Tax Rules for Children Who Have Investment Income +
a Check-up to Avoid a Tax Surprise
Tax Rules for Children Who Have
children receive investment income and are required to file a
federal tax return.
If a child cannot file his or her own tax return for any
reason, such as age, the child's parent or guardian is
responsible for filing a return on the child’s behalf.
There are special tax rules that affect how parents report a
child’s investment income. Some parents can include their
child’s investment income on their tax return. Other children
may have to file their own tax return.
Here are four facts from the IRS about the taxability of
your child’s investment income:
income normally includes interest, dividends, capital gains
and other unearned income, such as from a trust.
rules apply if your child's total investment income is more
than $1,900. The parent’s tax rate may apply to part of that
income instead of the child's tax rate.
your child's total interest and dividend income is less than
$9,500, you may be able to include the income on your tax
return. See Form 8814, Parents' Election to Report Child's
Interest and Dividends. If you make this choice, the child
does not file a return.
child must file their own tax return if they received
investment income of $9,500 or more. File Form 8615, Tax for
Certain Children Who Have Investment Income of More Than
$1,900, with the child’s federal tax return.
If you have any questions about this situation, feel free to
call our office at (704) 552-8689.
Summertime Tax Tip 2013-15)
Give Withholding and Payments a
to Avoid a Tax Surprise
people are surprised to learn they’re due a large federal
income tax refund when they file their taxes. Others are
surprised that they owe more taxes than they expected.
When this happens, it’s a
good idea to check your federal tax withholding or payments.
Doing so now can help avoid a tax surprise when you file your
2013 tax return next year.
Here are some tips to help you bring the tax you pay during
the year closer to what you’ll actually owe.
Wages and Income Tax Withholding
New Job. Your
employer will ask you to complete a Form W-4, Employee's
Withholding Allowance Certificate. Complete it accurately to
figure the amount of federal income tax to withhold from your
Life Event. Change
your Form W-4 when certain life events take place. A change in
marital status, birth of a child, getting or losing a job, or
purchasing a home, for example, can all change the amount of
taxes you owe. You can typically submit a new Form W–4
Calculator. This handy online tool will help you figure
the correct amount of tax to withhold based on your situation.
If a change is necessary, the tool will help you complete a
new Form W-4.
Self-Employment and Other Income
Estimated tax. This
is how you pay tax on income that’s not subject to
withholding. Examples include income from self-employment,
interest, dividends, alimony, rent and gains from the sale of
assets. You also may need to pay estimated tax if the amount
of income tax withheld from your wages, pension or other
income is not enough. If you expect to owe a thousand dollars
or more in taxes and meet other conditions, you may need to
make estimated tax payments.
Form 1040-ES. Use the
worksheet in Form 1040-ES, Estimated Tax for Individuals, to
find out if you need to pay estimated taxes on a quarterly
Change in Estimated Tax.
After you make an estimated tax payment, some life events or
financial changes may affect your future payments. Changes in
your income, adjustments, deductions, credits or exemptions
may make it necessary for you to refigure your estimated tax.
Additional Medicare Tax.
A new Additional Medicare Tax went into effect on Jan. 1,
2013. The 0.9 percent Additional Medicare Tax applies to an
individual’s wages, Railroad Retirement Tax Act compensation
and self-employment income that exceeds a threshold amount
based on the individual’s filing status. For additional
information on the Additional Medicare Tax, see our questions
Net Investment Income Tax.
A new Net Investment Income Tax went into effect on Jan. 1,
2013. The 3.8 percent Net Investment Income Tax applies to
individuals, estates and trusts that have certain investment
income above certain threshold amounts. For additional
information on the Net Investment Income Tax, see our
questions and answers.
If you need more information start with IRS Publication 505,
Tax Withholding and Estimated Tax. You can get it at IRS.gov
or by calling 1-800-TAX-FORM (1-800-829-3676). Or call us here
at the office at (704) 552-8689.
IRS Summertime Tax Tip 2013-25)
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