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Form 1040x Example

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Form 1040x Example

Form 1040x example Publication 554 - Introductory Material Table of Contents What's New Reminders IntroductionVolunteer Income Tax Assistance and Tax Counseling for the Elderly. Form 1040x example Ordering forms and publications. Form 1040x example Tax questions. Form 1040x example What's New Alternative minimum tax exemption increased. Form 1040x example  The AMT exemption amount has increased to $51,900 ($80,800 if married filing jointly or qualifying widow(er); $40,400 if married filing separately). Form 1040x example Earned income credit. Form 1040x example  The maximum amount of income you can earn and still get the credit has increased. Form 1040x example You may be able to take the credit if you earn less than: $14,340 ($19,680 if married filing jointly), do not have a qualifying child, and are at least 25 years old and under 65, $37,870 ($43,210 if married filing jointly), and you have one qualifying child, $43,038 ($48,378 if married filing jointly), and you have two qualifying children, or $46,227 ($51,567 if married filing jointly), and you have three or more qualifying children. Form 1040x example For more information, see Earned Income Credit , later. Form 1040x example Exemption phaseout. Form 1040x example  You lose at least part of the benefit of your exemptions if your adjusted gross income is above a certain amount. Form 1040x example For 2013, the phaseout begins at $150,000 for married individuals filing separate returns; $250,000 for single individuals; $275,000 for heads of household; and $300,000 for married individuals filing joint returns or qualifying widow(er)s. Form 1040x example For more information, see Phaseout of Exemptions in Publication 501. Form 1040x example Limit on itemized deductions. Form 1040x example   Beginning January 1, 2013, itemized deductions for taxpayers with adjusted gross incomes above $150,000 may be reduced. Form 1040x example See Overall limitation , later. Form 1040x example Medical and dental expenses. Form 1040x example   Beginning January 1, 2013, taxpayers 65 and older can deduct only the part of their medical and dental expenses that exceed 7. Form 1040x example 5% of their adjusted gross income (10% for taxpayers under 65). Form 1040x example Same-sex marriages. Form 1040x example  If you have a same-sex spouse whom you legally married in a state (or foreign country) that recognizes same-sex marriage, you and your spouse generally must use the married filing jointly or married filing separately filing status on your 2013 return, even if you and your spouse now live in a state (or foreign country) that does not recognize same-sex marriage. Form 1040x example For more information, see Publication 501. Form 1040x example Reminders Future developments. Form 1040x example  For the latest information about developments related to Publication 554, such as legislation enacted after it was published, go to www. Form 1040x example irs. Form 1040x example gov/pub554. Form 1040x example Tax return preparers. Form 1040x example  Choose your preparer carefully. Form 1040x example If you pay someone to prepare your return, the preparer is required, under the law, to sign the return and fill in the other blanks in the Paid Preparer's area of your return. Form 1040x example Remember, however, that you are still responsible for the accuracy of every item entered on your return. Form 1040x example If there is any underpayment, you are responsible for paying it, plus any interest and penalty that may be due. Form 1040x example Sale of home by surviving spouse. Form 1040x example  If you are an unmarried widow or widower, you may qualify to exclude up to $500,000 of any gain from the sale or exchange of your main home. Form 1040x example For more information, see Sale of Home , later. Form 1040x example Third party designee. Form 1040x example  You can check the “Yes” box in the Third Party Designee area of your return to authorize the IRS to discuss your return with your preparer, a friend, family member, or any other person you choose. Form 1040x example This allows the IRS to call the person you identified as your designee to answer any questions that may arise during the processing of your return. Form 1040x example It also allows your designee to perform certain actions. Form 1040x example See your income tax return instructions for details. Form 1040x example Employment tax withholding. Form 1040x example  Your wages are subject to withholding for income tax, social security tax, and Medicare tax even if you are receiving social security benefits. Form 1040x example Photographs of missing children. Form 1040x example  The Internal Revenue Service is a proud partner with the National Center for Missing and Exploited Children. Form 1040x example Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. Form 1040x example You can help bring these children home by looking at the photographs and calling 1-800-THE-LOST (1-800-843-5678) if you recognize a child. Form 1040x example Introduction The purpose of this publication is to provide a general overview of selected topics that are of interest to older taxpayers. Form 1040x example The publication will help you determine if you need to file a return and, if so, what items to report on your return. Form 1040x example Each topic is discussed only briefly, so you will find references to other free IRS publications that provide more detail on these topics if you need it. Form 1040x example Table I has a list of questions you may have about filing your federal tax return. Form 1040x example To the right of each question is the location of the answer in this publication. Form 1040x example Also, at the back of this publication there is an index to help you search for the topic you need. Form 1040x example While most federal income tax laws apply equally to all taxpayers, regardless of age, there are some provisions that give special treatment to older taxpayers. Form 1040x example The following are some examples. Form 1040x example Higher gross income threshold for filing. Form 1040x example You must be age 65 or older at the end of the year to get this benefit. Form 1040x example You are considered age 65 on the day before your 65th birthday. Form 1040x example Therefore, you are considered age 65 at the end of the year if your 65th birthday is on or before January 1 of the following year. Form 1040x example Higher standard deduction. Form 1040x example If you do not itemize deductions, you are entitled to a higher standard deduction if you are age 65 or older at the end of the year. Form 1040x example You are considered age 65 at the end of the year if your 65th birthday is on or before January 1 of the following year. Form 1040x example Credit for the elderly or the disabled. Form 1040x example If you qualify, you may benefit from the credit for the elderly or the disabled. Form 1040x example To determine if you qualify and how to figure this credit, see Credit for the Elderly or the Disabled , later. Form 1040x example Return preparation assistance. Form 1040x example   The IRS wants to make it easier for you to file your federal tax return. Form 1040x example You may find it helpful to visit a Volunteer Income Tax Assistance (VITA), Tax Counseling for the Elderly (TCE), or American Association of Retired Persons (AARP) Tax-Aide site near you. Form 1040x example Volunteer Income Tax Assistance and Tax Counseling for the Elderly. Form 1040x example   These programs provide free help for low-income taxpayers and taxpayers age 60 or older to fill in and file their returns. Form 1040x example For the VITA/TCE site nearest you, contact your local IRS office. Form 1040x example For more information, see Free help with your tax return under How To Get Tax Help. Form 1040x example   For the location of an AARP Tax-Aide site in your community, call 1-888-227-7669. Form 1040x example When asked, be ready to press in or speak your 5-digit ZIP code. Form 1040x example Or, you can visit their website on the Internet at www. Form 1040x example aarp. Form 1040x example org/money/taxaide. Form 1040x example Comments and suggestions. Form 1040x example   We welcome your comments about this publication and your suggestions for future editions. Form 1040x example   You can write to us at the following address: Internal Revenue Service Tax Forms and Publications Division 1111 Constitution Ave. Form 1040x example NW, IR-6526 Washington, DC 20224   We respond to many letters by telephone. Form 1040x example Therefore, it would be helpful if you would include your daytime phone number, including the area code, in your correspondence. Form 1040x example   You can send your comments from www. Form 1040x example irs. Form 1040x example gov/formspubs/. Form 1040x example Click on “More Information” and then on “Comment on Tax Forms and Publications. Form 1040x example ”   Although we cannot respond individually to each comment received, we do appreciate your feedback and will consider your comments as we revise our tax products. Form 1040x example Ordering forms and publications. Form 1040x example   Visit www. Form 1040x example irs. Form 1040x example gov/formspubs/ to download forms and publications, call 1-800-TAX-FORM (1-800-829-3676), or write to the address below and receive a response within 10 business days after your request is received. Form 1040x example Internal Revenue Service 1201 N. Form 1040x example Mitsubishi Motorway Bloomington, IL 61705-6613 Tax questions. Form 1040x example   If you have a tax question, check the information available on IRS. Form 1040x example gov or call 1-800-829-1040. Form 1040x example We cannot answer tax questions sent to either of the above addresses. Form 1040x example Table I. Form 1040x example What You Should Know About Federal Taxes Note. Form 1040x example The following is a list of questions you may have about filling out your federal income tax return. Form 1040x example  To the right of each question is the location of the answer in this publication. Form 1040x example What I Should Know Where To Find the Answer Do I need to file a return? See chapter 1. Form 1040x example Is my income taxable or nontaxable?  If it is nontaxable, must I still report it? See chapter 2. Form 1040x example How do I report benefits I received from the Social Security Administration or the Railroad Retirement Board?  Are these benefits taxable? See Social Security and Equivalent Railroad Retirement Benefits in chapter 2. Form 1040x example Must I report the sale of my home?  If I had a gain, is any part of it taxable? See Sale of Home in chapter 2. Form 1040x example What are some of the items that I can deduct to reduce my income? See chapters 3 and 4. Form 1040x example How do I report the amounts I set aside for my IRA? See Individual Retirement Arrangement (IRA) Contributions and Deductions in chapter 3. Form 1040x example Would it be better for me to claim the standard deduction or itemize my deductions? See chapter 4. Form 1040x example What are some of the credits I can claim to reduce my tax? See chapter 5 for discussions on the credit for the elderly or the disabled, the child and dependent care credit, and the earned income credit. Form 1040x example Must I make estimated tax payments? See chapter 6. Form 1040x example How do I contact the IRS or get more information? See chapter 7. Form 1040x example Prev  Up  Next   Home   More Online Publications
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Non-filer Investigations - Criminal Investigation (CI)

Overview
Taxpayers who fail to file income tax returns and pay taxes pose a serious threat to tax administration and the American economy.

Who Must File
All citizens must comply with the requirements of the tax law to file returns and pay taxes.

Facts & Fiction of Frivolous Arguments
The 16th Amendment was ratified on February 3, 1913 giving Congress the power "to lay and collect taxes."

IRS Warns of Frivolous Tax Arguments
IRS issued Press Releases that summarize several cases where the taxpayer was fined or penalized for frivolous contentions.

Department of Justice Issues Injunction
The Department of Justice has issued several injunctions against promoters of illegal tax plans or shelters that urge taxpayer to violate the tax laws.

Statistical Data
Enforcement statistics on investigations initiated, prosecutions recommended, indictments, sentenced investigations and months to serve in prison.

Examples of Non-filer Investigations
Examples are written from public record documents filed in the district courts where the case was prosecuted.

 


Criminal Enforcement Home Page

How to Report Suspected Tax Fraud Activities

Page Last Reviewed or Updated: 30-Oct-2013

The Form 1040x Example

Form 1040x example 31. Form 1040x example   Tax on Unearned Income of Certain Children Table of Contents What's New Introduction Useful Items - You may want to see: Which Parent's Return To UseParents Who Do Not File a Joint Return 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. Form 1040x example Figuring the Child's Net Unearned Income (Form 8615, Part I) Step 2. Form 1040x example Figuring Tentative Tax at the Parent's Tax Rate (Form 8615, Part II) Step 3. Form 1040x example Figuring the Child's Tax (Form 8615, Part III) What's New Net Investment Income Tax. Form 1040x example . Form 1040x example  For tax years beginning after December 31, 2012, a child whose tax is figured on Form 8615 may be subject to the Net Investment Income Tax (NIIT). Form 1040x example NIIT is a 3. Form 1040x example 8% tax on the lesser of the net investment income or the excess of the child's modified adjusted gross income (MAGI) over the threshold amount. Form 1040x example Use Form 8960, Net Investment Income Tax, to figure this tax. Form 1040x example For more information on NIIT, go to www. Form 1040x example irs. Form 1040x example gov and enter “Net Investment Income Tax” in the search box. Form 1040x example Introduction This chapter discusses the following two rules that may affect the tax on unearned income of certain children. Form 1040x example 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. Form 1040x example (See Parent's Election To Report Child's Interest and Dividends , later. Form 1040x example ) 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. Form 1040x example (See Tax for Certain Children Who Have Unearned Income , later. Form 1040x example ) For these rules, the term “child” includes a legally adopted child and a stepchild. Form 1040x example These rules apply whether or not the child is a dependent. Form 1040x example Useful Items - You may want to see: Publication 929 Tax Rules for Children and Dependents Form (and Instructions) 8615 Tax for Certain Children Who Have Unearned Income 8814 Parents' Election To Report Child's Interest and Dividends 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. Form 1040x example 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 . Form 1040x example 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. Form 1040x example Only the parent whose tax return is used can make the election described under Parent's Election To Report Child's Interest and Dividends . Form 1040x example Parents are married. Form 1040x example   If the child's parents file separate returns, use the return of the parent with the greater taxable income. Form 1040x example Parents not living together. Form 1040x example   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. Form 1040x example If the custodial parent is not considered unmarried, use the return of the parent with the greater taxable income. Form 1040x example   For an explanation of when a married person living apart from his or her spouse is considered unmarried, see Head of Household in chapter 2. Form 1040x example Parents are divorced. Form 1040x example   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. Form 1040x example Custodial parent remarried. Form 1040x example   If the custodial parent has remarried, the stepparent (rather than the noncustodial parent) is treated as the child's other parent. Form 1040x example Therefore, if the custodial parent and the stepparent file a joint return, use that joint return. Form 1040x example Do not use the return of the noncustodial parent. Form 1040x example   If the custodial parent and the stepparent are married, but file separate returns, use the return of the one with the greater taxable income. Form 1040x example If the custodial parent and the stepparent are married but not living together, the earlier discussion under Parents not living together applies. Form 1040x example Parents never married. Form 1040x example   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. Form 1040x example If the parents did not live together all year, the rules explained earlier under Parents are divorced apply. Form 1040x example Widowed parent remarried. Form 1040x example   If a widow or widower remarries, the new spouse is treated as the child's other parent. Form 1040x example The rules explained earlier under Custodial parent remarried apply. Form 1040x example 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. Form 1040x example If you do, your child will not have to file a return. Form 1040x example You can make this election only if all the following conditions are met. Form 1040x example Your child was under age 19 (or under age 24 if a full-time student) at the end of the year. Form 1040x example Your child had income only from interest and dividends (including capital gain distributions and Alaska Permanent Fund dividends). Form 1040x example The child's gross income was less than $10,000. Form 1040x example The child is required to file a return unless you make this election. Form 1040x example The child does not file a joint return for the year. Form 1040x example 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. Form 1040x example No federal income tax was taken out of your child's income under the backup withholding rules. Form 1040x example You are the parent whose return must be used when applying the special tax rules for children. Form 1040x example (See Which Parent's Return To Use , earlier. Form 1040x example ) These conditions are also shown in Figure 31-A. Form 1040x example Certain January 1 birthdays. Form 1040x example   A child born on January 1, 1995, is considered to be age 19 at the end of 2013. Form 1040x example You cannot make this election for such a child unless the child was a full-time student. Form 1040x example   A child born on January 1, 1990, is considered to be age 24 at the end of 2013. Form 1040x example You cannot make this election for such a child. Form 1040x example Full-time student. Form 1040x example   A full-time student is a child who during some part of each of any 5 calendar months of the year was enrolled as a full-time student at a school, or took a full-time on-farm training course given by a school or a state, county, or local government agency. Form 1040x example A school includes a technical, trade, or mechanical school. Form 1040x example It does not include an on-the-job training course, correspondence school, or school offering courses only through the Internet. Form 1040x example How to make the election. Form 1040x example   Make the election by attaching Form 8814 to your Form 1040. Form 1040x example (If you make this election, you cannot file Form 1040A or Form 1040EZ. Form 1040x example ) Attach a separate Form 8814 for each child for whom you make the election. Form 1040x example You can make the election for one or more children and not for others. Form 1040x example Effect of Making the Election The federal income tax on your child's income may be more if you make the Form 8814 election. Form 1040x example Rate may be higher. Form 1040x example   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. Form 1040x example This is because the tax rate on the child's income between $1,000 and $2,000 is 10% if you make this election. Form 1040x example 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. Form 1040x example Deductions you cannot take. Form 1040x example   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. Form 1040x example The additional standard deduction if the child is blind. Form 1040x example The deduction for a penalty on an early withdrawal of your child's savings. Form 1040x example Itemized deductions (such as your child's investment expenses or charitable contributions). Form 1040x example Reduced deductions or credits. Form 1040x example   If you use Form 8814, your increased adjusted gross income may reduce certain deductions or credits on your return including the following. Form 1040x example Deduction for contributions to a traditional individual retirement arrangement (IRA). Form 1040x example Deduction for student loan interest. Form 1040x example Itemized deductions for medical expenses, casualty and theft losses, and certain miscellaneous expenses. Form 1040x example Credit for child and dependent care expenses. Form 1040x example Child tax credit. Form 1040x example Education tax credits. Form 1040x example Earned income credit. Form 1040x example Penalty for underpayment of estimated tax. Form 1040x example   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. Form 1040x example 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. Form 1040x example See chapter 4 for more information. Form 1040x example Figuring Child's Income Use Form 8814, Part I, to figure your child's interest and dividend income to report on your return. Form 1040x example Only the amount over $2,000 is added to your income. Form 1040x example The amount over $2,000 is shown on Form 8814, line 6. Form 1040x example Unless the child's income includes qualified dividends or capital gain distributions (discussed next), the same amount is shown on Form 8814, line 12. Form 1040x example Include the amount from Form 8814, line 12, on Form 1040, line 21. Form 1040x example Enter “Form 8814” on the dotted line next to line 21. Form 1040x example If you file more than one Form 8814, include the total amounts from line 12 of all your Forms 8814 on Form 1040, line 21. Form 1040x example Capital gain distributions and qualified dividends. Form 1040x example   If your child's dividend income included any capital gain distributions, see Capital gain distributions under Figuring Child's Income in Publication 929, Part 2. Form 1040x example If your child's dividend income included any qualified dividends, see Qualified dividends under Figuring Child's Income in Publication 929, Part 2. Form 1040x example 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. Form 1040x example This tax is added to the tax figured on your income. Form 1040x example This additional tax is the smaller of: 10% × (your child's gross income − $1,000), or $100. Form 1040x example Include the amount from line 15 of all your Forms 8814 in the total on Form 1040, line 44. Form 1040x example Check box a on Form 1040, line 44. Form 1040x example Figure 31-A. Form 1040x example Can You Include Your Child's Income On Your Tax Return? Please click here for the text description of the image. Form 1040x example Figure 31–A. Form 1040x example Can You Include Your Child's Income On Your Tax Return? 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. Form 1040x example 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. Form 1040x example Attach the completed form to the child's Form 1040 or Form 1040A. Form 1040x example When Form 8615 must be filed. Form 1040x example   Form 8615 must be filed for a child if all of the following statements are true. Form 1040x example The child's investment income was more than $2,000. Form 1040x example The child is required to file a return for 2013. Form 1040x example 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. Form 1040x example At least one of the child's parents was alive at the end of 2013. Form 1040x example The child does not file a joint return for 2013. Form 1040x example These conditions are also shown in  Figure 31-B. Form 1040x example Earned income. Form 1040x example   Earned income includes salaries, wages, tips, and other payments received for personal services performed. Form 1040x example It does not include unearned income as defined later in this chapter. Form 1040x example Support. Form 1040x example   Your child's support includes all amounts spent to provide the child with food, lodging, clothing, education, medical and dental care, recreation, transportation, and similar necessities. Form 1040x example To figure your child's support, count support provided by you, your child, and others. Form 1040x example However, a scholarship received by your child is not considered support if your child is a full-time student. Form 1040x example See chapter 3 for details about support. Form 1040x example Certain January 1 birthdays. Form 1040x example   Use the following chart to determine whether certain children with January 1 birthdays meet condition 3 under When Form 8615 must be filed. Form 1040x example Figure 31-B. Form 1040x example Do You Have To Use Form 8615 To Figure Your Child's Tax? Please click here for the text description of the image. Form 1040x example Figure 31-B. Form 1040x example Do You Have To Use Form 8615 To Figure Your Child's Tax?    IF a child was born on. Form 1040x example . Form 1040x example . Form 1040x example THEN, at the end of 2013, the child is considered to be. Form 1040x example . Form 1040x example . Form 1040x example January 1, 1996 18* January 1, 1995 19** January 1, 1990 24*** *This child is not under age 18. Form 1040x example The child meets condition 3 only if the child did not have earned income that was more than half of the child's support. Form 1040x example  **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. Form 1040x example  ***Do not use Form 8615 for this child. Form 1040x example Providing Parental Information (Form 8615, lines A–C) On Form 8615, lines A and B, enter the parent's name and social security number. Form 1040x example (If the parents filed a joint return, enter the name and social security number listed first on the joint return. Form 1040x example ) On line C, check the box for the parent's filing status. Form 1040x example See Which Parent's Return To Use at the beginning of this chapter for information on which parent's return information must be used on Form 8615. Form 1040x example Parent with different tax year. Form 1040x example   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. Form 1040x example Parent's return information not known timely. Form 1040x example   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. Form 1040x example   You can use any reasonable estimate. Form 1040x example This includes using information from last year's return. Form 1040x example If you use an estimated amount on Form 8615, enter “Estimated” on the line next to the amount. Form 1040x example    When you get the correct information, file an amended return on Form 1040X, Amended U. Form 1040x example S. Form 1040x example Individual Income Tax Return. Form 1040x example   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. Form 1040x example S. Form 1040x example Individual Income Tax Return. Form 1040x example Extensions are discussed in chapter 1. Form 1040x example Step 1. Form 1040x example 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. Form 1040x example To do that, use Form 8615, Part I. Form 1040x example Line 1 (unearned income). Form 1040x example   If the child had no earned income, enter on this line the adjusted gross income shown on the child's return. Form 1040x example Adjusted gross income is shown on Form 1040, line 38, or Form 1040A, line 22. Form 1040x example Form 1040EZ cannot be used if Form 8615 must be filed. Form 1040x example   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. Form 1040x example   However, if the child has: excluded any foreign earned income, deducted either a loss from self-employment, or deducted a net operating loss from another year, then use the Alternate Worksheet for Form 8615, Line 1, in Publication 929 to figure the amount to enter on Form 8615, line 1. Form 1040x example Unearned income defined. Form 1040x example   Unearned income is generally all income other than salaries, wages, and other amounts received as pay for work actually done. Form 1040x example It includes taxable interest, dividends (including capital gain distributions), capital gains, unemployment compensation, the taxable part of social security and pension payments, and certain distributions from trusts. Form 1040x example 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). Form 1040x example Nontaxable income. Form 1040x example   For this purpose, unearned income includes only amounts the child must include in total income. Form 1040x example Nontaxable unearned income, such as tax-exempt interest and the nontaxable part of social security and pension payments, is not included. Form 1040x example Income from property received as a gift. Form 1040x example   A child's unearned income includes all income produced by property belonging to the child. Form 1040x example 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. Form 1040x example   A child's unearned income includes income produced by property given as a gift to the child. Form 1040x example This includes gifts to the child from grandparents or any other person and gifts made under the Uniform Gift to Minors Act. Form 1040x example Example. Form 1040x example Amanda Black, age 13, received the following income. Form 1040x example Dividends — $800 Wages — $2,100 Taxable interest — $1,200 Tax-exempt interest — $100 Net capital gains — $100 The dividends were qualified dividends on stock given to her by her grandparents. Form 1040x example Amanda's unearned income is $2,100. Form 1040x example This is the total of the dividends ($800), taxable interest ($1,200), and net capital gains ($100). Form 1040x example Her wages are earned (not unearned) income because they are received for work actually done. Form 1040x example Her tax-exempt interest is not included because it is nontaxable. Form 1040x example Trust income. Form 1040x example   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. Form 1040x example   However, for purposes of completing Form 8615, a taxable distribution from a qualified disability trust is considered earned income, not unearned income. Form 1040x example Line 2 (deductions). Form 1040x example   If the child does not itemize deductions on Schedule A (Form 1040), enter $2,000 on line 2. Form 1040x example   If the child does itemize 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, that are directly connected with the production of unearned income entered on line 1, or $2,000. Form 1040x example Directly connected. Form 1040x example   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. Form 1040x example These expenses include custodian fees and service charges, service fees to collect taxable interest and dividends, and certain investment counsel fees. Form 1040x example   These expenses are added to certain other miscellaneous itemized deductions on Schedule A (Form 1040). Form 1040x example Only the amount greater than 2% of the child's adjusted gross income can be deducted. Form 1040x example See chapter 28 for more information. Form 1040x example Example 1. Form 1040x example 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% limit) that are directly connected with his unearned income. Form 1040x example His adjusted gross income is $8,000, which is entered on Form 1040, line 38, and on Form 8615, line 1. Form 1040x example 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. Form 1040x example Example 2. Form 1040x example Eleanor, age 8, has unearned income of $16,000 and an early withdrawal penalty of $100. Form 1040x example She has no other income. Form 1040x example She has itemized deductions of $1,050 (net of the 2% limit) that are directly connected with the production of her unearned income. Form 1040x example Her adjusted gross income, entered on line 1, is $15,900 ($16,000 − $100). Form 1040x example The amount on line 2 is $2,050. Form 1040x example This is the larger of: $1,000 plus the $1,050 of directly connected itemized deductions, or $2,000. Form 1040x example Line 3. Form 1040x example   Subtract line 2 from line 1 and enter the result on this line. Form 1040x example If zero or less, do not complete the rest of the form. Form 1040x example However, you must still attach Form 8615 to the child's tax return. Form 1040x example Figure the tax on the child's taxable income in the normal manner. Form 1040x example Line 4 (child's taxable income). Form 1040x example   Enter on line 4 the child's taxable income from Form 1040, line 43, or Form 1040A, line 27. Form 1040x example   However, if the child files Form 2555 or 2555-EZ to claim the foreign earned income exclusion, housing exclusion, or housing deduction, see the Form 8615 instructions or Pub. Form 1040x example 929. Form 1040x example Line 5 (net unearned income). Form 1040x example   A child's net unearned income cannot be more than his or her taxable income. Form 1040x example Enter on Form 8615, line 5, the smaller of line 3 or line 4. Form 1040x example This is the child's net unearned income. Form 1040x example   If zero or less, do not complete the rest of the form. Form 1040x example However, you must still attach Form 8615 to the child's tax return. Form 1040x example Figure the tax on the child's taxable income in the normal manner. Form 1040x example Step 2. Form 1040x example Figuring 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. Form 1040x example 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. Form 1040x example 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. Form 1040x example For example, do not refigure the medical expense deduction. Form 1040x example Figure the tentative tax on Form 8615, lines 6 through 13. Form 1040x example Note. Form 1040x example If the child or parent has any capital gains or losses, get Publication 929 for help in completing Form 8615, Part II. Form 1040x example Line 6 (parent's taxable income). Form 1040x example   Enter on line 6 the parent's taxable income from Form 1040, line 43, Form 1040A, line 27, or Form 1040EZ, line 6. Form 1040x example   If the Foreign Earned Income Tax Worksheet (in the Form 1040 instructions) was used to figure the parent's tax, enter the amount from line 3 of that worksheet instead of the parent's taxable income. Form 1040x example Line 7 (net unearned income of other children). Form 1040x example   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. Form 1040x example Do not include the amount from line 5 of the Form 8615 being completed. Form 1040x example Example. Form 1040x example Paul and Jane Persimmon have three children, Sharon, Jerry, and Mike, who must attach Form 8615 to their tax returns. Form 1040x example 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. Form 1040x example Line 7 of Jerry's Form 8615 will show $1,800 ($800 + $1,000). Form 1040x example Line 7 of Mike's Form 8615 will show $1,400 ($800 + $600). Form 1040x example Other children's information not available. Form 1040x example   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. Form 1040x example See Parent's return information not known timely , earlier. Form 1040x example Line 11 (tentative tax). Form 1040x example   Subtract line 10 from line 9 and enter the result on this line. Form 1040x example This is the tentative tax. Form 1040x example   If line 7 is blank, skip lines 12a and 12b and enter the amount from line 11 on line 13. Form 1040x example Also skip the discussion for lines 12a and 12b that follows. Form 1040x example Lines 12a and 12b (dividing the tentative tax). Form 1040x example   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 unearned income. Form 1040x example This is done on lines 12a, 12b, and 13. Form 1040x example Add the amount on line 7 to the amount on line 5 and enter the total on line 12a. Form 1040x example Divide the amount on line 5 by the amount on line 12a and enter the result, as a decimal, on line 12b. Form 1040x example Example. Form 1040x example In the earlier example under Line 7 (net unearned income of other children), Sharon's Form 8615 shows $1,600 on line 7. Form 1040x example The amount entered on line 12a is $2,400, the total of the amounts on lines 5 and 7 ($800 + $1,600). Form 1040x example The decimal on line 12b is  . Form 1040x example 333, figured as follows and rounded to three places. Form 1040x example   $800 = . Form 1040x example 333     $2,400   Step 3. Form 1040x example Figuring the Child's Tax (Form 8615, Part III) The final step in figuring a child's tax using Form 8615 is to determine the larger of: The total of: The child's share of the tentative tax based on the parent's tax rate, plus The tax on the child's taxable income in excess of net unearned income, figured at the child's tax rate, or The tax on the child's taxable income, figured at the child's tax rate. Form 1040x example This is the child's tax. Form 1040x example It is figured on Form 8615, lines 14 through 18. Form 1040x example Alternative minimum tax. Form 1040x example   A child may be subject to alternative minimum tax (AMT) if he or she has certain items given preferential treatment under the tax law. Form 1040x example See Alternative Minimum Tax (AMT) in chapter 30. Form 1040x example    For more information on who is liable for AMT and how to figure it, see Form 6251, Alternative Minimum Tax—Individuals. Form 1040x example For information on special limits that apply to a child who files Form 6251, see Certain Children Under Age 24 in the Instructions for Form 6251. Form 1040x example Prev  Up  Next   Home   More Online Publications