Tax help

<p>I have a foster child who is a freshman in a State college. for Summer job he did umpiring and earned $660. at college he earned 416.00 for job on campus (I thought it was work study job) he also has money in a Cd so I got an interest statement from the bank for $2500 .. which is still in a Cd and has not been touched.. Do I have to do taxes as he is still our dependent on our taxes??? I am so confused with this or do you suggest seeing a tax consultant It seems so silly for wages of $1046.. but when I do turbo tax it shows he will owe $310 and can not take the tax breaks for education since we claim him on our taxes and I will have to change ours since I did not take the tax breaks for him on ours... any help will be so helpful ... thanks in advance.</p>

<p>1) Have you done your taxes? If he is your dependent AND if he made less than $3700 (apparently it's true), you can claim his income on your taxes. Did he provide more than half of his own support? If not, then he must be claimed as a dependent.
2) If you have claimed him as a dependent on your taxes (but didn't claim his income) then he is not required to file a tax return. He might choose to do that to get the paid federal taxes back (if he did pay them). If he chooses to file anyway, then he can't claim himself as a dependent (personal exemption). He should owe no tax at all since the standard deduction of $5800 wipes out taxable income. </p>

<p>I believe that he CAN claim his education expenses on his return if you didn't do that. However, since he didn't make a lot of money the credit will benefit him only if it will be refunded, but there are rules for this:</p>

<p>1) Taxpayer claiming the credit is under 18 or was 18 at the end of the year, and their earned income was less than one-half of their own support (which is a case here I believe) 2) Taxpayer claiming the credit is a full time student over 18 and under 24 and their earned income was less than one-half of their own support.
Source: IRS 4012 VITA/TCE Volunteer Resource Guide.</p>

<p>P.S. I'm not a tax expert, I'm an IRS volunteer tax preparer (the VITA program).</p>

<p>Since my advice might be wrong, I recommend you to find a VITA site at your location and ask for an advice the site manager of that site. He/She will be able to provide you a better advice. Here is a link: Get</a> Free Tax Prep Help<br>
And it's free of course... No need to spend money on a tax consultant.</p>

<p>Thank you for that information .. I will check this out thanks again</p>

<p>Without knowing all the facts, it's hard to comment. However, is it possible the tax software is showing tax due because the $660 is considered income from self-employment?</p>

<p>Is the value of the CD $2500 or was the interest earned $2500? If the interest was $2500 that is one large CD given current rates. It doesn't matter whether any money was actually withdrawn from the CD. </p>

<p>From IRS pub 501:</p>

<p>The standard deduction for an individual who can be claimed as a dependent on another person's tax return is generally limited to the greater of: </p>

<p>$950, or</p>

<p>The individual's earned income for the year plus $300 (but not more than the regular standard deduction amount, generally $5,800). </p>

<p>If your son has $2500 unearned income, his standard deduction would be $1376 with an income of $3576. The tax on $2200 is $221.</p>

<p>I would think Turbo Tax has a view where you can look at the actual forms and the numbers it put on them. Is there something else making the amount owed $310? But, yes, if he has $2500 in unearned income, he needs to file.</p>

<p>"If the interest was $2500 that is one large CD given current rates."</p>

<p> the neighborhood of $150,000....give or take</p>

<p>I'm not sure, but I think there is something about interest earned by minors (under 21 I think) and that part of the tax goes on the parents' return. I think the limit a "child" can have taxed at his tax rate is 1700. So the tax on the other 700 might be at a higher rate. It usually works out better to take the child as a dependent and get the whole tuition credit (if tuition was paid). I actually did it both ways for us and our son one year. I looked at the TOTAL tax paid between both returns to see which way the IRS got the least in tax $ from our family. We got a bigger return, but kiddo owed $. We just paid it for him since we were still ahead. THe interest by minors is addressed on turbotax etc.</p>

<p>Also, that's one lucky foster child to have $ put away like that! Or not, if it was the result of a life insurance policy or something....didn't think of that at first.</p>

<p>Only unearned income can be put on the parent's return. Since this student has earned income, he needs to file his own return for all his income, provided the $2500 was the amount of interest.</p>

<p>Yes he was a fortunate great grandson his great grandfather put away around $200,000 in when he passed our foster child was given this (his mom and dad had passed away) We put it in a 5 year cd and got the interest rate at 2%... so it will grow with out him touching it. He did earn $660 from umpiring job this past summer and $400 from his work study job at college but this is all he earned from work..But putting these figures in turbo tax it did come up as a self employment since it was put on a Misc Income the $416 was put on a W 2 form with no taxes out of it.. this might explain my confusion..</p>

<p>for the self employment income, you can deduct expenses.</p>

<p>He needs to file a return. Be sure to include Form 8615 as his net investment income exceeds $1900. If you are going to amend your return (to claim the American Opportunity Credit) you need to do that before he can fill out Form 8615.</p>