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Free Tax Act 2011

Taxact 2011 Free Federal EditionState E FileHow To Amend A Tax Return 2011File Taxes For FreeFree Filing Of State Taxes1040 Ez Tax FormFree 2012 Tax FormsHow To Amend A Tax Return With TurbotaxNeed To File 2012 Tax ReturnsFree Online State Tax Filing1040ez Instruction ManualPrint 1040ez FormsFree Taxes For Military1040nr Online FilingHr Block Tax CalculatorFree Filing For State Taxes1040ez Instructions2011 Tax Schedule2011 Tax Act Deluxe Unlock CodeCan I File 1040x OnlineIrs AmendmentFree 1040ez FilingIrsfreefileCan A Tax Return Be AmendedFree Efile Of State TaxesAmend Your Tax ReturnAmend 2011 Taxes2010 TaxesIrs Forms 1040ez 2012Where To File 2012 Form 1040How Do I Amend My State Tax ReturnAmending Tax Return Online2012 Free Tax FilingEarned Income Tax CreditFederal Tax FormsAmend 2011 ReturnFree Federal & State Tax FilingFree Tax FilingWhen Can I File My 2011 TaxesAmending Your Tax Return

Free Tax Act 2011

Free tax act 2011 Publication 1212 - Introductory Material Table of Contents Future Developments Photographs of Missing Children IntroductionOrdering forms and publications. Free tax act 2011 Tax questions. Free tax act 2011 Useful Items - You may want to see: Future Developments For the latest information about developments related to Pub. Free tax act 2011 1212, such as legislation enacted after it was published, go to www. Free tax act 2011 irs. Free tax act 2011 gov/pub1212. Free tax act 2011 Photographs of Missing Children The Internal Revenue Service is a proud partner with the National Center for Missing and Exploited Children. Free tax act 2011 Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. Free tax act 2011 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. Free tax act 2011 Introduction This publication has two purposes. Free tax act 2011 Its primary purpose is to help brokers and other middlemen identify publicly offered original issue discount (OID) debt instruments they may hold as nominees for the true owners, so they can file Forms 1099-OID or Forms 1099-INT as required. Free tax act 2011 The other purpose of the publication is to help owners of publicly offered OID debt instruments determine how much OID to report on their income tax returns. Free tax act 2011 The list of publicly offered OID debt instruments (OID list) is on the IRS website. Free tax act 2011 The original issue discount tables, Sections I-A through III-F, are only available on the IRS website at www. Free tax act 2011 irs. Free tax act 2011 gov/pub1212 by clicking the link under Recent Developments. Free tax act 2011 The tables are posted to the website in late November or early December of each year. Free tax act 2011 The information on these lists come from the issuers of the debt instruments and from financial publications and is updated annually. Free tax act 2011 (However, see Debt Instruments Not on the OID List, later. Free tax act 2011 ) Brokers and other middlemen can rely on this list to determine, for information reporting purposes, whether a debt instrument was issued at a discount and the OID to be reported on information returns. Free tax act 2011 However, because the information in the list has generally not been verified by the IRS as correct, the following tax matters are subject to change upon examination by the IRS. Free tax act 2011 The OID reported by owners of a debt instrument on their income tax returns. Free tax act 2011 The issuer's classification of an instrument as debt for federal income tax purposes. Free tax act 2011 Instructions for issuers of OID debt instruments. Free tax act 2011   In general, issuers of publicly offered OID debt instruments must, within 30 days after the issue date, report information about the instruments to the IRS on Form 8281, Information Return for Publicly Offered Original Issue Discount Instruments. Free tax act 2011 See the form instructions for more information. Free tax act 2011 Issuers should report errors in and omissions from the list in writing at the following address:  IRS OID Publication Project SE:W:CAR:MP:T  1111 Constitution Ave. Free tax act 2011 NW, IR-6526 Washington, D. Free tax act 2011 C. Free tax act 2011 20224 REMIC and CDO information reporting requirements. Free tax act 2011   Brokers and other middlemen must follow special information reporting requirements for real estate mortgage investment conduits (REMIC) regular, and collateralized debt obligations (CDO) interests. Free tax act 2011 The rules are explained in Publication 938, Real Estate Mortgage Investment Conduits (REMICs) Reporting Information (And Other Collateralized Debt Obligations (CDOs)). Free tax act 2011   Holders of interests in REMICs and CDOs should see chapter 1 of Publication 550 for information on REMICs and CDOs. Free tax act 2011 Comments and suggestions. Free tax act 2011   We welcome your comments about this publication and your suggestions for future editions. Free tax act 2011   You can write to us at the following address: Internal Revenue Service Tax Forms and Publications Division 1111 Constitution Ave. Free tax act 2011 NW, IR-6526 Washington, DC 20224   We respond to many letters by telephone. Free tax act 2011 Therefore, it would be helpful if you would include your daytime phone number, including the area code, in your correspondence. Free tax act 2011   You can send your comments from www. Free tax act 2011 irs. Free tax act 2011 gov/formspubs/. Free tax act 2011 Click on “More Information” and then on “Comment on Tax Forms and Publications. Free tax act 2011 ”   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. Free tax act 2011 Ordering forms and publications. Free tax act 2011   Visit www. Free tax act 2011 irs. Free tax act 2011 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 days after your request is received. Free tax act 2011 Internal Revenue Service 1201 N. Free tax act 2011 Mitsubishi Motorway Bloomington, IL 61705-6613 Tax questions. Free tax act 2011   If you have a tax question, check the information available on IRS. Free tax act 2011 gov or call 1-800-829-1040. Free tax act 2011 We cannot answer tax questions sent to any of the preceding addresses. Free tax act 2011 Useful Items - You may want to see: Publication 515 Withholding of Tax on Nonresident Aliens and Foreign Entities 550 Investment Income and Expenses 938 Real Estate Mortgage Investment Conduits (REMICs) Reporting Information (And Other Collateralized Debt Obligations (CDOs)). Free tax act 2011 Form (and Instructions) 1096 Annual Summary and Transmittal of U. Free tax act 2011 S. Free tax act 2011 Information Returns 1099-B Proceeds From Broker and Barter Exchange Transactions 1099-INT Interest Income 1099-OID Original Issue Discount 8949 Sales and Other Dispositions of Capital Assets Schedule B (Form 1040A or 1040) Interest and Ordinary Dividends Schedule D (Form 1040) Capital Gains and Losses W-8 Instructions for the Requester of Forms W-8BEN, W-8ECI, W-8EXP, and W-8IMY See How To Get Tax Help near the end of this publication for information about getting publications and forms. Free tax act 2011 Prev  Up  Next   Home   More Online Publications
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The Free Tax Act 2011

Free tax act 2011 31. Free tax act 2011   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. Free tax act 2011 Figuring the Child's Net Unearned Income (Form 8615, Part I) Step 2. Free tax act 2011 Figuring Tentative Tax at the Parent's Tax Rate (Form 8615, Part II) Step 3. Free tax act 2011 Figuring the Child's Tax (Form 8615, Part III) What's New Net Investment Income Tax. Free tax act 2011 . Free tax act 2011  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). Free tax act 2011 NIIT is a 3. Free tax act 2011 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. Free tax act 2011 Use Form 8960, Net Investment Income Tax, to figure this tax. Free tax act 2011 For more information on NIIT, go to www. Free tax act 2011 irs. Free tax act 2011 gov and enter “Net Investment Income Tax” in the search box. Free tax act 2011 Introduction This chapter discusses the following two rules that may affect the tax on unearned income of certain children. Free tax act 2011 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. Free tax act 2011 (See Parent's Election To Report Child's Interest and Dividends , later. Free tax act 2011 ) 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. Free tax act 2011 (See Tax for Certain Children Who Have Unearned Income , later. Free tax act 2011 ) For these rules, the term “child” includes a legally adopted child and a stepchild. Free tax act 2011 These rules apply whether or not the child is a dependent. Free tax act 2011 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. Free tax act 2011 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 . Free tax act 2011 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. Free tax act 2011 Only the parent whose tax return is used can make the election described under Parent's Election To Report Child's Interest and Dividends . Free tax act 2011 Parents are married. Free tax act 2011   If the child's parents file separate returns, use the return of the parent with the greater taxable income. Free tax act 2011 Parents not living together. Free tax act 2011   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. Free tax act 2011 If the custodial parent is not considered unmarried, use the return of the parent with the greater taxable income. Free tax act 2011   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. Free tax act 2011 Parents are divorced. Free tax act 2011   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. Free tax act 2011 Custodial parent remarried. Free tax act 2011   If the custodial parent has remarried, the stepparent (rather than the noncustodial parent) is treated as the child's other parent. Free tax act 2011 Therefore, if the custodial parent and the stepparent file a joint return, use that joint return. Free tax act 2011 Do not use the return of the noncustodial parent. Free tax act 2011   If the custodial parent and the stepparent are married, but file separate returns, use the return of the one with the greater taxable income. Free tax act 2011 If the custodial parent and the stepparent are married but not living together, the earlier discussion under Parents not living together applies. Free tax act 2011 Parents never married. Free tax act 2011   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. Free tax act 2011 If the parents did not live together all year, the rules explained earlier under Parents are divorced apply. Free tax act 2011 Widowed parent remarried. Free tax act 2011   If a widow or widower remarries, the new spouse is treated as the child's other parent. Free tax act 2011 The rules explained earlier under Custodial parent remarried apply. Free tax act 2011 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. Free tax act 2011 If you do, your child will not have to file a return. Free tax act 2011 You can make this election only if all the following conditions are met. Free tax act 2011 Your child was under age 19 (or under age 24 if a full-time student) at the end of the year. Free tax act 2011 Your child had income only from interest and dividends (including capital gain distributions and Alaska Permanent Fund dividends). Free tax act 2011 The child's gross income was less than $10,000. Free tax act 2011 The child is required to file a return unless you make this election. Free tax act 2011 The child does not file a joint return for the year. Free tax act 2011 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. Free tax act 2011 No federal income tax was taken out of your child's income under the backup withholding rules. Free tax act 2011 You are the parent whose return must be used when applying the special tax rules for children. Free tax act 2011 (See Which Parent's Return To Use , earlier. Free tax act 2011 ) These conditions are also shown in Figure 31-A. Free tax act 2011 Certain January 1 birthdays. Free tax act 2011   A child born on January 1, 1995, is considered to be age 19 at the end of 2013. Free tax act 2011 You cannot make this election for such a child unless the child was a full-time student. Free tax act 2011   A child born on January 1, 1990, is considered to be age 24 at the end of 2013. Free tax act 2011 You cannot make this election for such a child. Free tax act 2011 Full-time student. Free tax act 2011   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. Free tax act 2011 A school includes a technical, trade, or mechanical school. Free tax act 2011 It does not include an on-the-job training course, correspondence school, or school offering courses only through the Internet. Free tax act 2011 How to make the election. Free tax act 2011   Make the election by attaching Form 8814 to your Form 1040. Free tax act 2011 (If you make this election, you cannot file Form 1040A or Form 1040EZ. Free tax act 2011 ) Attach a separate Form 8814 for each child for whom you make the election. Free tax act 2011 You can make the election for one or more children and not for others. Free tax act 2011 Effect of Making the Election The federal income tax on your child's income may be more if you make the Form 8814 election. Free tax act 2011 Rate may be higher. Free tax act 2011   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. Free tax act 2011 This is because the tax rate on the child's income between $1,000 and $2,000 is 10% if you make this election. Free tax act 2011 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. Free tax act 2011 Deductions you cannot take. Free tax act 2011   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. Free tax act 2011 The additional standard deduction if the child is blind. Free tax act 2011 The deduction for a penalty on an early withdrawal of your child's savings. Free tax act 2011 Itemized deductions (such as your child's investment expenses or charitable contributions). Free tax act 2011 Reduced deductions or credits. Free tax act 2011   If you use Form 8814, your increased adjusted gross income may reduce certain deductions or credits on your return including the following. Free tax act 2011 Deduction for contributions to a traditional individual retirement arrangement (IRA). Free tax act 2011 Deduction for student loan interest. Free tax act 2011 Itemized deductions for medical expenses, casualty and theft losses, and certain miscellaneous expenses. Free tax act 2011 Credit for child and dependent care expenses. Free tax act 2011 Child tax credit. Free tax act 2011 Education tax credits. Free tax act 2011 Earned income credit. Free tax act 2011 Penalty for underpayment of estimated tax. Free tax act 2011   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. Free tax act 2011 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. Free tax act 2011 See chapter 4 for more information. Free tax act 2011 Figuring Child's Income Use Form 8814, Part I, to figure your child's interest and dividend income to report on your return. Free tax act 2011 Only the amount over $2,000 is added to your income. Free tax act 2011 The amount over $2,000 is shown on Form 8814, line 6. Free tax act 2011 Unless the child's income includes qualified dividends or capital gain distributions (discussed next), the same amount is shown on Form 8814, line 12. Free tax act 2011 Include the amount from Form 8814, line 12, on Form 1040, line 21. Free tax act 2011 Enter “Form 8814” on the dotted line next to line 21. Free tax act 2011 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. Free tax act 2011 Capital gain distributions and qualified dividends. Free tax act 2011   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. Free tax act 2011 If your child's dividend income included any qualified dividends, see Qualified dividends under Figuring Child's Income in Publication 929, Part 2. Free tax act 2011 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. Free tax act 2011 This tax is added to the tax figured on your income. Free tax act 2011 This additional tax is the smaller of: 10% × (your child's gross income − $1,000), or $100. Free tax act 2011 Include the amount from line 15 of all your Forms 8814 in the total on Form 1040, line 44. Free tax act 2011 Check box a on Form 1040, line 44. Free tax act 2011 Figure 31-A. Free tax act 2011 Can You Include Your Child's Income On Your Tax Return? Please click here for the text description of the image. Free tax act 2011 Figure 31–A. Free tax act 2011 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. Free tax act 2011 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. Free tax act 2011 Attach the completed form to the child's Form 1040 or Form 1040A. Free tax act 2011 When Form 8615 must be filed. Free tax act 2011   Form 8615 must be filed for a child if all of the following statements are true. Free tax act 2011 The child's investment income was more than $2,000. Free tax act 2011 The child is required to file a return for 2013. Free tax act 2011 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. Free tax act 2011 At least one of the child's parents was alive at the end of 2013. Free tax act 2011 The child does not file a joint return for 2013. Free tax act 2011 These conditions are also shown in  Figure 31-B. Free tax act 2011 Earned income. Free tax act 2011   Earned income includes salaries, wages, tips, and other payments received for personal services performed. Free tax act 2011 It does not include unearned income as defined later in this chapter. Free tax act 2011 Support. Free tax act 2011   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. Free tax act 2011 To figure your child's support, count support provided by you, your child, and others. Free tax act 2011 However, a scholarship received by your child is not considered support if your child is a full-time student. Free tax act 2011 See chapter 3 for details about support. Free tax act 2011 Certain January 1 birthdays. Free tax act 2011   Use the following chart to determine whether certain children with January 1 birthdays meet condition 3 under When Form 8615 must be filed. Free tax act 2011 Figure 31-B. Free tax act 2011 Do You Have To Use Form 8615 To Figure Your Child's Tax? Please click here for the text description of the image. Free tax act 2011 Figure 31-B. Free tax act 2011 Do You Have To Use Form 8615 To Figure Your Child's Tax?    IF a child was born on. Free tax act 2011 . Free tax act 2011 . Free tax act 2011 THEN, at the end of 2013, the child is considered to be. Free tax act 2011 . Free tax act 2011 . Free tax act 2011 January 1, 1996 18* January 1, 1995 19** January 1, 1990 24*** *This child is not under age 18. Free tax act 2011 The child meets condition 3 only if the child did not have earned income that was more than half of the child's support. Free tax act 2011  **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. Free tax act 2011  ***Do not use Form 8615 for this child. Free tax act 2011 Providing Parental Information (Form 8615, lines A–C) On Form 8615, lines A and B, enter the parent's name and social security number. Free tax act 2011 (If the parents filed a joint return, enter the name and social security number listed first on the joint return. Free tax act 2011 ) On line C, check the box for the parent's filing status. Free tax act 2011 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. Free tax act 2011 Parent with different tax year. Free tax act 2011   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. Free tax act 2011 Parent's return information not known timely. Free tax act 2011   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. Free tax act 2011   You can use any reasonable estimate. Free tax act 2011 This includes using information from last year's return. Free tax act 2011 If you use an estimated amount on Form 8615, enter “Estimated” on the line next to the amount. Free tax act 2011    When you get the correct information, file an amended return on Form 1040X, Amended U. Free tax act 2011 S. Free tax act 2011 Individual Income Tax Return. Free tax act 2011   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. Free tax act 2011 S. Free tax act 2011 Individual Income Tax Return. Free tax act 2011 Extensions are discussed in chapter 1. Free tax act 2011 Step 1. Free tax act 2011 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. Free tax act 2011 To do that, use Form 8615, Part I. Free tax act 2011 Line 1 (unearned income). Free tax act 2011   If the child had no earned income, enter on this line the adjusted gross income shown on the child's return. Free tax act 2011 Adjusted gross income is shown on Form 1040, line 38, or Form 1040A, line 22. Free tax act 2011 Form 1040EZ cannot be used if Form 8615 must be filed. Free tax act 2011   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. Free tax act 2011   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. Free tax act 2011 Unearned income defined. Free tax act 2011   Unearned income is generally all income other than salaries, wages, and other amounts received as pay for work actually done. Free tax act 2011 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. Free tax act 2011 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). Free tax act 2011 Nontaxable income. Free tax act 2011   For this purpose, unearned income includes only amounts the child must include in total income. Free tax act 2011 Nontaxable unearned income, such as tax-exempt interest and the nontaxable part of social security and pension payments, is not included. Free tax act 2011 Income from property received as a gift. Free tax act 2011   A child's unearned income includes all income produced by property belonging to the child. Free tax act 2011 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. Free tax act 2011   A child's unearned income includes income produced by property given as a gift to the child. Free tax act 2011 This includes gifts to the child from grandparents or any other person and gifts made under the Uniform Gift to Minors Act. Free tax act 2011 Example. Free tax act 2011 Amanda Black, age 13, received the following income. Free tax act 2011 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. Free tax act 2011 Amanda's unearned income is $2,100. Free tax act 2011 This is the total of the dividends ($800), taxable interest ($1,200), and net capital gains ($100). Free tax act 2011 Her wages are earned (not unearned) income because they are received for work actually done. Free tax act 2011 Her tax-exempt interest is not included because it is nontaxable. Free tax act 2011 Trust income. Free tax act 2011   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. Free tax act 2011   However, for purposes of completing Form 8615, a taxable distribution from a qualified disability trust is considered earned income, not unearned income. Free tax act 2011 Line 2 (deductions). Free tax act 2011   If the child does not itemize deductions on Schedule A (Form 1040), enter $2,000 on line 2. Free tax act 2011   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. Free tax act 2011 Directly connected. Free tax act 2011   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. Free tax act 2011 These expenses include custodian fees and service charges, service fees to collect taxable interest and dividends, and certain investment counsel fees. Free tax act 2011   These expenses are added to certain other miscellaneous itemized deductions on Schedule A (Form 1040). Free tax act 2011 Only the amount greater than 2% of the child's adjusted gross income can be deducted. Free tax act 2011 See chapter 28 for more information. Free tax act 2011 Example 1. Free tax act 2011 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. Free tax act 2011 His adjusted gross income is $8,000, which is entered on Form 1040, line 38, and on Form 8615, line 1. Free tax act 2011 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. Free tax act 2011 Example 2. Free tax act 2011 Eleanor, age 8, has unearned income of $16,000 and an early withdrawal penalty of $100. Free tax act 2011 She has no other income. Free tax act 2011 She has itemized deductions of $1,050 (net of the 2% limit) that are directly connected with the production of her unearned income. Free tax act 2011 Her adjusted gross income, entered on line 1, is $15,900 ($16,000 − $100). Free tax act 2011 The amount on line 2 is $2,050. Free tax act 2011 This is the larger of: $1,000 plus the $1,050 of directly connected itemized deductions, or $2,000. Free tax act 2011 Line 3. Free tax act 2011   Subtract line 2 from line 1 and enter the result on this line. Free tax act 2011 If zero or less, do not complete the rest of the form. Free tax act 2011 However, you must still attach Form 8615 to the child's tax return. Free tax act 2011 Figure the tax on the child's taxable income in the normal manner. Free tax act 2011 Line 4 (child's taxable income). Free tax act 2011   Enter on line 4 the child's taxable income from Form 1040, line 43, or Form 1040A, line 27. Free tax act 2011   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. Free tax act 2011 929. Free tax act 2011 Line 5 (net unearned income). Free tax act 2011   A child's net unearned income cannot be more than his or her taxable income. Free tax act 2011 Enter on Form 8615, line 5, the smaller of line 3 or line 4. Free tax act 2011 This is the child's net unearned income. Free tax act 2011   If zero or less, do not complete the rest of the form. Free tax act 2011 However, you must still attach Form 8615 to the child's tax return. Free tax act 2011 Figure the tax on the child's taxable income in the normal manner. Free tax act 2011 Step 2. Free tax act 2011 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. Free tax act 2011 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. Free tax act 2011 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. Free tax act 2011 For example, do not refigure the medical expense deduction. Free tax act 2011 Figure the tentative tax on Form 8615, lines 6 through 13. Free tax act 2011 Note. Free tax act 2011 If the child or parent has any capital gains or losses, get Publication 929 for help in completing Form 8615, Part II. Free tax act 2011 Line 6 (parent's taxable income). Free tax act 2011   Enter on line 6 the parent's taxable income from Form 1040, line 43, Form 1040A, line 27, or Form 1040EZ, line 6. Free tax act 2011   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. Free tax act 2011 Line 7 (net unearned income of other children). Free tax act 2011   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. Free tax act 2011 Do not include the amount from line 5 of the Form 8615 being completed. Free tax act 2011 Example. Free tax act 2011 Paul and Jane Persimmon have three children, Sharon, Jerry, and Mike, who must attach Form 8615 to their tax returns. Free tax act 2011 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. Free tax act 2011 Line 7 of Jerry's Form 8615 will show $1,800 ($800 + $1,000). Free tax act 2011 Line 7 of Mike's Form 8615 will show $1,400 ($800 + $600). Free tax act 2011 Other children's information not available. Free tax act 2011   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. Free tax act 2011 See Parent's return information not known timely , earlier. Free tax act 2011 Line 11 (tentative tax). Free tax act 2011   Subtract line 10 from line 9 and enter the result on this line. Free tax act 2011 This is the tentative tax. Free tax act 2011   If line 7 is blank, skip lines 12a and 12b and enter the amount from line 11 on line 13. Free tax act 2011 Also skip the discussion for lines 12a and 12b that follows. Free tax act 2011 Lines 12a and 12b (dividing the tentative tax). Free tax act 2011   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. Free tax act 2011 This is done on lines 12a, 12b, and 13. Free tax act 2011 Add the amount on line 7 to the amount on line 5 and enter the total on line 12a. Free tax act 2011 Divide the amount on line 5 by the amount on line 12a and enter the result, as a decimal, on line 12b. Free tax act 2011 Example. Free tax act 2011 In the earlier example under Line 7 (net unearned income of other children), Sharon's Form 8615 shows $1,600 on line 7. Free tax act 2011 The amount entered on line 12a is $2,400, the total of the amounts on lines 5 and 7 ($800 + $1,600). Free tax act 2011 The decimal on line 12b is  . Free tax act 2011 333, figured as follows and rounded to three places. Free tax act 2011   $800 = . Free tax act 2011 333     $2,400   Step 3. Free tax act 2011 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. Free tax act 2011 This is the child's tax. Free tax act 2011 It is figured on Form 8615, lines 14 through 18. Free tax act 2011 Alternative minimum tax. Free tax act 2011   A child may be subject to alternative minimum tax (AMT) if he or she has certain items given preferential treatment under the tax law. Free tax act 2011 See Alternative Minimum Tax (AMT) in chapter 30. Free tax act 2011    For more information on who is liable for AMT and how to figure it, see Form 6251, Alternative Minimum Tax—Individuals. Free tax act 2011 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. Free tax act 2011 Prev  Up  Next   Home   More Online Publications