Program error correction

[kenescobar]

A child that is a dependent of their parent has W2 income of $1,393 and unearned income of $1,000

This should result in zero tax because a dependent child is allowed $1,150 of unearned income tax free. The program is coming up with a tax of $61 and I believe that is wrong. It seems to me that it is not taking out the $1,150 that should be tax free. I just spent 1 hour 40 minutes on the phone with tech support and they say the program is working correctly. If the program is working correctly, why is there a tax?

[rbynaker]

Have a look at the 1040 instructions, Standard Deduction Worksheet for Dependents on page 34:

https://www.irs.gov/pub/irs-pdf/i1040gi.pdf

Rick

[kenescobar]

Thanks Rick. That wipes adds $400 to the amount of earned income and wipes it out. My concern is the unearned income. It is my understanding that $1,150 of unearned income should be nontaxable. This would still leave the $1,000 of unearned income as being taxed. 

[rbynaker]

Take a closer look at Line 2 of the worksheet.  If earned income is <=$750 then the standard deduction is $1,150.  But with the earned income it makes unearned income over $400 subject to tax.  Depending on the nature of the income you may get QD/LTCG treatment but it sounds like that's not the case here (or the system wouldn't have given you 10% x $600 tax.)

[PATAX]

Intuit does a good job on this. If there was a program error others would have found it by now.