Requirements for filing Form 8615

[texgirl]

Our client has two children, one that is 17 and one that is a 21 year old student. They are both being claimed as a dependent by our client(s). They each inherited an IRA that was cashed in and they received nearly $14,000 each. We reported this income on Form 8615 for the 17 year old. Would the 21 year old need to report it on Form 8615 as well?

[poolcleaner · Accepted solution]

Yes, but if the child had enough earned income to provide more than half of his/her support, you need to do some more research.

[texgirl]

Thank you. The 21 year old actually had a small NOL from a Schedule C. What is a bit confusing is that the software directions say if there's "investment" income of more than $2,100, then they are required tp file Form 8615. The definition I found says that distributions from an IRA is not considered investment income. The IRS directions state that if there is more than $2,100 of "unearned" income, then they have to file Form 8615. The distribution would be considered unearned income. ?? When talking to Proseries, they felt confident in their software and says the IRS signs off on it. We want to do what's right. If the 8615 isn't filed, there's a very small refund. If the 8615 is filed, there's a $2,100 liability.

[George4Tacks]

Follow the instructions for the 8615 - "unearned" is the key word.
Have you determined whether the $14,000 was used for "support" and if so is more than have the cost of the support.

[Accountant-Man]

IRA money is not earned income.