 1040x Enter the dependent's gross income. Fillable 1040x If line 6 is more than line 5, the dependent must file an income tax return. Fillable 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. Fillable 1040x       Table 1. Fillable 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. Fillable 1040x   See the definitions of “dependent,”“earned income,”“unearned income,” and “gross income” in the Glossary. Fillable 1040x   Single dependents—Were you either age 65 or older or blind?     No. Fillable 1040x You must file a return if any of the following apply. Fillable 1040x       Your unearned income was over $1,000. Fillable 1040x Your earned income was over $6,100. Fillable 1040x Your gross income was more than the larger of—       $1,000, or Your earned income (up to $5,750) plus $350. Fillable 1040x         Yes. Fillable 1040x You must file a return if any of the following apply. Fillable 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). Fillable 1040x       Married dependents—Were you either age 65 or older or blind?     No. Fillable 1040x You must file a return if any of the following apply. Fillable 1040x       Your gross income was at least $5 and your spouse files a separate return and itemizes deductions. Fillable 1040x Your unearned income was over $1,000. Fillable 1040x Your earned income was over $6,100. Fillable 1040x Your gross income was more than the larger of—       $1,000, or Your earned income (up to $5,750) plus $350. Fillable 1040x       Yes. Fillable 1040x You must file a return if any of the following apply. Fillable 1040x       Your gross income was at least $5 and your spouse files a separate return and itemizes deductions. Fillable 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). Fillable 1040x       Example 1. Fillable 1040x Joe is 20, single, not blind, and a full-time college student. Fillable 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. Fillable 1040x He received $200 taxable interest income and earned $2,750 from a part-time job. Fillable 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). Fillable 1040x Filled-in Example 1 Filing Requirement Worksheet  for Most Dependents 1. Fillable 1040x Enter dependent's earned income plus $350   $ 3,100 2. Fillable 1040x Minimum amount   1,000 3. Fillable 1040x Compare lines 1 and 2. Fillable 1040x Enter the larger amount   3,100 4. Fillable 1040x Maximum amount   6,100 5. Fillable 1040x Compare lines 3 and 4. Fillable 1040x Enter the smaller amount   3,100 6. Fillable 1040x Enter the dependent's gross income. Fillable 1040x If line 6 is more than line 5, the dependent must file an income tax return. Fillable 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. Fillable 1040x   $ 2,950   Example 2. Fillable 1040x The facts are the same as in Example 1 except that Joe had $600 taxable interest income. Fillable 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). Fillable 1040x Filled-in Example 2 Filing Requirement Worksheet for Most Dependents 1. Fillable 1040x Enter dependent's earned income plus $350   $ 3,100 2. Fillable 1040x Minimum amount   1,000 3. Fillable 1040x Compare lines 1 and 2. Fillable 1040x Enter the larger amount   3,100 4. Fillable 1040x Maximum amount   6,100 5. Fillable 1040x Compare lines 3 and 4. Fillable 1040x Enter the smaller amount   3,100 6. Fillable 1040x Enter the dependent's gross income. Fillable 1040x If line 6 is more than line 5, the dependent must file an income tax return. Fillable 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. Fillable 1040x   $ 3,350   Age 65 or older or blind. Fillable 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. Fillable 1040x Filing Requirement Worksheet  for Dependents Who Are Age 65 or Older or Blind 1. Fillable 1040x Enter dependent's earned income plus $350     2. Fillable 1040x Minimum amount   $1,000 3. Fillable 1040x Compare lines 1 and 2. Fillable 1040x Enter the larger amount     4. Fillable 1040x Maximum amount   6,100 5. Fillable 1040x Compare lines 3 and 4. Fillable 1040x Enter the smaller amount     6. Fillable 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. Fillable 1040x Add lines 5 and 6. Fillable 1040x Enter the total     8. Fillable 1040x Enter the dependent's gross income. Fillable 1040x If line 8 is more than line 7, the dependent must file an income tax return. Fillable 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. Fillable 1040x The facts are the same as in Example 2 except that Joe is also blind. Fillable 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). Fillable 1040x   Filled-in Example 3 Filing Requirement Worksheet  for Dependents Who Are Age 65 or Older or Blind 1. Fillable 1040x Enter dependent's earned income plus $350   $3,100 2. Fillable 1040x Minimum amount   1,000 3. Fillable 1040x Compare lines 1 and 2. Fillable 1040x Enter the larger amount   3,100 4. Fillable 1040x Maximum amount   6,100 5. Fillable 1040x Compare lines 3 and 4. Fillable 1040x Enter the smaller amount   3,100 6. Fillable 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. Fillable 1040x Add lines 5 and 6. Fillable 1040x Enter the total   4,600 8. Fillable 1040x Enter the dependent's gross income. Fillable 1040x If line 8 is more than line 7, the dependent must file an income tax return. Fillable 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. Fillable 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. Fillable 1040x But if the dependent is filing a return only because of this tax, the dependent can file Form 5329 by itself. Fillable 1040x A dependent must also file a tax return if he or she: Had wages of $108. Fillable 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. Fillable 1040x Spouse itemizes. Fillable 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). Fillable 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. Fillable 1040x Income tax was withheld from his or her income. Fillable 1040x He or she qualifies for the earned income credit, additional child tax credit, health coverage tax credit, or refundable American opportunity education credit. Fillable 1040x See the tax return instructions to find out who qualifies for these credits. Fillable 1040x  By filing a return, the dependent can get a refund. Fillable 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. Fillable 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. Fillable 1040x Signing the child's return. Fillable 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. Fillable 1040x ” Authority of parent or guardian. Fillable 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. Fillable 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. Fillable 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. Fillable 1040x Third party designee. Fillable 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. Fillable 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. Fillable 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. Fillable 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. Fillable 1040x See the return instructions for more information. Fillable 1040x Designated as representative. Fillable 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. Fillable 1040x Form 2848, Power of Attorney and Declaration of Representative, is used to designate a child's representative. Fillable 1040x See Publication 947, Practice Before the IRS and Power of Attorney, for more information. Fillable 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. Fillable 1040x IRS notice. Fillable 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. Fillable 1040x The notice will show who to contact. Fillable 1040x The IRS will try to resolve the matter with the parent(s) or guardian(s) of the child consistent with their authority. Fillable 1040x Child's earnings. Fillable 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. Fillable 1040x This is true even if, under state law, the parent has the right to the earnings and may actually have received them. Fillable 1040x If the child does not pay the tax due on this income, the parent may be liable for the tax. Fillable 1040x Child's expenses. Fillable 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. Fillable 1040x Example. Fillable 1040x You made payments on your child's behalf that are deductible as a business expense and a charitable contribution. Fillable 1040x You made the payments out of your child's earnings. Fillable 1040x These items can be deducted only on the child's return. Fillable 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). Fillable 1040x However, the standard deduction may be higher for a dependent who: Is 65 or older, or Is blind. Fillable 1040x Certain dependents cannot claim any standard deduction. Fillable 1040x See Standard Deduction of Zero , later. Fillable 1040x Worksheet 1. Fillable 1040x   Use Worksheet 1 to figure the dependent's standard deduction. Fillable 1040x Worksheet 1. Fillable 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. Fillable 1040x If you were 65 or older and/or blind, check the correct number of boxes below. Fillable 1040x Put the total number of boxes checked in box c and go to line 1. Fillable 1040x a. Fillable 1040x You 65 or older   Blind   b. Fillable 1040x Your spouse, if claiming  spouse's exemption 65 or older   Blind   c. Fillable 1040x Total boxes checked         1. Fillable 1040x Enter your earned income (defined below) plus $350. Fillable 1040x If none, enter -0-. Fillable 1040x 1. Fillable 1040x     2. Fillable 1040x Minimum amount. Fillable 1040x   2. Fillable 1040x $1,000   3. Fillable 1040x Compare lines 1 and 2. Fillable 1040x Enter the larger of the two amounts here. Fillable 1040x 3. Fillable 1040x     4. Fillable 1040x Enter on line 4 the amount shown below for your filing status. Fillable 1040x       Single or Married filing separately—$6,100 Married filing jointly—$12,200 Head of household—$8,950 4. Fillable 1040x     5. Fillable 1040x Standard deduction. Fillable 1040x         a. Fillable 1040x Compare lines 3 and 4. Fillable 1040x Enter the smaller amount here. Fillable 1040x If under 65 and not blind, stop here. Fillable 1040x This is your standard deduction. Fillable 1040x Otherwise, go on to line 5b. Fillable 1040x 5a. Fillable 1040x     b. Fillable 1040x If 65 or older or blind, multiply $1,500 ($1,200 if married) by the number in box c above. Fillable 1040x Enter the result here. Fillable 1040x 5b. Fillable 1040x     c. Fillable 1040x Add lines 5a and 5b. Fillable 1040x This is your standard deduction for 2013. Fillable 1040x 5c. Fillable 1040x     Earned income includes wages, salaries, tips, professional fees, and other compensation received for personal services you performed. Fillable 1040x It also includes any amount received as a scholarship that you must include in income. Fillable 1040x   Example 1. Fillable 1040x Michael is single, age 15, and not blind. Fillable 1040x His parents can claim him as a dependent on their tax return. Fillable 1040x He has taxable interest income of $800 and wages of $150. Fillable 1040x He enters $500 (his earned income plus $350) on line 1 of Worksheet 1. Fillable 1040x On line 3, he enters $1,000, the larger of $500 or $1,000. Fillable 1040x Michael enters $6,100 on line 4. Fillable 1040x On line 5a, he enters $1,000, the smaller of $1,000 or $6,100. Fillable 1040x His standard deduction is $1,000. Fillable 1040x Example 2. Fillable 1040x Judy, a full-time student, is single, age 22, and not blind. Fillable 1040x Her parents can claim her as a dependent on their tax return. Fillable 1040x She has dividend income of $275 and wages of $2,500. Fillable 1040x She enters $2,850 (her earned income plus $350) on line 1 of Worksheet 1. Fillable 1040x On line 3, she enters $2,850, the larger of $2,850 or $1,000. Fillable 1040x She enters $6,100 on line 4. Fillable 1040x On line 5a, she enters $2,850 (the smaller of $2,850 or $6,100) as her standard deduction. Fillable 1040x Example 3. Fillable 1040x Amy, who is single, is claimed as a dependent on her parents' tax return. Fillable 1040x She is 18 years old and blind. Fillable 1040x She has taxable interest income of $1,000 and wages of $2,000. Fillable 1040x She enters $2,350 (her earned income plus $350) on line 1 of Worksheet 1. Fillable 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. Fillable 1040x Because Amy is blind, she checks the box for blindness and enters “1” in box c at the top of Worksheet 1. Fillable 1040x She enters $1,500 (the number in box c times $1,500) on line 5b. Fillable 1040x Her standard deduction on line 5c is $3,850 ($2,350 + $1,500). Fillable 1040x Standard Deduction of Zero The standard deduction for the following dependents is zero. Fillable 1040x A married dependent filing a separate return whose spouse itemizes deductions. Fillable 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. Fillable 1040x A nonresident or dual-status alien dependent, unless the dependent is married to a U. Fillable 1040x S. Fillable 1040x citizen or resident alien at the end of the year and chooses to be treated as a U. Fillable 1040x S. Fillable 1040x resident for the year. Fillable 1040x See Publication 519, U. Fillable 1040x S. Fillable 1040x Tax Guide for Aliens, for information on making this choice. Fillable 1040x Example. Fillable 1040x Jennifer, who is a dependent of her parents, is entitled to file a joint return with her husband. Fillable 1040x However, her husband elects to file a separate return and itemize his deductions. Fillable 1040x Because he itemizes, Jennifer's standard deduction on her return is zero. Fillable 1040x She can, however, itemize any of her allowable deductions. Fillable 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. Fillable 1040x This is true even if the other taxpayer does not actually claim the exemption. Fillable 1040x Example. Fillable 1040x James and Barbara can claim their child, Ben, as a dependent on their return. Fillable 1040x Ben is a college student who works during the summer and must file a tax return. Fillable 1040x Ben cannot claim his own exemption on his return. Fillable 1040x This is true even if James and Barbara do not claim him as a dependent on their return. Fillable 1040x Withholding From Wages Employers generally withhold federal income tax, social security tax, and Medicare tax from an employee's wages. Fillable 1040x If the employee claims exemption from withholding on Form W-4, the employer will not withhold federal income tax. Fillable 1040x The exemption from withholding does not apply to social security and Medicare taxes. Fillable 1040x Conditions for exemption from withholding. Fillable 1040x   An employee can claim exemption from withholding for 2014 only if he or she meets both of the following conditions. Fillable 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. Fillable 1040x For 2014, the employee expects a refund of all federal income tax withheld because he or she expects to have no tax liability. Fillable 1040x Dependents. Fillable 1040x   An employee who is a dependent ordinarily cannot claim exemption from withholding if both of the following are true. Fillable 1040x The employee's gross income will be more than $1,000, the minimum standard deduction for 2014. Fillable 1040x The employee's unearned income will be more than $350. Fillable 1040x Exceptions. Fillable 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. Fillable 1040x The above exceptions do not apply to supplemental wages greater than $1,000,000. Fillable 1040x For more information, see Exemption From Withholding in chapter 1 of Publication 505. Fillable 1040x Example. Fillable 1040x Guy is 17 and a student. Fillable 1040x During the summer he works part time at a grocery store. Fillable 1040x He expects to earn about $1,200 this year. Fillable 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. Fillable 1040x The only other income he expects during the year is $375 interest on a savings account. Fillable 1040x He expects that his parents will be able to claim him as a dependent on their tax return. Fillable 1040x He is not blind and will not claim adjustments to income, itemized deductions, a higher standard deduction, or tax credits on his return. Fillable 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. Fillable 1040x Claiming exemption from withholding. Fillable 1040x    To claim exemption from withholding, an employee must enter “Exempt” in the space provided on Form W-4, line 7. Fillable 1040x The employee must complete the rest of the form, as explained in the form instructions, and give it to his or her employer. Fillable 1040x Renewing an exemption from withholding. Fillable 1040x   An exemption from withholding is good for only one year. Fillable 1040x An employee must file a new Form W-4 by February 15 each year to continue the exemption. Fillable 1040x Part 2. Fillable 1040x Tax on Unearned Income of Certain Children The two rules that follow may affect the tax on the unearned income of certain children. Fillable 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. Fillable 1040x (See Parent's Election To Report Child's Interest and Dividends , later. Fillable 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. Fillable 1040x (See Tax for Certain Children Who Have Unearned Income , later. Fillable 1040x ) For these rules, the term “child” includes a legally adopted child and a stepchild. Fillable 1040x These rules apply whether or not the child is a dependent. Fillable 1040x These rules do not apply if neither of the child's parents were living at the end of the year. Fillable 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. Fillable 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 . Fillable 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. Fillable 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 . Fillable 1040x Parents are married. Fillable 1040x   If the child's parents file separate returns, use the return of the parent with the greater taxable income. Fillable 1040x Parents not living together. Fillable 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. Fillable 1040x If the custodial parent is not considered unmarried, use the return of the parent with the greater taxable income. Fillable 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. Fillable 1040x Parents are divorced. Fillable 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. Fillable 1040x Custodial parent remarried. Fillable 1040x   If the custodial parent has remarried, the stepparent (rather than the noncustodial parent) is treated as the child's other parent. Fillable 1040x Therefore, if the custodial parent and the stepparent file a joint return, use that joint return. Fillable 1040x Do not use the return of the noncustodial parent. Fillable 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. Fillable 1040x If the custodial parent and the stepparent are married but not living together, the earlier discussion under Parents not living together applies. Fillable 1040x Parents never married. Fillable 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. Fillable 1040x If the parents did not live together all year, the rules explained earlier under Parents are divorced apply. Fillable 1040x Widowed parent remarried. Fillable 1040x   If a widow or widower remarries, the new spouse is treated as the child's other parent. Fillable 1040x The rules explained earlier under Custodial parent remarried apply. Fillable 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. Fillable 1040x If you do, your child will not have to file a return. Fillable 1040x You can make this election only if all the following conditions are met. Fillable 1040x Your child was under age 19 (or under age 24 if a full-time student) at the end of the year. Fillable 1040x Your child had income only from interest and dividends (including capital gain distributions and Alaska Permanent Fund dividends). Fillable 1040x The child's gross income was less than $10,000. Fillable 1040x The child is required to file a return unless you make this election. Fillable 1040x The child does not file a joint return for the year. Fillable 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. Fillable 1040x No federal income tax was withheld from your child's income under the backup withholding rules. Fillable 1040x You are the parent whose return must be used when applying the special tax rules for children. Fillable 1040x (See Which Parent's Return To Use , earlier. Fillable 1040x ) These conditions are also shown in Figure 1. Fillable 1040x Certain January 1 birthdays. Fillable 1040x   A child born on January 1, 1995, is considered to be age 19 at the end of 2013. Fillable 1040x You cannot make this election for such a child unless the child was a full-time student. Fillable 1040x   A child born on January 1, 1990, is considered to be age 24 at the end of 2013. Fillable 1040x You cannot make this election for such a child. Fillable 1040x How to make the election. Fillable 1040x    Make the election by attaching Form 8814 to your Form 1040 or Form 1040NR. Fillable 1040x (If you make this election, you cannot file Form 1040A or Form 1040EZ. Fillable 1040x ) Attach a separate Form 8814 for each child for whom you make the election. Fillable 1040x You can make the election for one or more children and not for others. Fillable 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. Fillable 1040x Rate may be higher. Fillable 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. Fillable 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. Fillable 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. Fillable 1040x Deductions you cannot take. Fillable 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. Fillable 1040x The additional standard deduction if the child is blind. Fillable 1040x The deduction for a penalty on an early withdrawal of your child's savings. Fillable 1040x Itemized deductions (such as your child's investment expenses or charitable contributions). Fillable 1040x Figure 1. Fillable 1040x Can You Include Your Child's Income On Your Tax Return? Please click here for the text description of the image. Fillable 1040x Figure 1. Fillable 1040x Can You Include Your Child's Income On Your Tax Return? Deductible investment interest. Fillable 1040x   If you use Form 8814, your child's unearned income is considered your unearned income. Fillable 1040x To figure the limit on your deductible investment interest, add the child's unearned income to yours. Fillable 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. Fillable 1040x Alternative minimum tax. Fillable 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. Fillable 1040x If it is, you must include it with your own tax preference items when figuring your AMT. Fillable 1040x See Form 6251, Alternative Minimum Tax—Individuals, and its instructions for details. Fillable 1040x Reduced deductions or credits. Fillable 1040x   If you use Form 8814, your increased adjusted gross income may reduce certain deductions or credits on your return, including the following. Fillable 1040x Deduction for contributions to a traditional individual retirement arrangement (IRA). Fillable 1040x Deduction for student loan interest. Fillable 1040x Itemized deductions for medical expenses, casualty and theft losses, and certain miscellaneous expenses. Fillable 1040x Credit for child and dependent care expenses. Fillable 1040x Child tax credit. Fillable 1040x Education tax credits. Fillable 1040x Earned income credit. Fillable 1040x Penalty for underpayment of estimated tax. Fillable 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. Fillable 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. Fillable 1040x Get Publication 505 for more information. Fillable 1040x Figuring Child's Income Use Form 8814, Part I, to figure your child's interest and dividend income to report on your return. Fillable 1040x Only the amount over $2,000 is added to your income. Fillable 1040x The amount over $2,000 is shown on Form 8814, line 6. Fillable 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. Fillable 1040x Include the amount from Form 8814, line 12, on Form 1040 or Form 1040NR, line 21. Fillable 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. Fillable 1040x On the dotted line next to line 21, enter “Form 8814” and the total of the Form 8814, line 12 amounts. Fillable 1040x Note. Fillable 1040x The tax on the first $2,000 is figured on Form 8814, Part II. Fillable 1040x See Figuring Additional Tax , later. Fillable 1040x Qualified dividends. Fillable 1040x   Enter on Form 8814, line 2a, any ordinary dividends your child received. Fillable 1040x This amount may include qualified dividends. Fillable 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. Fillable 1040x For detailed information about qualified dividends, see Publication 550. Fillable 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. Fillable 1040x You do not include these dividends on Form 8814, line 12, or on line 21 of Form 1040 or Form 1040NR. Fillable 1040x   Enter the child's qualified dividends on Form 8814, line 2b. Fillable 1040x But do not include this amount on Form 1040, lines 9a and 9b, or Form 1040NR, lines 10a and 10b. Fillable 1040x Instead, include the amount from Form 8814, line 9, on Form 1040, lines 9a and 9b, or Form 1040NR, lines 10a and 10b. Fillable 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. Fillable 1040x ) Capital gain distributions. Fillable 1040x   Enter on Form 8814, line 3, any capital gain distributions your child received. Fillable 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. Fillable 1040x You do not include it on Form 8814, line 12, or on line 21 of Form 1040 or Form 1040NR. Fillable 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. Fillable 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. Fillable 1040x ) Collectibles (28% rate) gain. Fillable 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. Fillable 1040x Multiply the child's capital gain distribution included on Schedule D, line 13, by a fraction. Fillable 1040x The numerator is the part of the child's total capital gain distribution that is collectibles (28% rate) gain. Fillable 1040x The denominator is the child's total capital gain distribution. Fillable 1040x Enter the result on line 4 of the 28% Rate Gain Worksheet. Fillable 1040x Unrecaptured section 1250 gain. Fillable 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. Fillable 1040x Multiply the child's capital gain distribution included on Schedule D, line 13, by a fraction. Fillable 1040x The numerator is the part of the child's total capital gain distribution that is unrecaptured section 1250 gain. Fillable 1040x The denominator is the child's total capital gain distribution. Fillable 1040x Enter the result on the Unrecaptured Section 1250 Gain Worksheet, line 11. Fillable 1040x Section 1202 gain. Fillable 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. Fillable 1040x (For information about the exclusion, see chapter 4 of Publication 550. Fillable 1040x ) To figure that part, multiply the child's capital gain distribution included on Schedule D, line 13, by a fraction. Fillable 1040x The numerator is the part of the child's total capital gain distribution that is section 1202 gain. Fillable 1040x The denominator is the child's total capital gain distribution. Fillable 1040x Your section 1202 exclusion is generally 50% of the result, but may be subject to a limit. Fillable 1040x In some cases, the exclusion is more than 50%. Fillable 1040x See the instructions for Schedule D for details and information on how to report the exclusion amount. Fillable 1040x Example. Fillable 1040x Fred is 6 years old. Fillable 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. Fillable 1040x (None of the distributions were reported on Form 1099-DIV as unrecaptured section 1250 gain, section 1202 gain, or collectibles (28% rate) gain. Fillable 1040x ) All of the ordinary dividends are qualified dividends. Fillable 1040x He has no other income and is not subject to backup withholding. Fillable 1040x No estimated tax payments were made under his name and social security number. Fillable 1040x Fred's parents elect to include Fred's income on their tax return instead of filing a return for him. Fillable 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. Fillable 1040x They leave lines 1a and 1b of Form 8814 blank because Fred does not have any interest income. Fillable 1040x They enter his ordinary dividends of $1,575 on lines 2a and 2b because all of Fred's ordinary dividends are qualified dividends. Fillable 1040x They enter the amount of Fred's capital gain distributions, $525, on line 3. Fillable 1040x Next, they add the amounts on lines 1a, 2a, and 3 and enter the result, $2,100, on line 4. Fillable 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. Fillable 1040x This is the total amount from Form 8814 to be reported on their return. Fillable 1040x Next, they figure how much of this amount is qualified dividends and how much is capital gain distributions. Fillable 1040x They divide the amount on line 2b, $1,575, by the amount on line 4, $2,100. Fillable 1040x They enter the result, . Fillable 1040x 75, on line 7. Fillable 1040x They divide the amount on line 3, $525, by the amount on line 4, $2,100. Fillable 1040x They enter the result, . Fillable 1040x 25, on line 8. Fillable 1040x They multiply the amount on line 6, $100, by the decimal on line 7, . Fillable 1040x 75, and enter the result, $75, on line 9. Fillable 1040x They multiply the amount on line 6, $100, by the decimal on line 8, . Fillable 1040x 25, and enter the result, $25, on line 10. Fillable 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. Fillable 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. Fillable 1040x They enter $100 ($75 + $25) on line 11 and -0- ($100 – $100) on line 12. Fillable 1040x Because the amount on line 12 is -0-, they do not include any amount from Form 8814 on their Form 1040, line 21. Fillable 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. Fillable 1040x This tax is added to the tax figured on your income. Fillable 1040x This additional tax is the smaller of: 10% x (your child's gross income − $1,000), or $100. Fillable 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. Fillable 1040x Check box a on Form 1040, line 44, or Form 1040NR, line 42. Fillable 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. Fillable 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. Fillable 1040x Attach the completed form to the child's Form 1040, Form 1040A, or Form 1040NR. Fillable 1040x When Form 8615 must be filed. Fillable 1040x   Form 8615 must be filed for a child if all of the following statements are true. Fillable 1040x The child's unearned income was more than $2,000. Fillable 1040x The child is required to file a return for 2013. Fillable 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. Fillable 1040x At least one of the child's parents was alive at the end of 2013. Fillable 1040x The child does not file a joint return for 2013. Fillable 1040x These conditions are also shown in Figure 2. Fillable 1040x Certain January 1 birthdays. Fillable 1040x   Use the following chart to determine whether certain children with January 1 birthdays meet condition 3 under When Form 8615 must be filed. Fillable 1040x IF a child was born on. Fillable 1040x . Fillable 1040x . Fillable 1040x THEN, at the end of 2013, the child is considered to be. Fillable 1040x . Fillable 1040x . Fillable 1040x January 1, 1996 18* January 1, 1995 19** January 1, 1990 24*** *This child is not under age 18. Fillable 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. Fillable 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. Fillable 1040x  ***Do not use Form 8615 for this child. Fillable 1040x Figure 2. Fillable 1040x Do You Have To Use Form 8615 To Figure Your Child's Tax? Please click here for the text description of the image. Fillable 1040x Figure 2. Fillable 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. Fillable 1040x (If the parents filed a joint return, enter the name and social security number listed first on the joint return. Fillable 1040x ) On line C, check the box for the parent's filing status. Fillable 1040x See Which Parent's Return To Use, earlier, for information on which parent's return information must be used on Form 8615. Fillable 1040x Parent with different tax year. Fillable 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. Fillable 1040x Example. Fillable 1040x Kimberly must use her mother's tax and taxable income to complete her Form 8615 for calendar year 2013 (January 1 – December 31). Fillable 1040x Kimberly's mother files her tax return on a fiscal year basis (July 1 – June 30). Fillable 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. Fillable 1040x Parent's return information not known timely. Fillable 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. Fillable 1040x   You can use any reasonable estimate. Fillable 1040x This includes using information from last year's return. Fillable 1040x If you use an estimated amount on Form 8615, enter “Estimated” on the line next to the amount. Fillable 1040x   When you get the correct information, file an amended return on Form 1040X, Amended U. Fillable 1040x S. Fillable 1040x Individual Income Tax Return. Fillable 1040x Extension of time to file. Fillable 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. Fillable 1040x S. Fillable 1040x Individual Income Tax Return. Fillable 1040x See the instructions for Form 4868 for details. Fillable 1040x    An extension of time to file is not an extension of time to pay. Fillable 1040x You must make an accurate estimate of the tax for 2013. Fillable 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. Fillable 1040x See Form 4868 and its instructions. Fillable 1040x Parent's return information not available. Fillable 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). Fillable 1040x How to request. Fillable 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. Fillable 1040x (The IRS cannot process a request received before the end of the tax year. Fillable 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. Fillable 1040x   The request must contain all of the following. Fillable 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. Fillable 1040x Proof of the child's age (for example, a copy of the child's birth certificate). Fillable 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). Fillable 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. Fillable 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. Fillable 1040x Step 1. Fillable 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. Fillable 1040x To do that, use Form 8615, Part I. Fillable 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. Fillable 1040x Adjusted gross income is shown on Form 1040, line 38; Form 1040A, line 22; or Form 1040NR, line 37. Fillable 1040x Form 1040EZ and Form 1040NR-EZ cannot be used if Form 8615 must be filed. Fillable 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. Fillable 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. Fillable 1040x Alternate Worksheet for Form 8615, Line 1 A. Fillable 1040x Enter the amount from the child's Form 1040, line 22, or Form 1040NR, line 23   B. Fillable 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. Fillable 1040x Enter this total as a positive number (greater than zero)   C. Fillable 1040x Add line A and line B and  enter the total   D. Fillable 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. Fillable 1040x Subtract line D from line C. Fillable 1040x Enter the result here and on Form 8615, line 1   Unearned income defined. Fillable 1040x   Unearned income is generally all income other than salaries, wages, and other amounts received as pay for work actually performed. Fillable 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. Fillable 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). Fillable 1040x Nontaxable income. Fillable 1040x   For this purpose, unearned income includes only amounts the child must include in gross income. Fillable 1040x Nontaxable unearned income, such as tax-exempt interest and the nontaxable part of social security and pension payments, is not included. Fillable 1040x Capital loss. Fillable 1040x   A child's capital losses are taken into account in figuring the child's unearned income. Fillable 1040x Capital losses are first applied against capital gains. Fillable 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. Fillable 1040x Any difference over $3,000 is carried to the next year. Fillable 1040x Income from property received as a gift. Fillable 1040x   A child's unearned income includes all income produced by property belonging to the child. Fillable 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. Fillable 1040x   A child's unearned income includes income produced by property given as a gift to the child. Fillable 1040x This includes gifts to the child from grandparents or any other person and gifts made under the Uniform Gift to Minors Act. Fillable 1040x Example. Fillable 1040x Amanda Black, age 13, received the following income. Fillable 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. Fillable 1040x Amanda's unearned income is $2,100. Fillable 1040x This is the total of the dividends ($800), taxable interest ($1,200), and capital gains reduced by capital losses ($300 − $200 = $100). Fillable 1040x Her wages are earned (not unearned) income because they are received for work actually performed. Fillable 1040x Her tax-exempt interest is not included because it is nontaxable. Fillable 1040x Trust income. Fillable 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. Fillable 1040x   However, taxable distributions from a qualified disability trust are considered earned income for the purposes of completing Form 8615. Fillable 1040x See the Form 8615 instructions for details. Fillable 1040x Adjustment to income. Fillable 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. Fillable 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. Fillable 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. Fillable 1040x Directly connected. Fillable 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. Fillable 1040x These expenses include custodian fees and service charges, service fees to collect taxable interest and dividends, and certain investment counsel fees. Fillable 1040x    These expenses are added to certain other miscellaneous itemized deductions on Schedule A (Form 1040). Fillable 1040x Only the amount greater than 2% of the child's adjusted gross income can be deducted. Fillable 1040x See Publication 529, Miscellaneous Deductions, for more information. Fillable 1040x Example 1. Fillable 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. Fillable 1040x His adjusted gross income is $8,000, which is entered on Form 1040, line 38, and on Form 8615, line 1. Fillable 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. Fillable 1040x Example 2. Fillable 1040x Eleanor, age 8, has unearned income of $16,000 and an early withdrawal penalty of $100. Fillable 1040x She has no other income. Fillable 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. Fillable 1040x Her adjusted gross income, entered on line 1, is $15,900 ($16,000 − $100). Fillable 1040x The amount on line 2 is $2,050. Fillable 1040x This is the larger of: $1,000 plus the $1,050 of directly connected itemized deductions, or $2,000. Fillable 1040x Line 3 Subtract line 2 from line 1 and enter the result on this line. Fillable 1040x If zero or less, do not complete the rest of the form. Fillable 1040x However, you must still attach Form 8615 to the child's tax return. Fillable 1040x Figure the tax on the child's taxable income in the normal manner. Fillable 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. Fillable 1040x Child files Form 2555 or 2555-EZ. Fillable 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. Fillable 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. Fillable 1040x Line 5 (Net Unearned Income) A child's net unearned income cannot be more than his or her taxable income. Fillable 1040x Enter on Form 8615, line 5, the smaller of line 3 or line 4. Fillable 1040x This is the child's net unearned income. Fillable 1040x If zero or less, do not complete the rest of the form. Fillable 1040x However, you must still attach Form 8615 to the child's tax return. Fillable 1040x Figure the tax on the child's taxable income in the normal manner. Fillable 1040x Step 2. Fillable 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. Fillable 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. Fillable 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. Fillable 1040x For example, do not refigure the medical expense deduction. Fillable 1040x Figure the tentative tax on Form 8615, lines 6 through 13. Fillable 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. Fillable 1040x If the parent's taxable income is zero or less, enter zero on line 6. Fillable 1040x Parent files Form 2555 or 2555-EZ. Fillable 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. Fillable 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. Fillable 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. Fillable 1040x Do not include the amount from line 5 of the Form 8615 being completed. Fillable 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. Fillable 1040x ) Example. Fillable 1040x Paul and Jane Persimmon have three children, Sharon, Jerry, and Mike, who must attach Form 8615 to their tax returns. Fillable 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. Fillable 1040x Line 7 of Jerry's Form 8615 will show $1,800 ($800 + $1,000). Fillable 1040x Line 7 of Mike's Form 8615 will show $1,400 ($800 + $600). Fillable 1040x Other children's information not available. Fillable 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. Fillable 1040x Estimates and extensions are discussed earlier under Providing Parental Information (Form 8615, Lines A–C) . Fillable 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. Fillable 1040x You must determine the amount of net capital gain and qualified dividends included on this line before completing Form 8615, line 9. Fillable 1040x Net capital gain. Fillable 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. Fillable 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. Fillable 1040x Qualified dividends. Fillable 1040x   Qualified dividends are those dividends reported on line 9b of Form 1040 or Form 1040A, or line 10b of Form 1040NR. Fillable 1040x Net capital gain and qualified dividends on line 8. Fillable 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. Fillable 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. Fillable 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. Fillable 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. Fillable 1040x   Use the instructions for Form 8615, line 8, including the appropriate Line 5 Worksheet, to find these amounts. Fillable 1040x See the instructions for Form 8615 for more details. Fillable 1040x Note. Fillable 1040x The amount of any net capital gain or qualified dividends is not separately reported on line 8. Fillable 1040x It is  needed, however, when figuring the tax on line 9. Fillable 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. Fillable 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. Fillable 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. Fillable 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. Fillable 1040x For details, see the instructions for Form 8615, line 9. Fillable 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. Fillable 1040x But if Schedule J is used to figure the tax on the parent's return, use it to figure this tax. Fillable 1040x Child files Form 2555 or 2555-EZ. Fillable 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. Fillable 1040x Using the Schedule D Tax Worksheet for line 9 tax. Fillable 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. Fillable 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. Fillable 1040x Then figure the line 9 tax using another Schedule D Tax Worksheet. Fillable 1040x (Do not attach this Schedule D Tax Worksheet to the child's return. Fillable 1040x )   Complete this Schedule D Tax Worksheet as follows. Fillable 1040x On line 1, enter the amount from Form 8615, line 8. Fillable 1040x On line 2, enter the qualified dividends included on Form 8615, line 8. Fillable 1040x (See the earlier discussion for line 8. Fillable 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. Fillable 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. Fillable 1040x If applicable, include instead the smaller amount entered on the dotted line next to line 4e. Fillable 1040x On lines 5 and 6, follow the worksheet instructions. Fillable 1040x On line 7, enter the net capital gain included on Form 8615, line 8. Fillable 1040x (See the earlier discussion for line 8. Fillable 1040x ) On lines 8 through 10, follow the worksheet instructions. Fillable 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). Fillable 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. Fillable 1040x Figure these amounts as explained later under Figuring unrecaptured section 1250 gain (line 11) and Figuring 28% rate gain (line 11). Fillable 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. Fillable 1040x Otherwise, skip steps 10, 11, and 12 below, and go to step 13. Fillable 1040x Determine whether there is a line 8 capital gain excess as follows. Fillable 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. Fillable 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. Fillable 1040x ) Subtract (a) from the amount on line 1 of this Schedule D Tax Worksheet. Fillable 1040x Subtract (b) from the amount on line 10 of this Schedule D Tax Worksheet. Fillable 1040x If the result is more than zero, that amount is the line 8 capital gain excess. Fillable 1040x If the result is zero or less, there is no line 8 capital gain excess. Fillable 1040x If there is no line 8 capital gain excess, skip step 12 below and go to step 13. Fillable 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. Fillable 1040x (These modifications are to be made only for purposes of filling out this additional Schedule D Tax Worksheet. Fillable 1040x ) Reduce the amount you would otherwise enter on line 9 (but not below zero) by the line 8 capital gain excess. Fillable 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. Fillable 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. Fillable 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. Fillable 1040x Complete lines 12 through 45 following the worksheet instructions. Fillable 1040x Use the parent's filing status to complete lines 15, 42, and 44. Fillable 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