Publication 929 - Tax Rules For Children And Dependents

You can use any reasonable estimate. This

example, see the Illustrated Part I of Form 8615

child must include in total income. Nontaxable

includes using information from last year’s re-

on the next page.

investment income, such as tax-exempt interest

turn. If you use an estimated amount on Form

and the nontaxable part of social security and

8615, enter “Estimated” on the line next to the

pension payments, is not included.

Line 1 (Investment Income)

amount.

Capital loss. A child’s capital losses are

When you get the correct information, file an

If the child had no earned income, enter on this

taken into account in figuring the child’s invest-

amended return on Form 1040X, Amended U.S.

line the adjusted gross income shown on the

ment income. Capital losses are first applied

Individual Income Tax Return.

child’s return. Adjusted gross income is shown

against capital gains. If the capital losses are

Extension of time to file. Instead of using

on Form 1040, line 38; Form 1040A, line 22; or

more than the capital gains, the difference (up to

estimates, you can get an automatic 6-month

Form 1040NR, line 36. Form 1040EZ and Form

$3,000) is subtracted from the child’s interest,

extension of time to file if, by the date your return

1040NR-EZ cannot be used if Form 8615 must

dividends, and other investment income. Any

is due, you file Form 4868, Application for Auto-

be filed.

difference over $3,000 is carried to the next

matic Extension of Time To File U.S. Individual

If the child had earned income, figure the

year.

Income Tax Return. You can file a paper Form

amount to enter on Form 8615, line 1, by using

4868 or you can file it electronically. See the

Income from property received as a gift.

the worksheet in the instructions for the form.

instructions for Form 4868 for details.

A child’s investment income includes all income

However, use the following worksheet

produced by property belonging to the child.

An extension of time to file is not an

if the child has excluded any foreign

This is true even if the property was transferred

extension of time to pay. You must

earned income or deducted a loss from

to the child, regardless of when the property was

make an accurate estimate of the tax

CAUTION

self-employment or a net operating loss from

transferred or purchased or who transferred it.

for 2006. If you do not pay the full amount due by

another year.

the regular due date, the child will owe interest

A child’s investment income includes income

and may also be charged penalties. See Form

produced by property given as a gift to the child.

Alternate Worksheet

4868 and its instructions.

This includes gifts to the child from grandparents

for Form 8615, Line 1

or any other person and gifts made under the

A. Enter the amount from the

Parent’s return information not available. If

Uniform Gift to Minors Act.

child’s Form 1040, line 22, or

a child cannot get the required information about

Form 1040NR, line 23 . . . . . .

his or her parent’s tax return, the child (or the

Example. Amanda Black, age 13, received

child’s legal representative) can request the

B. Enter the total of any net loss

the following income.

necessary information from the Internal Reve-

from self-employment, any net

•

Dividends — $600

nue Service (IRS).

operating loss deduction, any

•

foreign earned income

Wages — $2,100

How to request. After the end of the tax

exclusion, and any foreign

•

year, send a signed, written request for the infor-

Taxable interest — $1,200

housing exclusion from the

mation to the Internal Revenue Service Center

•

child’s Form 1040 or Form

Tax-exempt interest — $100

where the parent’s return will be filed. (The IRS

1040NR. Enter this total as a

•

cannot process a request received before the

Capital gains — $300

positive number (greater than

end of the tax year.)

zero) . . . . . . . . . . . . . . . . .

•

Capital losses — ($200)

You should also consider getting an

C. Add line A and line B and

The dividends were qualified dividends on stock

TIP

extension of time to file the child’s re-

enter the total. . . . . . . . . . . .

given to her by her grandparents.

turn, because there may be a delay in

D. Enter the child’s earned

getting the requested information.

Amanda’s investment income is $1,900. This

income plus any amount from

The request must contain all of the following.

is the total of the dividends ($600), taxable inter-

the child’s Form 1040, line 30

•

est ($1,200), and capital gains reduced by capi-

or the child’s Form 1040NR,

A statement that you are making the re-

tal losses ($300 − $200 = $100). Her wages are

line 29. . . . . . . . . . . . . . . . .

quest to comply with section 1(g) of the

earned (not investment) income because they

Internal Revenue Code and that you have

Generally, the child’s earned

are received for work actually done. Her

tried to get the information from the par-

income is the total of the

tax-exempt interest is not included because it is

ent.

amounts reported on Form

nontaxable.

•

1040, lines 7, 12, and 18 (if line

Proof the child is under 18 years of age

12 or 18 is a loss, use zero) or

(for example, a copy of the child’s birth

Trust income. If a child is the beneficiary of

Form 1040NR, lines 8, 13, and

certificate).

a trust, distributions of taxable interest, divi-

19 (if line 13 or 19 is a loss,

dends, capital gains, and other investment in-

•

Evidence the child has more than $1,700

use zero)

come from the trust are investment income to

of unearned income (for example, a copy

E. Subtract line D from line C.

the child.

of the child’s prior year tax return or copies

Enter the result here and on

of Forms 1099 for the current year).

However, taxable distributions from a quali-

Form 8615, line 1 . . . . . . . . .

fied disability trust are considered earned in-

•

The name, address, social security num-

come for the purposes of completing Form

ber (if known), and filing status (if known)

8615. See the Form 8615 instructions for de-

of the parent whose information is to be

tails.

Investment income defined. Investment in-

shown on Form 8615.

come is generally all income other than salaries,

Adjustment to income. In figuring the

wages, and other amounts received as pay for

A child’s legal representative making the re-

amount to enter on line 1, the child’s investment

work actually done. It includes taxable interest,

quest should include a copy of his or her Power

income is reduced by any penalty on the early

dividends, capital gains (including capital gain

of Attorney, such as Form 2848, or proof of legal

withdrawal of savings.

distributions), the taxable part of social security

guardianship.

and pension payments, and certain distributions

Step 1. Figuring the Child’s

from trusts. Investment income includes

Line 2 (Deductions)

amounts produced by assets the child obtained

Net Investment Income

with earned income (such as interest on a sav-

If the child does not itemize deductions on

(Form 8615, Part I)

ings account into which the child deposited

Schedule A (Form 1040 or Form 1040NR), enter

wages).

$1,700 on line 2.

The first step in figuring a child’s tax using Form

If the child does itemize deductions, enter on

8615 is to figure the child’s net investment in-

Nontaxable income. For this purpose, in-

come. To do that, use Form 8615, Part I. For an

vestment income includes only amounts the

line 2 the larger of:

Publication 929 (2006)

Page 11

Publication 929 - Tax Rules For Children And Dependents - 2006 Page 11

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