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Help With 1040x

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Help with 1040x 5. Help with 1040x   Taxes Table of Contents What's New Introduction Topics - This chapter discusses: Useful Items - You may want to see: When To Deduct Taxes Real Estate TaxesSeparate elections. Help with 1040x Making the election. Help with 1040x Form 3115. Help with 1040x Income TaxesAccrual of contested income taxes. Help with 1040x Employment Taxes Other TaxesAdditional Medicare Tax. Help with 1040x What's New Additional Medicare Tax. Help with 1040x  Beginning in 2013, you must withhold a 0. Help with 1040x 9% Additional Medicare Tax from wages you pay to an employee in excess of $200,000 in a calendar year. Help with 1040x Also, self-employed individuals may be required to pay Additional Medicare Tax on self-employment income. Help with 1040x See Employment Taxes , and Self-employment tax , later. Help with 1040x Introduction You can deduct various federal, state, local, and foreign taxes directly attributable to your trade or business as business expenses. Help with 1040x You cannot deduct federal income taxes, estate and gift taxes, or state inheritance, legacy, and succession taxes. Help with 1040x Topics - This chapter discusses: When to deduct taxes Real estate taxes Income taxes Employment taxes Other taxes Useful Items - You may want to see: Publication 15 (Circular E), Employer's Tax Guide 334 Tax Guide for Small Business 510 Excise Taxes 538 Accounting Periods and Methods 551 Basis of Assets Form (and Instructions) Sch A (Form 1040) Itemized Deductions Sch SE (Form 1040) Self-Employment Tax 3115 Application for Change in Accounting Method 8959 Additional Medicare Tax See chapter 12 for information about getting publications and forms. Help with 1040x When To Deduct Taxes Generally, you can only deduct taxes in the year you pay them. Help with 1040x This applies whether you use the cash method or an accrual method of accounting. Help with 1040x Under an accrual method, you can deduct a tax before you pay it if you meet the exception for recurring items discussed under Economic Performance in Publication 538. Help with 1040x You can also elect to ratably accrue real estate taxes as discussed later under Real Estate Taxes . Help with 1040x Limit on accrual of taxes. Help with 1040x   A taxing jurisdiction can require the use of a date for accruing taxes that is earlier than the date it originally required. Help with 1040x However, if you use an accrual method, and can deduct the tax before you pay it, use the original accrual date for the year of change and all future years to determine when you can deduct the tax. Help with 1040x Example. Help with 1040x Your state imposes a tax on personal property used in a trade or business conducted in the state. Help with 1040x This tax is assessed and becomes a lien as of July 1 (accrual date). Help with 1040x In 2013, the state changed the assessment and lien dates from July 1, 2014, to December 31, 2013, for property tax year 2014. Help with 1040x Use the original accrual date (July 1, 2014) to determine when you can deduct the tax. Help with 1040x You must also use the July 1 accrual date for all future years to determine when you can deduct the tax. Help with 1040x Uniform capitalization rules. Help with 1040x   Uniform capitalization rules apply to certain taxpayers who produce real property or tangible personal property for use in a trade or business or for sale to customers. Help with 1040x They also apply to certain taxpayers who acquire property for resale. Help with 1040x Under these rules, you either include certain costs in inventory or capitalize certain expenses related to the property, such as taxes. Help with 1040x For more information, see chapter 1. Help with 1040x Carrying charges. Help with 1040x   Carrying charges include taxes you pay to carry or develop real estate or to carry, transport, or install personal property. Help with 1040x You can elect to capitalize carrying charges not subject to the uniform capitalization rules if they are otherwise deductible. Help with 1040x For more information, see chapter 7. Help with 1040x Refunds of taxes. Help with 1040x   If you receive a refund for any taxes you deducted in an earlier year, include the refund in income to the extent the deduction reduced your federal income tax in the earlier year. Help with 1040x For more information, see Recovery of amount deducted (tax benefit rule) in chapter 1. Help with 1040x    You must include in income any interest you receive on tax refunds. Help with 1040x Real Estate Taxes Deductible real estate taxes are any state, local, or foreign taxes on real estate levied for the general public welfare. Help with 1040x The taxing authority must base the taxes on the assessed value of the real estate and charge them uniformly against all property under its jurisdiction. Help with 1040x Deductible real estate taxes generally do not include taxes charged for local benefits and improvements that increase the value of the property. Help with 1040x See Taxes for local benefits , later. Help with 1040x If you use an accrual method, you generally cannot accrue real estate taxes until you pay them to the government authority. Help with 1040x However, you can elect to ratably accrue the taxes during the year. Help with 1040x See Electing to ratably accrue , later. Help with 1040x Taxes for local benefits. Help with 1040x   Generally, you cannot deduct taxes charged for local benefits and improvements that tend to increase the value of your property. Help with 1040x These include assessments for streets, sidewalks, water mains, sewer lines, and public parking facilities. Help with 1040x You should increase the basis of your property by the amount of the assessment. Help with 1040x   You can deduct taxes for these local benefits only if the taxes are for maintenance, repairs, or interest charges related to those benefits. Help with 1040x If part of the tax is for maintenance, repairs, or interest, you must be able to show how much of the tax is for these expenses to claim a deduction for that part of the tax. Help with 1040x Example. Help with 1040x To improve downtown commercial business, Waterfront City converted a downtown business area street into an enclosed pedestrian mall. Help with 1040x The city assessed the full cost of construction, financed with 10-year bonds, against the affected properties. Help with 1040x The city is paying the principal and interest with the annual payments made by the property owners. Help with 1040x The assessments for construction costs are not deductible as taxes or as business expenses, but are depreciable capital expenses. Help with 1040x The part of the payments used to pay the interest charges on the bonds is deductible as taxes. Help with 1040x Charges for services. Help with 1040x   Water bills, sewerage, and other service charges assessed against your business property are not real estate taxes, but are deductible as business expenses. Help with 1040x Purchase or sale of real estate. Help with 1040x   If real estate is sold, the real estate taxes must be allocated between the buyer and the seller. Help with 1040x   The buyer and seller must allocate the real estate taxes according to the number of days in the real property tax year (the period to which the tax imposed relates) that each owned the property. Help with 1040x Treat the seller as paying the taxes up to but not including the date of sale. Help with 1040x Treat the buyer as paying the taxes beginning with the date of sale. Help with 1040x You can usually find this information on the settlement statement you received at closing. Help with 1040x   If you (the seller) use an accrual method and have not elected to ratably accrue real estate taxes, you are considered to have accrued your part of the tax on the date you sell the property. Help with 1040x Example. Help with 1040x Alberto Verde, a calendar year accrual method taxpayer, owns real estate in Olmo County. Help with 1040x He has not elected to ratably accrue property taxes. Help with 1040x November 30 of each year is the assessment and lien date for the current real property tax year, which is the calendar year. Help with 1040x He sold the property on June 30, 2013. Help with 1040x Under his accounting method he would not be able to claim a deduction for the taxes because the sale occurred before November 30. Help with 1040x He is treated as having accrued his part of the tax, 181/366  (January 1–June 29), on June 30, and he can deduct it for 2013. Help with 1040x Electing to ratably accrue. Help with 1040x   If you use an accrual method, you can elect to accrue real estate tax related to a definite period ratably over that period. Help with 1040x Example. Help with 1040x Juan Sanchez is a calendar year taxpayer who uses an accrual method. Help with 1040x His real estate taxes for the real property tax year, July 1, 2013, to June 30, 2014, are $1,200. Help with 1040x July 1 is the assessment and lien date. Help with 1040x If Juan elects to ratably accrue the taxes, $600 will accrue in 2013 ($1,200 × 6/12, July 1–December 31) and the balance will accrue in 2014. Help with 1040x Separate elections. Help with 1040x   You can elect to ratably accrue the taxes for each separate trade or business and for nonbusiness activities if you account for them separately. Help with 1040x Once you elect to ratably accrue real estate taxes, you must use that method unless you get permission from the IRS to change. Help with 1040x See Form 3115 , later. Help with 1040x Making the election. Help with 1040x   If you elect to ratably accrue the taxes for the first year in which you incur real estate taxes, attach a statement to your income tax return for that year. Help with 1040x The statement should show all the following items. Help with 1040x The trades or businesses to which the election applies and the accounting method or methods used. Help with 1040x The period to which the taxes relate. Help with 1040x The computation of the real estate tax deduction for that first year. Help with 1040x   Generally, you must file your return by the due date (including extensions). Help with 1040x However, if you timely filed your return for the year without electing to ratably accrue, you can still make the election by filing an amended return within 6 months after the due date of the return (excluding extensions). Help with 1040x Attach the statement to the amended return and write “Filed pursuant to section 301. Help with 1040x 9100-2” on the statement. Help with 1040x File the amended return at the same address where you filed the original return. Help with 1040x Form 3115. Help with 1040x    If you elect to ratably accrue real estate taxes for a year after the first year in which you incur real estate taxes, or if you want to revoke your election to ratably accrue real estate taxes, file Form 3115. Help with 1040x For more information, including applicable time frames for filing, see the Instructions for Form 3115. Help with 1040x Note. Help with 1040x If you are filing an application for a change in accounting method filed after January 9, 2011, for a year of change ending after April 29, 2010, see Revenue Procedure 2011-14, 2011-4 I. Help with 1040x R. Help with 1040x B. Help with 1040x 330, as modified and clarified by Revenue Procedure 2012-19, 2012-14 I. Help with 1040x R. Help with 1040x B. Help with 1040x 689, and Revenue Procedure 2012-20, 2012-14 I. Help with 1040x R. Help with 1040x B. Help with 1040x 700, or any successor. Help with 1040x Revenue Procedure 2011-14 is available at  www. Help with 1040x irs. Help with 1040x gov/irb/2011-04IRB/ar08. Help with 1040x html. Help with 1040x Income Taxes This section discusses federal, state, local, and foreign income taxes. Help with 1040x Federal income taxes. Help with 1040x   You cannot deduct federal income taxes. Help with 1040x State and local income taxes. Help with 1040x   A corporation or partnership can deduct state and local income taxes imposed on the corporation or partnership as business expenses. Help with 1040x An individual can deduct state and local income taxes only as an itemized deduction on Schedule A (Form 1040). Help with 1040x   However, an individual can deduct a state tax on gross income (as distinguished from net income) directly attributable to a trade or business as a business expense. Help with 1040x Accrual of contested income taxes. Help with 1040x   If you use an accrual method, and you contest a state or local income tax liability, you must accrue and deduct any contested amount in the tax year in which the liability is finally determined. Help with 1040x   If additional state or local income taxes for a prior year are assessed in a later year, you can deduct the taxes in the year in which they were originally imposed (the prior year) if the tax liability is not contested. Help with 1040x You cannot deduct them in the year in which the liability is finally determined. Help with 1040x    The filing of an income tax return is not considered a contest and, in the absence of an overt act of protest, you can deduct the tax in the prior year. Help with 1040x Also, you can deduct any additional taxes in the prior year if you do not show some affirmative evidence of denial of the liability. Help with 1040x   However, if you consistently deduct additional assessments in the year they are paid or finally determined (including those for which there was no contest), you must continue to do so. Help with 1040x You cannot take a deduction in the earlier year unless you receive permission to change your method of accounting. Help with 1040x For more information on accounting methods, see When Can I Deduct an Expense in chapter 1. Help with 1040x Foreign income taxes. Help with 1040x   Generally, you can take either a deduction or a credit for income taxes imposed on you by a foreign country or a U. Help with 1040x S. Help with 1040x possession. Help with 1040x However, an individual cannot take a deduction or credit for foreign income taxes paid on income that is exempt from U. Help with 1040x S. Help with 1040x tax under the foreign earned income exclusion or the foreign housing exclusion. Help with 1040x For information on these exclusions, see Publication 54, Tax Guide for U. Help with 1040x S. Help with 1040x Citizens and Resident Aliens Abroad. Help with 1040x For information on the foreign tax credit, see Publication 514, Foreign Tax Credit for Individuals. Help with 1040x Employment Taxes If you have employees, you must withhold various taxes from your employees' pay. Help with 1040x Most employers must withhold their employees' share of social security, Medicare taxes, and Additional Medicare Tax (if applicable) along with state and federal income taxes. Help with 1040x You may also need to pay certain employment taxes from your own funds. Help with 1040x These include your share of social security and Medicare taxes as an employer, along with unemployment taxes. Help with 1040x Note. Help with 1040x Additional Medicare Tax is only imposed on the employee. Help with 1040x There is no employer share of Additional Medicare Tax. Help with 1040x Your deduction for wages paid is not reduced by the social security and Medicare taxes, Additional Medicare Tax, and income taxes you withhold from your employees. Help with 1040x You can deduct the employment taxes you must pay from your own funds as taxes. Help with 1040x Example. Help with 1040x You pay your employee $18,000 a year. Help with 1040x However, after you withhold various taxes, your employee receives $14,500. Help with 1040x You also pay an additional $1,500 in employment taxes. Help with 1040x You should deduct the full $18,000 as wages. Help with 1040x You can deduct the $1,500 you pay from your own funds as taxes. Help with 1040x For more information on employment taxes, see Publication 15 (Circular E). Help with 1040x Unemployment fund taxes. Help with 1040x   As an employer, you may have to make payments to a state unemployment compensation fund or to a state disability benefit fund. Help with 1040x Deduct these payments as taxes. Help with 1040x Other Taxes The following are other taxes you can deduct if you incur them in the ordinary course of your trade or business. Help with 1040x Excise taxes. Help with 1040x   Generally, you can deduct as a business expense all excise taxes that are ordinary and necessary expenses of carrying on your trade or business. Help with 1040x However, see Fuel taxes , later. Help with 1040x   For more information on excise taxes, see Publication 510. Help with 1040x Franchise taxes. Help with 1040x   You can deduct corporate franchise taxes as a business expense. Help with 1040x Fuel taxes. Help with 1040x   Generally, taxes on gasoline, diesel fuel, and other motor fuels that you use in your business are included as part of the cost of the fuel. Help with 1040x Do not deduct these taxes as a separate item. Help with 1040x   You may be entitled to a credit or refund for federal excise tax you paid on fuels used for certain purposes. Help with 1040x For more information, see Publication 510. Help with 1040x Occupational taxes. Help with 1040x   You can deduct as a business expense an occupational tax charged at a flat rate by a locality for the privilege of working or conducting a business in the locality. Help with 1040x Personal property tax. Help with 1040x   You can deduct any tax imposed by a state or local government on personal property used in your trade or business. Help with 1040x Sales tax. Help with 1040x   Treat any sales tax you pay on a service or on the purchase or use of property as part of the cost of the service or property. Help with 1040x If the service or the cost or use of the property is a deductible business expense, you can deduct the tax as part of that service or cost. Help with 1040x If the property is merchandise bought for resale, the sales tax is part of the cost of the merchandise. Help with 1040x If the property is depreciable, add the sales tax to the basis for depreciation. Help with 1040x For more information on basis, see Publication 551. Help with 1040x    Do not deduct state and local sales taxes imposed on the buyer that you must collect and pay over to the state or local government. Help with 1040x Also, do not include these taxes in gross receipts or sales. Help with 1040x Self-employment tax. Help with 1040x   You can deduct part of your self-employment tax as a business expense in figuring your adjusted gross income. Help with 1040x This deduction only affects your income tax. Help with 1040x It does not affect your net earnings from self-employment or your self-employment tax. Help with 1040x   To deduct the tax, enter on Form 1040, line 27, the amount shown on the Deduction for one-half of self-employment tax line of Schedule SE (Form 1040). Help with 1040x   For more information on self-employment tax, see Publication 334. Help with 1040x Additional Medicare Tax. Help with 1040x   Beginning in 2013, you may be required to pay Additional Medicare Tax on self-employment income. Help with 1040x See Form 8959 and the Instructions for Form 8959 for more information on the Additional Medicare Tax. Help with 1040x Prev  Up  Next   Home   More Online Publications
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Help with 1040x 31. Help with 1040x   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. Help with 1040x Figuring the Child's Net Unearned Income (Form 8615, Part I) Step 2. Help with 1040x Figuring Tentative Tax at the Parent's Tax Rate (Form 8615, Part II) Step 3. Help with 1040x Figuring the Child's Tax (Form 8615, Part III) What's New Net Investment Income Tax. Help with 1040x . Help with 1040x  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). Help with 1040x NIIT is a 3. Help with 1040x 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. Help with 1040x Use Form 8960, Net Investment Income Tax, to figure this tax. Help with 1040x For more information on NIIT, go to www. Help with 1040x irs. Help with 1040x gov and enter “Net Investment Income Tax” in the search box. Help with 1040x Introduction This chapter discusses the following two rules that may affect the tax on unearned income of certain children. Help with 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. Help with 1040x (See Parent's Election To Report Child's Interest and Dividends , later. Help with 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. Help with 1040x (See Tax for Certain Children Who Have Unearned Income , later. Help with 1040x ) For these rules, the term “child” includes a legally adopted child and a stepchild. Help with 1040x These rules apply whether or not the child is a dependent. Help with 1040x 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. Help with 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 . Help with 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. Help with 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 . Help with 1040x Parents are married. Help with 1040x   If the child's parents file separate returns, use the return of the parent with the greater taxable income. Help with 1040x Parents not living together. Help with 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. Help with 1040x If the custodial parent is not considered unmarried, use the return of the parent with the greater taxable income. Help with 1040x   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. Help with 1040x Parents are divorced. Help with 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. Help with 1040x Custodial parent remarried. Help with 1040x   If the custodial parent has remarried, the stepparent (rather than the noncustodial parent) is treated as the child's other parent. Help with 1040x Therefore, if the custodial parent and the stepparent file a joint return, use that joint return. Help with 1040x Do not use the return of the noncustodial parent. Help with 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. Help with 1040x If the custodial parent and the stepparent are married but not living together, the earlier discussion under Parents not living together applies. Help with 1040x Parents never married. Help with 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. Help with 1040x If the parents did not live together all year, the rules explained earlier under Parents are divorced apply. Help with 1040x Widowed parent remarried. Help with 1040x   If a widow or widower remarries, the new spouse is treated as the child's other parent. Help with 1040x The rules explained earlier under Custodial parent remarried apply. Help with 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. Help with 1040x If you do, your child will not have to file a return. Help with 1040x You can make this election only if all the following conditions are met. Help with 1040x Your child was under age 19 (or under age 24 if a full-time student) at the end of the year. Help with 1040x Your child had income only from interest and dividends (including capital gain distributions and Alaska Permanent Fund dividends). Help with 1040x The child's gross income was less than $10,000. Help with 1040x The child is required to file a return unless you make this election. Help with 1040x The child does not file a joint return for the year. Help with 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. Help with 1040x No federal income tax was taken out of your child's income under the backup withholding rules. Help with 1040x You are the parent whose return must be used when applying the special tax rules for children. Help with 1040x (See Which Parent's Return To Use , earlier. Help with 1040x ) These conditions are also shown in Figure 31-A. Help with 1040x Certain January 1 birthdays. Help with 1040x   A child born on January 1, 1995, is considered to be age 19 at the end of 2013. Help with 1040x You cannot make this election for such a child unless the child was a full-time student. Help with 1040x   A child born on January 1, 1990, is considered to be age 24 at the end of 2013. Help with 1040x You cannot make this election for such a child. Help with 1040x Full-time student. Help with 1040x   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. Help with 1040x A school includes a technical, trade, or mechanical school. Help with 1040x It does not include an on-the-job training course, correspondence school, or school offering courses only through the Internet. Help with 1040x How to make the election. Help with 1040x   Make the election by attaching Form 8814 to your Form 1040. Help with 1040x (If you make this election, you cannot file Form 1040A or Form 1040EZ. Help with 1040x ) Attach a separate Form 8814 for each child for whom you make the election. Help with 1040x You can make the election for one or more children and not for others. Help with 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. Help with 1040x Rate may be higher. Help with 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. Help with 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. Help with 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. Help with 1040x Deductions you cannot take. Help with 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. Help with 1040x The additional standard deduction if the child is blind. Help with 1040x The deduction for a penalty on an early withdrawal of your child's savings. Help with 1040x Itemized deductions (such as your child's investment expenses or charitable contributions). Help with 1040x Reduced deductions or credits. Help with 1040x   If you use Form 8814, your increased adjusted gross income may reduce certain deductions or credits on your return including the following. Help with 1040x Deduction for contributions to a traditional individual retirement arrangement (IRA). Help with 1040x Deduction for student loan interest. Help with 1040x Itemized deductions for medical expenses, casualty and theft losses, and certain miscellaneous expenses. Help with 1040x Credit for child and dependent care expenses. Help with 1040x Child tax credit. Help with 1040x Education tax credits. Help with 1040x Earned income credit. Help with 1040x Penalty for underpayment of estimated tax. Help with 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. Help with 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. Help with 1040x See chapter 4 for more information. Help with 1040x Figuring Child's Income Use Form 8814, Part I, to figure your child's interest and dividend income to report on your return. Help with 1040x Only the amount over $2,000 is added to your income. Help with 1040x The amount over $2,000 is shown on Form 8814, line 6. Help with 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. Help with 1040x Include the amount from Form 8814, line 12, on Form 1040, line 21. Help with 1040x Enter “Form 8814” on the dotted line next to line 21. Help with 1040x 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. Help with 1040x Capital gain distributions and qualified dividends. Help with 1040x   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. Help with 1040x If your child's dividend income included any qualified dividends, see Qualified dividends under Figuring Child's Income in Publication 929, Part 2. Help with 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. Help with 1040x This tax is added to the tax figured on your income. Help with 1040x This additional tax is the smaller of: 10% × (your child's gross income − $1,000), or $100. Help with 1040x Include the amount from line 15 of all your Forms 8814 in the total on Form 1040, line 44. Help with 1040x Check box a on Form 1040, line 44. Help with 1040x Figure 31-A. Help with 1040x Can You Include Your Child's Income On Your Tax Return? Please click here for the text description of the image. Help with 1040x Figure 31–A. Help with 1040x 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. Help with 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. Help with 1040x Attach the completed form to the child's Form 1040 or Form 1040A. Help with 1040x When Form 8615 must be filed. Help with 1040x   Form 8615 must be filed for a child if all of the following statements are true. Help with 1040x The child's investment income was more than $2,000. Help with 1040x The child is required to file a return for 2013. Help with 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. Help with 1040x At least one of the child's parents was alive at the end of 2013. Help with 1040x The child does not file a joint return for 2013. Help with 1040x These conditions are also shown in  Figure 31-B. Help with 1040x Earned income. Help with 1040x   Earned income includes salaries, wages, tips, and other payments received for personal services performed. Help with 1040x It does not include unearned income as defined later in this chapter. Help with 1040x Support. Help with 1040x   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. Help with 1040x To figure your child's support, count support provided by you, your child, and others. Help with 1040x However, a scholarship received by your child is not considered support if your child is a full-time student. Help with 1040x See chapter 3 for details about support. Help with 1040x Certain January 1 birthdays. Help with 1040x   Use the following chart to determine whether certain children with January 1 birthdays meet condition 3 under When Form 8615 must be filed. Help with 1040x Figure 31-B. Help with 1040x Do You Have To Use Form 8615 To Figure Your Child's Tax? Please click here for the text description of the image. Help with 1040x Figure 31-B. Help with 1040x Do You Have To Use Form 8615 To Figure Your Child's Tax?    IF a child was born on. Help with 1040x . Help with 1040x . Help with 1040x THEN, at the end of 2013, the child is considered to be. Help with 1040x . Help with 1040x . Help with 1040x January 1, 1996 18* January 1, 1995 19** January 1, 1990 24*** *This child is not under age 18. Help with 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. Help with 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. Help with 1040x  ***Do not use Form 8615 for this child. Help with 1040x Providing Parental Information (Form 8615, lines A–C) On Form 8615, lines A and B, enter the parent's name and social security number. Help with 1040x (If the parents filed a joint return, enter the name and social security number listed first on the joint return. Help with 1040x ) On line C, check the box for the parent's filing status. Help with 1040x 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. Help with 1040x Parent with different tax year. Help with 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. Help with 1040x Parent's return information not known timely. Help with 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. Help with 1040x   You can use any reasonable estimate. Help with 1040x This includes using information from last year's return. Help with 1040x If you use an estimated amount on Form 8615, enter “Estimated” on the line next to the amount. Help with 1040x    When you get the correct information, file an amended return on Form 1040X, Amended U. Help with 1040x S. Help with 1040x Individual Income Tax Return. Help with 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. Help with 1040x S. Help with 1040x Individual Income Tax Return. Help with 1040x Extensions are discussed in chapter 1. Help with 1040x Step 1. Help with 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. Help with 1040x To do that, use Form 8615, Part I. Help with 1040x Line 1 (unearned income). Help with 1040x   If the child had no earned income, enter on this line the adjusted gross income shown on the child's return. Help with 1040x Adjusted gross income is shown on Form 1040, line 38, or Form 1040A, line 22. Help with 1040x Form 1040EZ cannot be used if Form 8615 must be filed. Help with 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. Help with 1040x   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. Help with 1040x Unearned income defined. Help with 1040x   Unearned income is generally all income other than salaries, wages, and other amounts received as pay for work actually done. Help with 1040x 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. Help with 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). Help with 1040x Nontaxable income. Help with 1040x   For this purpose, unearned income includes only amounts the child must include in total income. Help with 1040x Nontaxable unearned income, such as tax-exempt interest and the nontaxable part of social security and pension payments, is not included. Help with 1040x Income from property received as a gift. Help with 1040x   A child's unearned income includes all income produced by property belonging to the child. Help with 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. Help with 1040x   A child's unearned income includes income produced by property given as a gift to the child. Help with 1040x This includes gifts to the child from grandparents or any other person and gifts made under the Uniform Gift to Minors Act. Help with 1040x Example. Help with 1040x Amanda Black, age 13, received the following income. Help with 1040x 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. Help with 1040x Amanda's unearned income is $2,100. Help with 1040x This is the total of the dividends ($800), taxable interest ($1,200), and net capital gains ($100). Help with 1040x Her wages are earned (not unearned) income because they are received for work actually done. Help with 1040x Her tax-exempt interest is not included because it is nontaxable. Help with 1040x Trust income. Help with 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. Help with 1040x   However, for purposes of completing Form 8615, a taxable distribution from a qualified disability trust is considered earned income, not unearned income. Help with 1040x Line 2 (deductions). Help with 1040x   If the child does not itemize deductions on Schedule A (Form 1040), enter $2,000 on line 2. Help with 1040x   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. Help with 1040x Directly connected. Help with 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. Help with 1040x These expenses include custodian fees and service charges, service fees to collect taxable interest and dividends, and certain investment counsel fees. Help with 1040x   These expenses are added to certain other miscellaneous itemized deductions on Schedule A (Form 1040). Help with 1040x Only the amount greater than 2% of the child's adjusted gross income can be deducted. Help with 1040x See chapter 28 for more information. Help with 1040x Example 1. Help with 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% limit) that are directly connected with his unearned income. Help with 1040x His adjusted gross income is $8,000, which is entered on Form 1040, line 38, and on Form 8615, line 1. Help with 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. Help with 1040x Example 2. Help with 1040x Eleanor, age 8, has unearned income of $16,000 and an early withdrawal penalty of $100. Help with 1040x She has no other income. Help with 1040x She has itemized deductions of $1,050 (net of the 2% limit) that are directly connected with the production of her unearned income. Help with 1040x Her adjusted gross income, entered on line 1, is $15,900 ($16,000 − $100). Help with 1040x The amount on line 2 is $2,050. Help with 1040x This is the larger of: $1,000 plus the $1,050 of directly connected itemized deductions, or $2,000. Help with 1040x Line 3. Help with 1040x   Subtract line 2 from line 1 and enter the result on this line. Help with 1040x If zero or less, do not complete the rest of the form. Help with 1040x However, you must still attach Form 8615 to the child's tax return. Help with 1040x Figure the tax on the child's taxable income in the normal manner. Help with 1040x Line 4 (child's taxable income). Help with 1040x   Enter on line 4 the child's taxable income from Form 1040, line 43, or Form 1040A, line 27. Help with 1040x   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. Help with 1040x 929. Help with 1040x Line 5 (net unearned income). Help with 1040x   A child's net unearned income cannot be more than his or her taxable income. Help with 1040x Enter on Form 8615, line 5, the smaller of line 3 or line 4. Help with 1040x This is the child's net unearned income. Help with 1040x   If zero or less, do not complete the rest of the form. Help with 1040x However, you must still attach Form 8615 to the child's tax return. Help with 1040x Figure the tax on the child's taxable income in the normal manner. Help with 1040x Step 2. Help with 1040x 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. Help with 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. Help with 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. Help with 1040x For example, do not refigure the medical expense deduction. Help with 1040x Figure the tentative tax on Form 8615, lines 6 through 13. Help with 1040x Note. Help with 1040x If the child or parent has any capital gains or losses, get Publication 929 for help in completing Form 8615, Part II. Help with 1040x Line 6 (parent's taxable income). Help with 1040x   Enter on line 6 the parent's taxable income from Form 1040, line 43, Form 1040A, line 27, or Form 1040EZ, line 6. Help with 1040x   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. Help with 1040x Line 7 (net unearned income of other children). Help with 1040x   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. Help with 1040x Do not include the amount from line 5 of the Form 8615 being completed. Help with 1040x Example. Help with 1040x Paul and Jane Persimmon have three children, Sharon, Jerry, and Mike, who must attach Form 8615 to their tax returns. Help with 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. Help with 1040x Line 7 of Jerry's Form 8615 will show $1,800 ($800 + $1,000). Help with 1040x Line 7 of Mike's Form 8615 will show $1,400 ($800 + $600). Help with 1040x Other children's information not available. Help with 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. Help with 1040x See Parent's return information not known timely , earlier. Help with 1040x Line 11 (tentative tax). Help with 1040x   Subtract line 10 from line 9 and enter the result on this line. Help with 1040x This is the tentative tax. Help with 1040x   If line 7 is blank, skip lines 12a and 12b and enter the amount from line 11 on line 13. Help with 1040x Also skip the discussion for lines 12a and 12b that follows. Help with 1040x Lines 12a and 12b (dividing the tentative tax). Help with 1040x   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. Help with 1040x This is done on lines 12a, 12b, and 13. Help with 1040x Add the amount on line 7 to the amount on line 5 and enter the total on line 12a. Help with 1040x Divide the amount on line 5 by the amount on line 12a and enter the result, as a decimal, on line 12b. Help with 1040x Example. Help with 1040x In the earlier example under Line 7 (net unearned income of other children), Sharon's Form 8615 shows $1,600 on line 7. Help with 1040x The amount entered on line 12a is $2,400, the total of the amounts on lines 5 and 7 ($800 + $1,600). Help with 1040x The decimal on line 12b is  . Help with 1040x 333, figured as follows and rounded to three places. Help with 1040x   $800 = . Help with 1040x 333     $2,400   Step 3. Help with 1040x 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. Help with 1040x This is the child's tax. Help with 1040x It is figured on Form 8615, lines 14 through 18. Help with 1040x Alternative minimum tax. Help with 1040x   A child may be subject to alternative minimum tax (AMT) if he or she has certain items given preferential treatment under the tax law. Help with 1040x See Alternative Minimum Tax (AMT) in chapter 30. Help with 1040x    For more information on who is liable for AMT and how to figure it, see Form 6251, Alternative Minimum Tax—Individuals. Help with 1040x 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. Help with 1040x Prev  Up  Next   Home   More Online Publications