Common questions about Form 8615, 8614 and unearned income

In this article, you can find information regarding Form 8615 (Kiddie Tax) and Form 8814 in Lacerte, including when to use each form, how to manage family links, and how to report earned income for Kiddie Tax purposes.

Table of contents:

What is Form 8615 (Kiddie Tax) and when is it required?

Form 8615, Tax for Certain Children Who Have Unearned Income, is often referred to as the "Kiddie Tax". Its purpose is to calculate the appropriate tax rate for a child's unearned income based on the parent's income.

Who should file Form 8615?

Form 8615 must be filed for any child who meets all of the following conditions:

• The child had more than the specified threshold amount of unearned income.
• The child is required to file a tax return.
• The child meets one of the following age criteria at the end of the tax year:
  • Was under age 18.
  • Was age 18 and did not have earned income that was more than half of their support.
  • Was at least 19 and under age 24, a full-time student, and did not have earned income that was more than half of their support.
• At least one of the child's parents was alive at the end of the tax year.
• The child does not file a joint return for the tax year.

What's considered earned income?

Earned income generally includes wages, tips, and other payments received for personal services performed. For more detailed information about what qualifies as earned income, refer to the IRS Instructions for Form 8615.

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What is Form 8814 and when can it be used?

Form 8814, Parent's Election to Report Child's Interest and Dividends, allows a parent to report their child's income on their own return, eliminating the need for the child to file a separate tax return.

Who should file Form 8814?

A client can make this election if their child meets all of the following conditions:

• The child was under age 19 (or under age 24 if a full-time student) at the end of the tax year (e.g., 2024).
• The child is required to file a tax return.
• The child does not file a joint return.
• The child's only income was from interest and dividends, which includes capital gain distributions and Alaska Permanent Fund dividends.
• The child's gross income for the tax year was less than the specified threshold amount.
• There were no estimated tax payments made for the child in the tax year (including any overpayment of tax from the prior year's return applied to the current year's estimated tax).
• There was no federal income tax withheld from the child's income.

Additionally, the parents must also qualify to make this election. Refer to the IRS Instructions for Form 8814 for more information.

How does this election affect the client's tax benefits?

If a client elects to report their child's income on their return using Form 8814, they cannot take certain deductions that the child could otherwise take on their own return. These include:

• An additional standard deduction if the child is blind.
• The penalty on early withdrawal of the child's savings.
• Itemized deductions, such as the child's charitable contributions.

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How to create a family link in Lacerte for Form 8615

Creating a Family Link in Lacerte automates the transfer of necessary tax information between the parent's and child's tax returns, which is essential for calculating Form 8615.

The parent's and child's tax returns should be completed first to ensure that the family link flows the correct information accurately.

To create the family link:

1. Go to the Tools dropdown menu and select Family Link (8615).
2. Select the parent from the Available Clients section, and then select Add Parent.
3. Select the child from the Available Clients section, and then select Add Child.
4. Select Preview Tax Data to review the parent and child tax information.
5. From the Data Sections in the left panel, select the parent and child and verify that the tax information is correct (the child's age will be displayed in parentheses).
6. Select Print to print the parent and child tax information for your records.
7. If you estimated the parent's tax information, check the box labeled Parent's Information is Estimated. This will cause "Estimated" to print on the completed Form 8615, Lines C, 6, 9, and 10 for each child.
8. Select Transfer. Lacerte will transfer all necessary tax information to complete Form 8615 between the parent's and child's tax returns, and will calculate the correct tax rate for the child's investment income. The transferred data can be found on Screen 43, Certain Children (8615).

To update the family link:

If there are any changes to either the parent's or child's return after the link is established, Lacerte will prompt you to update the family link:

1. Select Yes when prompted to open the family link.
2. Select Preview Tax Data to review the new amounts.
3. Select Transfer to update the return with the new information.

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How to report Form 8615 Kiddie Tax income as earned income in Lacerte

If a child taxpayer is subject to the Kiddie Tax (Form 8615) and is linked to the parent's return through the family link, you may need to treat certain income as earned income instead of investment income.

Follow these steps to report income from a Form 1099-MISC as earned income:

1. Go to Screen 14.1, Miscellaneous Income.
2. In the section list on the left, select Alimony and Other Income.
3. Enter the 1099-MISC income in the field Income subject to self-employment tax (Ctrl+E). This entry will instruct the program to treat this income as earned income.

Follow these steps if this income isn't subject to self-employment tax (e.g., if you only want to classify it as earned income for Kiddie Tax purposes without calculating SE tax):

1. Go to Screen 45.1, Self-Employment Tax (Schedule SE).
2. Enter -1 in the field Self-Employment Tax (SE) [O] (code 12) to suppress the self-employment tax calculation.

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How to remove an existing family link in Lacerte

If you are working in a network environment, ensure that all users have exited both the Parent and Child client files before attempting to remove the link.

1. Select the Clients list to view your list of clients.
2. From the Tools menu, select Family Link (8615).
3. In the Family Links section (on the right side of the window), select the Parent's return.
4. Select Remove.
5. Confirm the action by selecting Yes to the confirmation window Delete Family [client name]?

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Related Topics

• How do you Generate Form 8615 Without Using the Family Link in Lacerte
• Common questions about Form 8615 and unearned income
• How do you generate Form 8615 in ProConnect Tax
• How to report Form 8615 Kiddie Tax income as earned income in ProConnect Tax
• Common questions about using Form 8615 and Form 8814 in ProSeries
• Using Form 8814 or Form 8615 to Report Child's Income
• How to resolve Lacerte diagnostic ref 826 - Form 8615 must be filed