Form 8615 Questions

[Frustrated-in-IL]

Question 1:  Pub 929 indicates that if parent info is not available, you can file using estimated amounts by putting "Estimated" next to those amounts.  I don't think the program allows this but I might be overlooking something.  Is there a way to enter "Estimated" on Form 8615 and still electronically file?   (I know you can apply for an extension and write to IRS for info on parent, but realistically, the IRS might not even open the correspondence, let alone respond, by October 15th).

Question 2:  21 year old full-time student who has earned income of $10000, received scholarships of $15000 on $12000 of tuition, and accepted $10000 of student loans.  My understanding is that the $3000 of excess scholarships subjects the student to filing Form 8615.  However, one parent is deceased and the other took off, with whereabouts unknown and no contact with student in years.  The student's earnings plus borrowings were all spent on school housing and other living expenses, and far exceed the value of living in her grandmother's home while not at school, so the student does provide more than 50% of her own support.  Am I correct that she is subject to filing Form 8615 under these circumstances, even if she is not a dependent on anyone?

[rbynaker]

1) I don't recall a way to have PS write "estimated" for this.  Absent something I'm not aware of, I would attach a preparer note disclosing that you're using an estimate.

2) I agree with your analysis.  The exception for kiddie tax would be if the student had earned income in excess of 50% of support (IRC 1(g)).  It might be worth going through a support worksheet, I wouldn't rule it out completely but I think you have to include FMV of rent in grandma's neighborhood as part of support.

The point of the estimate is to just to determine the parent's tax rate.  Your client might be able to make a guess at this.  Hint: most of the deadbeat parents that I've seen don't make very much.

Rick

[TaxGuyBill]

After factoring in the taxable scholarship, does her income exceed the $12,000+ Standard Deduction?  For some strange reason, for purposes of the Standard Deduction, the taxable scholarship is considered as "earned" (but for any other purpose, including Kiddie Tax, it is "unearned").

[Frustrated-in-IL]

The loans and taxable scholarships/value of living with grandmother are more than student's earned income so student isn't going to have earned income greater than 50% of support.

This is what I was thinking of doing.  Last known whereabouts of missing parent was in a large metro area.  I have the median household income for that area as of mid-2021.  I was going to use that, double it, and assume a single marital status, all being disclosed in an attachment to the return.  I'm figuring I'd rather be conservative and pay too much than have IRS come down on student for not paying enough.  The student doesn't completely understand this but would rather not have to deal with an IRS notice.  Plus my time involved with responding to them will be more than the extra tax paid.

I appreciate your response Rick!

[Frustrated-in-IL]

The total income does exceed the standard deduction so there is taxable income and tax, but I assume a lot less than if the student was a dependent of someone.  An earned income credit also popped up but I found the box to kill that as the student is under 24.  But the $1400 stimulus is also popping in, which is good because the earned income was paid on a 1099 so there is approximately $1500 in SE tax due.