Question

Answer the following Essential Question: Amy, age 8, is a qualified dependent to her father John. She received interest and dividends totaling $2,500 during 2019. What tax responsibilities, if any, does Amy have?

Guiding Hints/Questions:

- Are dependents required to file taxes if they have unearned income?

- If so, how are their taxes determined?

- does kiddie tax apply?

- can someone be a dependent and still required to file taxes?

Answer 1

Anyone who has claimed as dependant on another's return but have one of the following needs to file Form 1040 -

• Unearned income (Taxable interest, dividend , capital gains) > $1,100
• Earned income (Salaries/wages/professional fees/scholorships/grants) > $12,200 (limit for 2019)
• Gross income (Earned income + Unearned income) > greater of

1. $1,100 or

2. Earned income(upto $11,850) + $350 (limit for 2019)

Also, if dependant is a child with age less than 19 years or 24 years if full time student and its unearned income > $2,200 then income of a child will be liable to Kiddie tax.

In the A's case -

• A is a 8 years old qualified dependant for her father
• Her unearned income > $1,100, needs to file Tax form 1040
• She also fulfills conditions for kiddie tax.

Calculation of A's tax liability-

Particulars	$
First $1,100 Standard deduction	No Tax
Next $1,100 @ 10%	$       110
On $300 @ 10%	$         30
Total tax liability of A	$       140

Note - Further if the child's only income is interest, dividend and capital gains and totals less than $11,000 the parent(s) may be able to elect to include that income on the parent(s) return rather than file a return for the child.

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