Form 8814 reporting dependents unearned income uses qualified dividends rate 15%. IRS Instructions says use estate tax rate which is 0. They are using bad rates?

Forum|Forum|6 years ago
December 7, 2019
11 replies
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The IRS instructions and internet instructions says for 2018 when parents report dividend income, the tax rates will be the estate tax rates. These rates are ). How do we let ProSeries professional know the rules, and follow the rules.

ProSeries Professional

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Best answer by rbynaker

I'm by no means an expert in these. But, following the bouncing ball in IRC § 1:

https://www.law.cornell.edu/uscode/text/26/1

Kiddie tax is in subsection (g). (g)(1) discusses the computation using the "allocable parental rate" (under the old rules). (g)(7) discusses the election to report on parents return.

https://www.law.cornell.edu/uscode/text/26/1#g

https://www.law.cornell.edu/uscode/text/26/1#g_7

The 2018-2025 modifications are in the new subsection (j) with kiddie tax specifically in (j)(4).

https://www.law.cornell.edu/uscode/text/26/1#j

https://www.law.cornell.edu/uscode/text/26/1#j_4

"1(j)(4)(A) In general. In the case of a child to whom subsection (g) applies for the taxable year, the rules of subparagraphs (B) and (C) shall apply in lieu of the rule under subsection (g)(1)."

So the new rules supplant (g)(1) but do not appear to modify or make obsolete (g)(7).

Rick

T

Terry53029

Intuit Community Champion

Form 8814 is for reporting child's income on parents return, and will be taxed at parents rate. if you file a return for the child you use form 8615

IRonMaN

Level 15

That was changed for 2018 to using trust and estate rates. Without any numbers being provided, we can't tell if the software is really wrong at this point.

Slava Ukraini!

Just-Lisa-Now-

Intuit Community Champion

Doesn't it look at all income to see which bracket it lands in (like capital gains)....just because the dividends alone is below the threshold for being taxed, doesn't mean they will be taxed at 0%.

♪♫•*¨*•.¸¸♥Lisa♥¸¸.•*¨*•♫♪

T

Terry53029

Intuit Community Champion

it is my understanding for 2018 to get the favorable kiddie tax, you must file the child's own tax return and fill out form 8615 in the child's return.

rbynakerAnswer

Level 13

I'm by no means an expert in these. But, following the bouncing ball in IRC § 1:

https://www.law.cornell.edu/uscode/text/26/1

Kiddie tax is in subsection (g). (g)(1) discusses the computation using the "allocable parental rate" (under the old rules). (g)(7) discusses the election to report on parents return.

https://www.law.cornell.edu/uscode/text/26/1#g

https://www.law.cornell.edu/uscode/text/26/1#g_7

The 2018-2025 modifications are in the new subsection (j) with kiddie tax specifically in (j)(4).

https://www.law.cornell.edu/uscode/text/26/1#j

https://www.law.cornell.edu/uscode/text/26/1#j_4

"1(j)(4)(A) In general. In the case of a child to whom subsection (g) applies for the taxable year, the rules of subparagraphs (B) and (C) shall apply in lieu of the rule under subsection (g)(1)."

So the new rules supplant (g)(1) but do not appear to modify or make obsolete (g)(7).

Rick

T

TaxGuyBill

My brain can't handle all of the legalese today, but my first glance is that the Trust rates still apply.

(g)(7) still applies, but (g)(7)(B)(ii) still says the tax is the "amount determined under this section", which would include the Trust rate.

Right? Or do I need to read it when I have a mind-set to read legalese?