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2007 Tax Return Online Free

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2007 Tax Return Online Free

2007 tax return online free 2. 2007 tax return online free   Accounting Periods and Methods Table of Contents Introduction Useful Items - You may want to see: Accounting Periods Accounting MethodsCash Method Accrual Method Combination Method Inventories Uniform Capitalization Rules Special Methods Change in Accounting Method Introduction You must figure your taxable income and file an income tax return for an annual accounting period called a tax year. 2007 tax return online free Also, you must consistently use an accounting method that clearly shows your income and expenses for the tax year. 2007 tax return online free Useful Items - You may want to see: Publication 538 Accounting Periods and Methods See chapter 12 for information about getting publications and forms. 2007 tax return online free Accounting Periods When preparing a statement of income and expenses (generally your income tax return), you must use your books and records for a specific interval of time called an accounting period. 2007 tax return online free The annual accounting period for your income tax return is called a tax year. 2007 tax return online free You can use one of the following tax years. 2007 tax return online free A calendar tax year. 2007 tax return online free A fiscal tax year. 2007 tax return online free Unless you have a required tax year, you adopt a tax year by filing your first income tax return using that tax year. 2007 tax return online free A required tax year is a tax year required under the Internal Revenue Code or the Income Tax Regulations. 2007 tax return online free Calendar tax year. 2007 tax return online free   A calendar tax year is 12 consecutive months beginning January 1 and ending December 31. 2007 tax return online free   You must adopt the calendar tax year if any of the following apply. 2007 tax return online free You do not keep books. 2007 tax return online free You have no annual accounting period. 2007 tax return online free Your present tax year does not qualify as a fiscal year. 2007 tax return online free Your use of the calendar tax year is required under the Internal Revenue Code or the Income Tax Regulations. 2007 tax return online free   If you filed your first income tax return using the calendar tax year and you later begin business as a sole proprietor, you must continue to use the calendar tax year unless you get IRS approval to change it or are otherwise allowed to change it without IRS approval. 2007 tax return online free For more information, see Change in tax year, later. 2007 tax return online free   If you adopt the calendar tax year, you must maintain your books and records and report your income and expenses for the period from January 1 through December 31 of each year. 2007 tax return online free Fiscal tax year. 2007 tax return online free   A fiscal tax year is 12 consecutive months ending on the last day of any month except December. 2007 tax return online free A 52-53-week tax year is a fiscal tax year that varies from 52 to 53 weeks but does not have to end on the last day of a month. 2007 tax return online free   If you adopt a fiscal tax year, you must maintain your books and records and report your income and expenses using the same tax year. 2007 tax return online free   For more information on a fiscal tax year, including a 52-53-week tax year, see Publication 538. 2007 tax return online free Change in tax year. 2007 tax return online free   Generally, you must file Form 1128, Application To Adopt, Change, or Retain a Tax Year, to request IRS approval to change your tax year. 2007 tax return online free See the Instructions for Form 1128 for exceptions. 2007 tax return online free If you qualify for an automatic approval request, a user fee is not required. 2007 tax return online free If you do not qualify for automatic approval, a ruling must be requested. 2007 tax return online free See the instructions for Form 1128 for information about user fees if you are requesting a ruling. 2007 tax return online free Accounting Methods An accounting method is a set of rules used to determine when and how income and expenses are reported. 2007 tax return online free Your accounting method includes not only the overall method of accounting you use, but also the accounting treatment you use for any material item. 2007 tax return online free You choose an accounting method for your business when you file your first income tax return that includes a Schedule C for the business. 2007 tax return online free After that, if you want to change your accounting method, you must generally get IRS approval. 2007 tax return online free See Change in Accounting Method, later. 2007 tax return online free Kinds of methods. 2007 tax return online free   Generally, you can use any of the following accounting methods. 2007 tax return online free Cash method. 2007 tax return online free An accrual method. 2007 tax return online free Special methods of accounting for certain items of income and expenses. 2007 tax return online free Combination method using elements of two or more of the above. 2007 tax return online free You must use the same accounting method to figure your taxable income and to keep your books. 2007 tax return online free Also, you must use an accounting method that clearly shows your income. 2007 tax return online free Business and personal items. 2007 tax return online free   You can account for business and personal items under different accounting methods. 2007 tax return online free For example, you can figure your business income under an accrual method, even if you use the cash method to figure personal items. 2007 tax return online free Two or more businesses. 2007 tax return online free   If you have two or more separate and distinct businesses, you can use a different accounting method for each if the method clearly reflects the income of each business. 2007 tax return online free They are separate and distinct only if you maintain complete and separate books and records for each business. 2007 tax return online free Cash Method Most individuals and many sole proprietors with no inventory use the cash method because they find it easier to keep cash method records. 2007 tax return online free However, if an inventory is necessary to account for your income, you must generally use an accrual method of accounting for sales and purchases. 2007 tax return online free For more information, see Inventories, later. 2007 tax return online free Income Under the cash method, include in your gross income all items of income you actually or constructively receive during your tax year. 2007 tax return online free If you receive property or services, you must include their fair market value in income. 2007 tax return online free Example. 2007 tax return online free On December 30, 2012, Mrs. 2007 tax return online free Sycamore sent you a check for interior decorating services you provided to her. 2007 tax return online free You received the check on January 2, 2013. 2007 tax return online free You must include the amount of the check in income for 2013. 2007 tax return online free Constructive receipt. 2007 tax return online free   You have constructive receipt of income when an amount is credited to your account or made available to you without restriction. 2007 tax return online free You do not need to have possession of it. 2007 tax return online free If you authorize someone to be your agent and receive income for you, you are treated as having received it when your agent received it. 2007 tax return online free Example. 2007 tax return online free Interest is credited to your bank account in December 2013. 2007 tax return online free You do not withdraw it or enter it into your passbook until 2014. 2007 tax return online free You must include it in your gross income for 2013. 2007 tax return online free Delaying receipt of income. 2007 tax return online free   You cannot hold checks or postpone taking possession of similar property from one tax year to another to avoid paying tax on the income. 2007 tax return online free You must report the income in the year the property is received or made available to you without restriction. 2007 tax return online free Example. 2007 tax return online free Frances Jones, a service contractor, was entitled to receive a $10,000 payment on a contract in December 2013. 2007 tax return online free She was told in December that her payment was available. 2007 tax return online free At her request, she was not paid until January 2014. 2007 tax return online free She must include this payment in her 2013 income because it was constructively received in 2013. 2007 tax return online free Checks. 2007 tax return online free   Receipt of a valid check by the end of the tax year is constructive receipt of income in that year, even if you cannot cash or deposit the check until the following year. 2007 tax return online free Example. 2007 tax return online free Dr. 2007 tax return online free Redd received a check for $500 on December 31, 2013, from a patient. 2007 tax return online free She could not deposit the check in her business account until January 2, 2014. 2007 tax return online free She must include this fee in her income for 2013. 2007 tax return online free Debts paid by another person or canceled. 2007 tax return online free   If your debts are paid by another person or are canceled by your creditors, you may have to report part or all of this debt relief as income. 2007 tax return online free If you receive income in this way, you constructively receive the income when the debt is canceled or paid. 2007 tax return online free For more information, see Canceled Debt under Kinds of Income in chapter 5. 2007 tax return online free Repayment of income. 2007 tax return online free   If you include an amount in income and in a later year you have to repay all or part of it, you can usually deduct the repayment in the year in which you make it. 2007 tax return online free If the amount you repay is over $3,000, a special rule applies. 2007 tax return online free For details about the special rule, see Repayments in chapter 11 of Publication 535, Business Expenses. 2007 tax return online free Expenses Under the cash method, you generally deduct expenses in the tax year in which you actually pay them. 2007 tax return online free This includes business expenses for which you contest liability. 2007 tax return online free However, you may not be able to deduct an expense paid in advance or you may be required to capitalize certain costs, as explained later under Uniform Capitalization Rules. 2007 tax return online free Expenses paid in advance. 2007 tax return online free   You can deduct an expense you pay in advance only in the year to which it applies. 2007 tax return online free Example. 2007 tax return online free You are a calendar year taxpayer and you pay $1,000 in 2013 for a business insurance policy effective for one year, beginning July 1. 2007 tax return online free You can deduct $500 in 2013 and $500 in 2014. 2007 tax return online free Accrual Method Under an accrual method of accounting, you generally report income in the year earned and deduct or capitalize expenses in the year incurred. 2007 tax return online free The purpose of an accrual method of accounting is to match income and expenses in the correct year. 2007 tax return online free Income—General Rule Under an accrual method, you generally include an amount in your gross income for the tax year in which all events that fix your right to receive the income have occurred and you can determine the amount with reasonable accuracy. 2007 tax return online free Example. 2007 tax return online free You are a calendar year accrual method taxpayer. 2007 tax return online free You sold a computer on December 28, 2013. 2007 tax return online free You billed the customer in the first week of January 2014, but you did not receive payment until February 2014. 2007 tax return online free You must include the amount received for the computer in your 2013 income. 2007 tax return online free Income—Special Rules The following are special rules that apply to advance payments, estimating income, and changing a payment schedule for services. 2007 tax return online free Estimated income. 2007 tax return online free   If you include a reasonably estimated amount in gross income, and later determine the exact amount is different, take the difference into account in the tax year in which you make the determination. 2007 tax return online free Change in payment schedule for services. 2007 tax return online free   If you perform services for a basic rate specified in a contract, you must accrue the income at the basic rate, even if you agree to receive payments at a lower rate until you complete the services and then receive the difference. 2007 tax return online free Advance payments for services. 2007 tax return online free   Generally, you report an advance payment for services to be performed in a later tax year as income in the year you receive the payment. 2007 tax return online free However, if you receive an advance payment for services you agree to perform by the end of the next tax year, you can elect to postpone including the advance payment in income until the next tax year. 2007 tax return online free However, you cannot postpone including any payment beyond that tax year. 2007 tax return online free   For more information, see Advance Payment for Services under Accrual Method in Publication 538. 2007 tax return online free That publication also explains special rules for reporting the following types of income. 2007 tax return online free Advance payments for service agreements. 2007 tax return online free Prepaid rent. 2007 tax return online free Advance payments for sales. 2007 tax return online free   Special rules apply to including income from advance payments on agreements for future sales or other dispositions of goods you hold primarily for sale to your customers in the ordinary course of your business. 2007 tax return online free If the advance payments are for contracts involving both the sale and service of goods, it may be necessary to treat them as two agreements. 2007 tax return online free An agreement includes a gift certificate that can be redeemed for goods. 2007 tax return online free Treat amounts that are due and payable as amounts you received. 2007 tax return online free   You generally include an advance payment in income for the tax year in which you receive it. 2007 tax return online free However, you can use an alternative method. 2007 tax return online free For information about the alternative method, see Publication 538. 2007 tax return online free Expenses Under an accrual method of accounting, you generally deduct or capitalize a business expense when both the following apply. 2007 tax return online free The all-events test has been met. 2007 tax return online free The test has been met when: All events have occurred that fix the fact of liability, and The liability can be determined with reasonable accuracy. 2007 tax return online free Economic performance has occurred. 2007 tax return online free Economic performance. 2007 tax return online free   You generally cannot deduct or capitalize a business expense until economic performance occurs. 2007 tax return online free If your expense is for property or services provided to you, or for your use of property, economic performance occurs as the property or services are provided or as the property is used. 2007 tax return online free If your expense is for property or services you provide to others, economic performance occurs as you provide the property or services. 2007 tax return online free An exception allows certain recurring items to be treated as incurred during a tax year even though economic performance has not occurred. 2007 tax return online free For more information on economic performance, see Economic Performance under Accrual Method in Publication 538. 2007 tax return online free Example. 2007 tax return online free You are a calendar year taxpayer and use an accrual method of accounting. 2007 tax return online free You buy office supplies in December 2013. 2007 tax return online free You receive the supplies and the bill in December, but you pay the bill in January 2014. 2007 tax return online free You can deduct the expense in 2013 because all events that fix the fact of liability have occurred, the amount of the liability could be reasonably determined, and economic performance occurred in that year. 2007 tax return online free Your office supplies may qualify as a recurring expense. 2007 tax return online free In that case, you can deduct them in 2013 even if the supplies are not delivered until 2014 (when economic performance occurs). 2007 tax return online free Keeping inventories. 2007 tax return online free   When the production, purchase, or sale of merchandise is an income-producing factor in your business, you must generally take inventories into account at the beginning and the end of your tax year. 2007 tax return online free If you must account for an inventory, you must generally use an accrual method of accounting for your purchases and sales. 2007 tax return online free For more information, see Inventories , later. 2007 tax return online free Special rule for related persons. 2007 tax return online free   You cannot deduct business expenses and interest owed to a related person who uses the cash method of accounting until you make the payment and the corresponding amount is includible in the related person's gross income. 2007 tax return online free Determine the relationship, for this rule, as of the end of the tax year for which the expense or interest would otherwise be deductible. 2007 tax return online free If a deduction is not allowed under this rule, the rule will continue to apply even if your relationship with the person ends before the expense or interest is includible in the gross income of that person. 2007 tax return online free   Related persons include members of your immediate family, including only brothers and sisters (either whole or half), your spouse, ancestors, and lineal descendants. 2007 tax return online free For a list of other related persons, see section 267 of the Internal Revenue Code. 2007 tax return online free Combination Method You can generally use any combination of cash, accrual, and special methods of accounting if the combination clearly shows your income and expenses and you use it consistently. 2007 tax return online free However, the following restrictions apply. 2007 tax return online free If an inventory is necessary to account for your income, you must generally use an accrual method for purchases and sales. 2007 tax return online free (See, however, Inventories, later. 2007 tax return online free ) You can use the cash method for all other items of income and expenses. 2007 tax return online free If you use the cash method for figuring your income, you must use the cash method for reporting your expenses. 2007 tax return online free If you use an accrual method for reporting your expenses, you must use an accrual method for figuring your income. 2007 tax return online free If you use a combination method that includes the cash method, treat that combination method as the cash method. 2007 tax return online free Inventories Generally, if you produce, purchase, or sell merchandise in your business, you must keep an inventory and use the accrual method for purchases and sales of merchandise. 2007 tax return online free However, the following taxpayers can use the cash method of accounting even if they produce, purchase, or sell merchandise. 2007 tax return online free These taxpayers can also account for inventoriable items as materials and supplies that are not incidental (discussed later). 2007 tax return online free A qualifying taxpayer under Revenue Procedure 2001-10 in Internal Revenue Bulletin 2001-2. 2007 tax return online free A qualifying small business taxpayer under Revenue Procedure 2002-28 in Internal Revenue Bulletin 2002-18. 2007 tax return online free Qualifying taxpayer. 2007 tax return online free   You are a qualifying taxpayer if: Your average annual gross receipts for each prior tax year ending on or after December 17, 1998, is $1 million or less. 2007 tax return online free (Your average annual gross receipts for a tax year is figured by adding the gross receipts for that tax year and the 2 preceding tax years and dividing by 3. 2007 tax return online free ) Your business is not a tax shelter, as defined under section 448(d)(3) of the Internal Revenue Code. 2007 tax return online free Qualifying small business taxpayer. 2007 tax return online free   You are a qualifying small business taxpayer if: Your average annual gross receipts for each prior tax year ending on or after December 31, 2000, is more than $1 million but not more than $10 million. 2007 tax return online free (Your average annual gross receipts for a tax year is figured by adding the gross receipts for that tax year and the 2 preceding tax years and dividing the total by 3. 2007 tax return online free ) You are not prohibited from using the cash method under section 448 of the Internal Revenue Code. 2007 tax return online free Your principal business activity is an eligible business (described in Publication 538 and Revenue Procedure 2002-28). 2007 tax return online free Business not owned or not in existence for 3 years. 2007 tax return online free   If you did not own your business for all of the 3-tax-year period used in figuring your average annual gross receipts, include the period of any predecessor. 2007 tax return online free If your business has not been in existence for the 3-tax-year period, base your average on the period it has existed including any short tax years, annualizing the short tax year's gross receipts. 2007 tax return online free Materials and supplies that are not incidental. 2007 tax return online free   If you account for inventoriable items as materials and supplies that are not incidental, you will deduct the cost of the items you would otherwise include in inventory in the year you sell the items, or the year you pay for them, whichever is later. 2007 tax return online free If you are a producer, you can use any reasonable method to estimate the raw material in your work in process and finished goods on hand at the end of the year to determine the raw material used to produce finished goods that were sold during the year. 2007 tax return online free Changing accounting method. 2007 tax return online free   If you are a qualifying taxpayer or qualifying small business taxpayer and want to change to the cash method or to account for inventoriable items as non-incidental materials and supplies, you must file Form 3115, Application for Change in Accounting Method. 2007 tax return online free See Change in Accounting Method, later. 2007 tax return online free More information. 2007 tax return online free    For more information about the qualifying taxpayer exception, see Revenue Procedure 2001-10 in Internal Revenue Bulletin 2001-2. 2007 tax return online free For more information about the qualifying small business taxpayer exception, see Revenue Procedure 2002-28 in Internal Revenue Bulletin 2002-18. 2007 tax return online free Items included in inventory. 2007 tax return online free   If you are required to account for inventories, include the following items when accounting for your inventory. 2007 tax return online free Merchandise or stock in trade. 2007 tax return online free Raw materials. 2007 tax return online free Work in process. 2007 tax return online free Finished products. 2007 tax return online free Supplies that physically become a part of the item intended for sale. 2007 tax return online free Valuing inventory. 2007 tax return online free   You must value your inventory at the beginning and end of each tax year to determine your cost of goods sold (Schedule C, line 42). 2007 tax return online free To determine the value of your inventory, you need a method for identifying the items in your inventory and a method for valuing these items. 2007 tax return online free   Inventory valuation rules cannot be the same for all kinds of businesses. 2007 tax return online free The method you use to value your inventory must conform to generally accepted accounting principles for similar businesses and must clearly reflect income. 2007 tax return online free Your inventory practices must be consistent from year to year. 2007 tax return online free More information. 2007 tax return online free   For more information about inventories, see Publication 538. 2007 tax return online free Uniform Capitalization Rules Under the uniform capitalization rules, you must capitalize the direct costs and part of the indirect costs for production or resale activities. 2007 tax return online free Include these costs in the basis of property you produce or acquire for resale, rather than claiming them as a current deduction. 2007 tax return online free You recover the costs through depreciation, amortization, or cost of goods sold when you use, sell, or otherwise dispose of the property. 2007 tax return online free Activities subject to the uniform capitalization rules. 2007 tax return online free   You may be subject to the uniform capitalization rules if you do any of the following, unless the property is produced for your use other than in a business or an activity carried on for profit. 2007 tax return online free Produce real or tangible personal property. 2007 tax return online free For this purpose, tangible personal property includes a film, sound recording, video tape, book, or similar property. 2007 tax return online free Acquire property for resale. 2007 tax return online free Exceptions. 2007 tax return online free   These rules do not apply to the following property. 2007 tax return online free Personal property you acquire for resale if your average annual gross receipts are $10 million or less. 2007 tax return online free Property you produce if you meet either of the following conditions. 2007 tax return online free Your indirect costs of producing the property are $200,000 or less. 2007 tax return online free You use the cash method of accounting and do not account for inventories. 2007 tax return online free For more information, see Inventories, earlier. 2007 tax return online free Special Methods There are special methods of accounting for certain items of income or expense. 2007 tax return online free These include the following. 2007 tax return online free Amortization, discussed in chapter 8 of Publication 535, Business Expenses. 2007 tax return online free Bad debts, discussed in chapter 10 of Publication 535. 2007 tax return online free Depletion, discussed in chapter 9 of Publication 535. 2007 tax return online free Depreciation, discussed in Publication 946, How To Depreciate Property. 2007 tax return online free Installment sales, discussed in Publication 537, Installment Sales. 2007 tax return online free Change in Accounting Method Once you have set up your accounting method, you must generally get IRS approval before you can change to another method. 2007 tax return online free A change in your accounting method includes a change in: Your overall method, such as from cash to an accrual method, and Your treatment of any material item. 2007 tax return online free To get approval, you must file Form 3115, Application for Change in Accounting Method. 2007 tax return online free You can get IRS approval to change an accounting method under either the automatic change procedures or the advance consent request procedures. 2007 tax return online free You may have to pay a user fee. 2007 tax return online free For more information, see the form instructions. 2007 tax return online free Automatic change procedures. 2007 tax return online free   Certain taxpayers can presume to have IRS approval to change their method of accounting. 2007 tax return online free The approval is granted for the tax year for which the taxpayer requests a change (year of change), if the taxpayer complies with the provisions of the automatic change procedures. 2007 tax return online free No user fee is required for an application filed under an automatic change procedure generally covered in Revenue Procedure 2002-9. 2007 tax return online free   Generally, you must use Form 3115 to request an automatic change. 2007 tax return online free For more information, see the Instructions for Form 3115. 2007 tax return online free Prev  Up  Next   Home   More Online Publications
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The 2007 Tax Return Online Free

2007 tax return online free Publication 929 - Main Content Table of Contents Part 1. 2007 tax return online free Rules for All Dependents Filing RequirementsEarned Income Only Unearned Income Only Both Earned and Unearned Income Other Filing Requirements Should a Return Be Filed Even If Not Required? Responsibility for Child's ReturnThird party designee. 2007 tax return online free Designated as representative. 2007 tax return online free IRS notice. 2007 tax return online free Standard DeductionStandard Deduction of Zero Dependent's Own Exemption Withholding From WagesExceptions. 2007 tax return online free Part 2. 2007 tax return online free Tax on Unearned Income of Certain ChildrenWhich Parent's Return To Use Parent's Election To Report Child's Interest and DividendsEffect of Making the Election Figuring Child's Income Figuring Additional Tax Tax for Certain Children Who Have Unearned IncomeProviding Parental Information (Form 8615, Lines A–C) Step 1. 2007 tax return online free Figuring the Child's Net Unearned Income (Form 8615, Part I) Step 2. 2007 tax return online free Figuring a Tentative Tax at the Parent's Tax Rate (Form 8615, Part II) Step 3. 2007 tax return online free Figuring the Child's Tax (Form 8615, Part III) Alternative Minimum Tax Illustrated Example Part 1. 2007 tax return online free Rules for All Dependents This part of the publication discusses the filing requirements for dependents, who is responsible for a child's return, how to figure a dependent's standard deduction and exemption (if any), and whether a dependent can claim exemption from federal income tax withholding. 2007 tax return online free Filing Requirements Whether a dependent has to file a return generally depends on the amount of the dependent's earned and unearned income and whether the dependent is married, is age 65 or older, or is blind. 2007 tax return online free A dependent may have to file a return even if his or her income is less than the amount that would normally require a return. 2007 tax return online free See Other Filing Requirements, later. 2007 tax return online free The following sections apply to dependents with: Earned income only, Unearned income only, and Both earned and unearned income. 2007 tax return online free  To find out whether a dependent must file, read the section that applies, or use Table 1. 2007 tax return online free Earned Income Only A dependent whose gross income is only earned income must file a return if the gross income is more than the amount listed in the following table. 2007 tax return online free Marital Status Amount Single   Under 65 and not blind $6,100 Either 65 or older or blind $7,600 65 or older and blind $9,100 Married*   Under 65 and not blind $6,100 Either 65 or older or blind $7,300 65 or older and blind $8,500 *If a dependent's spouse itemizes deductions on a separate return, the dependent must file a return if the dependent has $5 or more of gross income (earned and/or unearned). 2007 tax return online free Example. 2007 tax return online free William is 16. 2007 tax return online free His mother claims an exemption for him on her income tax return. 2007 tax return online free He worked part time on weekends during the school year and full time during the summer. 2007 tax return online free He earned $7,000 in wages. 2007 tax return online free He did not have any unearned income. 2007 tax return online free He must file a tax return because he has earned income only and his gross income is more than $6,100. 2007 tax return online free If he is blind, he does not have to file a return because his gross income is not more than $7,600. 2007 tax return online free Unearned Income Only A dependent whose gross income is only unearned income must file a return if the gross income is more than the amount listed in the following table. 2007 tax return online free Marital Status Amount Single   Under 65 and not blind $1,000 Either 65 or older or blind $2,500 65 or older and blind $4,000 Married*   Under 65 and not blind $1,000 Either 65 or older or blind $2,200 65 or older and blind $3,400 *If a dependent's spouse itemizes deductions on a separate return, the dependent must file a return if the dependent has $5 or more of gross income (earned and/or unearned). 2007 tax return online free Example. 2007 tax return online free Sarah is 18 and single. 2007 tax return online free Her parents can claim an exemption for her on their income tax return. 2007 tax return online free She received $1,970 of taxable interest and dividend income. 2007 tax return online free She did not work during the year. 2007 tax return online free She must file a tax return because she has unearned income only and her gross income is more than $1,000. 2007 tax return online free If she is blind, she does not have to file a return because she has unearned income only and her gross income is not more than $2,500. 2007 tax return online free Election to report child's unearned income on parent's return. 2007 tax return online free   A parent of a child under age 19 (or under age 24 if a full-time student) may be able to elect to include the child's interest and dividend income on the parent's return. 2007 tax return online free See Parent's Election To Report Child's Interest and Dividends in Part 2. 2007 tax return online free If the parent makes this election, the child does not have to file a return. 2007 tax return online free Both Earned and Unearned Income A dependent who has both earned and unearned income generally must file a return if the dependent's gross income is more than line 5 of the following worksheet. 2007 tax return online free Filing Requirement Worksheet for Most Dependents 1. 2007 tax return online free Enter dependent's earned income plus $350     2. 2007 tax return online free Minimum amount   $1,000 3. 2007 tax return online free Compare lines 1 and 2. 2007 tax return online free Enter the larger amount     4. 2007 tax return online free Maximum amount   6,100 5. 2007 tax return online free Compare lines 3 and 4. 2007 tax return online free Enter the smaller amount     6. 2007 tax return online free Enter the dependent's gross income. 2007 tax return online free If line 6 is more than line 5, the dependent must file an income tax return. 2007 tax return online free If the dependent is married and his or her spouse itemizes deductions on a separate return, the dependent must file an income tax return if line 6 is $5 or more. 2007 tax return online free       Table 1. 2007 tax return online free 2013 Filing Requirements for Dependents If your parent (or someone else) can claim you as a dependent, use this table to see if you must file a return. 2007 tax return online free   See the definitions of “dependent,”“earned income,”“unearned income,” and “gross income” in the Glossary. 2007 tax return online free   Single dependents—Were you either age 65 or older or blind?     No. 2007 tax return online free You must file a return if any of the following apply. 2007 tax return online free       Your unearned income was over $1,000. 2007 tax return online free Your earned income was over $6,100. 2007 tax return online free Your gross income was more than the larger of—       $1,000, or Your earned income (up to $5,750) plus $350. 2007 tax return online free         Yes. 2007 tax return online free You must file a return if any of the following apply. 2007 tax return online free     Your unearned income was over $2,500 ($4,000 if 65 or older and blind), Your earned income was over $7,600 ($9,100 if 65 or older and blind), Your gross income was more than the larger of—       $2,500 ($4,000 if 65 or older and blind), or Your earned income (up to $5,750) plus $1,850 ($3,350 if 65 or older and blind). 2007 tax return online free       Married dependents—Were you either age 65 or older or blind?     No. 2007 tax return online free You must file a return if any of the following apply. 2007 tax return online free       Your gross income was at least $5 and your spouse files a separate return and itemizes deductions. 2007 tax return online free Your unearned income was over $1,000. 2007 tax return online free Your earned income was over $6,100. 2007 tax return online free Your gross income was more than the larger of—       $1,000, or Your earned income (up to $5,750) plus $350. 2007 tax return online free       Yes. 2007 tax return online free You must file a return if any of the following apply. 2007 tax return online free       Your gross income was at least $5 and your spouse files a separate return and itemizes deductions. 2007 tax return online free Your unearned income was over $2,200 ($3,400 if 65 or older and blind), Your earned income was over $7,300 ($8,500 if 65 or older and blind), Your gross income was more than the larger of—       $2,200 ($3,400 if 65 or older and blind), or Your earned income (up to $5,750) plus $1,550 ($2,750 if 65 or older and blind). 2007 tax return online free       Example 1. 2007 tax return online free Joe is 20, single, not blind, and a full-time college student. 2007 tax return online free He does not provide more than half of his own support, and his parents claim an exemption for him on their income tax return. 2007 tax return online free He received $200 taxable interest income and earned $2,750 from a part-time job. 2007 tax return online free He does not have to file a tax return because his gross income of $2,950 ($200 interest plus $2,750 in wages) is not more than $3,100, the amount on line 5 of his filled-in Filing Requirement Worksheet for Most Dependents (shown next). 2007 tax return online free Filled-in Example 1 Filing Requirement Worksheet  for Most Dependents 1. 2007 tax return online free Enter dependent's earned income plus $350   $ 3,100 2. 2007 tax return online free Minimum amount   1,000 3. 2007 tax return online free Compare lines 1 and 2. 2007 tax return online free Enter the larger amount   3,100 4. 2007 tax return online free Maximum amount   6,100 5. 2007 tax return online free Compare lines 3 and 4. 2007 tax return online free Enter the smaller amount   3,100 6. 2007 tax return online free Enter the dependent's gross income. 2007 tax return online free If line 6 is more than line 5, the dependent must file an income tax return. 2007 tax return online free If the dependent is married and his or her spouse itemizes deductions on a separate return, the dependent must file an income tax return if line 6 is $5 or more. 2007 tax return online free   $ 2,950   Example 2. 2007 tax return online free The facts are the same as in Example 1 except that Joe had $600 taxable interest income. 2007 tax return online free He must file a tax return because his gross income of $3,350 ($600 interest plus $2,750 wages) is more than $3,100, the amount on line 5 of his filled-in worksheet (shown next). 2007 tax return online free Filled-in Example 2 Filing Requirement Worksheet for Most Dependents 1. 2007 tax return online free Enter dependent's earned income plus $350   $ 3,100 2. 2007 tax return online free Minimum amount   1,000 3. 2007 tax return online free Compare lines 1 and 2. 2007 tax return online free Enter the larger amount   3,100 4. 2007 tax return online free Maximum amount   6,100 5. 2007 tax return online free Compare lines 3 and 4. 2007 tax return online free Enter the smaller amount   3,100 6. 2007 tax return online free Enter the dependent's gross income. 2007 tax return online free If line 6 is more than line 5, the dependent must file an income tax return. 2007 tax return online free If the dependent is married and his or her spouse itemizes deductions on a separate return, the dependent must file an income tax return if line 6 is $5 or more. 2007 tax return online free   $ 3,350   Age 65 or older or blind. 2007 tax return online free A dependent who is age 65 or older or blind must file a return if his or her gross income is more than line 7 of the following worksheet. 2007 tax return online free Filing Requirement Worksheet  for Dependents Who Are Age 65 or Older or Blind 1. 2007 tax return online free Enter dependent's earned income plus $350     2. 2007 tax return online free Minimum amount   $1,000 3. 2007 tax return online free Compare lines 1 and 2. 2007 tax return online free Enter the larger amount     4. 2007 tax return online free Maximum amount   6,100 5. 2007 tax return online free Compare lines 3 and 4. 2007 tax return online free Enter the smaller amount     6. 2007 tax return online free Enter the amount from the following table that applies to the dependent       Marital Status Amount     Single         Either 65 or older or blind $1,500       65 or older and blind $3,000     Married         Either 65 or older or blind $1,200       65 or older and blind $2,400   7. 2007 tax return online free Add lines 5 and 6. 2007 tax return online free Enter the total     8. 2007 tax return online free Enter the dependent's gross income. 2007 tax return online free If line 8 is more than line 7, the dependent must file an income tax return. 2007 tax return online free If the dependent is married and his or her spouse itemizes deductions on a separate return, the dependent must file an income tax return if line 8 is $5 or more     Example 3. 2007 tax return online free The facts are the same as in Example 2 except that Joe is also blind. 2007 tax return online free He does not have to file a return because his gross income of $3,350 is not more than $4,600, the amount on line 7 of his filled-in Filing Requirement Worksheet for Dependents Who Are Age 65 or Older or Blind (shown next). 2007 tax return online free   Filled-in Example 3 Filing Requirement Worksheet  for Dependents Who Are Age 65 or Older or Blind 1. 2007 tax return online free Enter dependent's earned income plus $350   $3,100 2. 2007 tax return online free Minimum amount   1,000 3. 2007 tax return online free Compare lines 1 and 2. 2007 tax return online free Enter the larger amount   3,100 4. 2007 tax return online free Maximum amount   6,100 5. 2007 tax return online free Compare lines 3 and 4. 2007 tax return online free Enter the smaller amount   3,100 6. 2007 tax return online free Enter the amount from the following table that applies to the dependent   1,500   Marital Status Amount     Single         Either 65 or older or blind $1,500       65 or older and blind $3,000     Married         Either 65 or older or blind $1,200       65 or older and blind $2,400   7. 2007 tax return online free Add lines 5 and 6. 2007 tax return online free Enter the total   4,600 8. 2007 tax return online free Enter the dependent's gross income. 2007 tax return online free If line 8 is more than line 7, the dependent must file an income tax return. 2007 tax return online free If the dependent is married and his or her spouse itemizes deductions on a separate return, the dependent must file an income tax return if line 8 is $5 or more   $3,350 Other Filing Requirements Some dependents may have to file a tax return even if their income is less than the amount that would normally require them to file a return. 2007 tax return online free A dependent must file a tax return if he or she owes any other taxes, such as: Social security and Medicare taxes on tips not reported to his or her employer or on wages received from an employer who did not withhold these taxes, Uncollected social security and Medicare or railroad retirement taxes on tips reported to his or her employer or on group-term life insurance, Alternative minimum tax, Additional tax on a health savings account from Form 8889, Part III, Recapture taxes, such as the tax from recapture of an education credit, or Additional tax on a qualified plan, including an individual retirement arrangement (IRA), or other tax-favored account. 2007 tax return online free But if the dependent is filing a return only because of this tax, the dependent can file Form 5329 by itself. 2007 tax return online free A dependent must also file a tax return if he or she: Had wages of $108. 2007 tax return online free 28 or more from a church or qualified church-controlled organization that is exempt from employer social security and Medicare taxes, or Had net earnings from self-employment of at least $400. 2007 tax return online free Spouse itemizes. 2007 tax return online free   A dependent must file a return if the dependent's spouse itemizes deductions on a separate return and the dependent has $5 or more of gross income (earned and/or unearned). 2007 tax return online free Should a Return Be Filed Even If Not Required? Even if a dependent does not meet any of the filing requirements discussed earlier, he or she should file a tax return if either of the following applies. 2007 tax return online free Income tax was withheld from his or her income. 2007 tax return online free He or she qualifies for the earned income credit, additional child tax credit, health coverage tax credit, or refundable American opportunity education credit. 2007 tax return online free See the tax return instructions to find out who qualifies for these credits. 2007 tax return online free  By filing a return, the dependent can get a refund. 2007 tax return online free Responsibility for Child's Return Generally, a child is responsible for filing his or her own tax return and for paying any tax, penalties, or interest on that return. 2007 tax return online free If a child cannot file his or her own return for any reason, such as age, the child's parent, guardian, or other legally responsible person must file it for the child. 2007 tax return online free Signing the child's return. 2007 tax return online free   If the child cannot sign his or her return, a parent or guardian must sign the child's name followed by the words “By (signature), parent (or guardian) for minor child. 2007 tax return online free ” Authority of parent or guardian. 2007 tax return online free   A parent or guardian who signs a return on a child's behalf can deal with the IRS on all matters connected with the return. 2007 tax return online free   In general, a parent or guardian who does not sign the child's return can only provide information concerning the child's return and pay the child's tax. 2007 tax return online free That parent or guardian is not entitled to receive information from the IRS or legally bind the child to a tax liability arising from the return. 2007 tax return online free Third party designee. 2007 tax return online free   A child's parent or guardian who does not sign the child's return may be authorized, as a third party designee, to discuss the processing of the return with the IRS as well as provide information concerning the return. 2007 tax return online free The child or the person signing the return on the child's behalf must check the “Yes” box in the “Third Party Designee” area of the return and name the parent or guardian as the designee. 2007 tax return online free   If designated, a parent or guardian can respond to certain IRS notices and receive information about the processing of the return and the status of a refund or payment. 2007 tax return online free This designation does not authorize the parent or guardian to receive any refund check, bind the child to any tax liability, or otherwise represent the child before the IRS. 2007 tax return online free See the return instructions for more information. 2007 tax return online free Designated as representative. 2007 tax return online free   A parent or guardian who does not sign the child's return may be designated as the child's representative by the child or the person signing the return on the child's behalf. 2007 tax return online free Form 2848, Power of Attorney and Declaration of Representative, is used to designate a child's representative. 2007 tax return online free See Publication 947, Practice Before the IRS and Power of Attorney, for more information. 2007 tax return online free   If designated, a parent or guardian can receive information about the child's return but cannot legally bind the child to a tax liability unless authorized to do so by the law of the state in which the child lives. 2007 tax return online free IRS notice. 2007 tax return online free   If you or the child receives a notice from the IRS concerning the child's return or tax liability, you should immediately inform the IRS that the notice concerns a child. 2007 tax return online free The notice will show who to contact. 2007 tax return online free The IRS will try to resolve the matter with the parent(s) or guardian(s) of the child consistent with their authority. 2007 tax return online free Child's earnings. 2007 tax return online free   For federal income tax purposes, amounts a child earns by performing services are included in the gross income of the child and not the gross income of the parent. 2007 tax return online free This is true even if, under state law, the parent has the right to the earnings and may actually have received them. 2007 tax return online free If the child does not pay the tax due on this income, the parent may be liable for the tax. 2007 tax return online free Child's expenses. 2007 tax return online free   Deductions for payments that are made out of a child's earnings are the child's, even if the payments are made by the parent. 2007 tax return online free Example. 2007 tax return online free You made payments on your child's behalf that are deductible as a business expense and a charitable contribution. 2007 tax return online free You made the payments out of your child's earnings. 2007 tax return online free These items can be deducted only on the child's return. 2007 tax return online free Standard Deduction The standard deduction for an individual who can be claimed as a dependent on another person's tax return is generally limited to the larger of: $1,000, or The individual's earned income plus $350, but not more than the regular standard deduction (generally $6,100). 2007 tax return online free However, the standard deduction may be higher for a dependent who: Is 65 or older, or Is blind. 2007 tax return online free Certain dependents cannot claim any standard deduction. 2007 tax return online free See Standard Deduction of Zero , later. 2007 tax return online free Worksheet 1. 2007 tax return online free   Use Worksheet 1 to figure the dependent's standard deduction. 2007 tax return online free Worksheet 1. 2007 tax return online free Standard Deduction Worksheet for Dependents Use this worksheet only if someone else can claim you (or your spouse, if filing jointly) as a dependent. 2007 tax return online free If you were 65 or older and/or blind, check the correct number of boxes below. 2007 tax return online free Put the total number of boxes checked in box c and go to line 1. 2007 tax return online free a. 2007 tax return online free You 65 or older   Blind   b. 2007 tax return online free Your spouse, if claiming  spouse's exemption 65 or older   Blind   c. 2007 tax return online free Total boxes checked         1. 2007 tax return online free Enter your earned income (defined below) plus $350. 2007 tax return online free If none, enter -0-. 2007 tax return online free 1. 2007 tax return online free     2. 2007 tax return online free Minimum amount. 2007 tax return online free   2. 2007 tax return online free $1,000   3. 2007 tax return online free Compare lines 1 and 2. 2007 tax return online free Enter the larger of the two amounts here. 2007 tax return online free 3. 2007 tax return online free     4. 2007 tax return online free Enter on line 4 the amount shown below for your filing status. 2007 tax return online free       Single or Married filing separately—$6,100 Married filing jointly—$12,200 Head of household—$8,950 4. 2007 tax return online free     5. 2007 tax return online free Standard deduction. 2007 tax return online free         a. 2007 tax return online free Compare lines 3 and 4. 2007 tax return online free Enter the smaller amount here. 2007 tax return online free If under 65 and not blind, stop here. 2007 tax return online free This is your standard deduction. 2007 tax return online free Otherwise, go on to line 5b. 2007 tax return online free 5a. 2007 tax return online free     b. 2007 tax return online free If 65 or older or blind, multiply $1,500 ($1,200 if married) by the number in box c above. 2007 tax return online free Enter the result here. 2007 tax return online free 5b. 2007 tax return online free     c. 2007 tax return online free Add lines 5a and 5b. 2007 tax return online free This is your standard deduction for 2013. 2007 tax return online free 5c. 2007 tax return online free     Earned income includes wages, salaries, tips, professional fees, and other compensation received for personal services you performed. 2007 tax return online free It also includes any amount received as a scholarship that you must include in income. 2007 tax return online free   Example 1. 2007 tax return online free Michael is single, age 15, and not blind. 2007 tax return online free His parents can claim him as a dependent on their tax return. 2007 tax return online free He has taxable interest income of $800 and wages of $150. 2007 tax return online free He enters $500 (his earned income plus $350) on line 1 of Worksheet 1. 2007 tax return online free On line 3, he enters $1,000, the larger of $500 or $1,000. 2007 tax return online free Michael enters $6,100 on line 4. 2007 tax return online free On line 5a, he enters $1,000, the smaller of $1,000 or $6,100. 2007 tax return online free His standard deduction is $1,000. 2007 tax return online free Example 2. 2007 tax return online free Judy, a full-time student, is single, age 22, and not blind. 2007 tax return online free Her parents can claim her as a dependent on their tax return. 2007 tax return online free She has dividend income of $275 and wages of $2,500. 2007 tax return online free She enters $2,850 (her earned income plus $350) on line 1 of Worksheet 1. 2007 tax return online free On line 3, she enters $2,850, the larger of $2,850 or $1,000. 2007 tax return online free She enters $6,100 on line 4. 2007 tax return online free On line 5a, she enters $2,850 (the smaller of $2,850 or $6,100) as her standard deduction. 2007 tax return online free Example 3. 2007 tax return online free Amy, who is single, is claimed as a dependent on her parents' tax return. 2007 tax return online free She is 18 years old and blind. 2007 tax return online free She has taxable interest income of $1,000 and wages of $2,000. 2007 tax return online free She enters $2,350 (her earned income plus $350) on line 1 of Worksheet 1. 2007 tax return online free She enters $2,350 (the larger of $2,350 or $1,000) on line 3, $6,100 on line 4, and $2,350 (the smaller of $2,350 or $6,100) on line 5a. 2007 tax return online free Because Amy is blind, she checks the box for blindness and enters “1” in box c at the top of Worksheet 1. 2007 tax return online free She enters $1,500 (the number in box c times $1,500) on line 5b. 2007 tax return online free Her standard deduction on line 5c is $3,850 ($2,350 + $1,500). 2007 tax return online free Standard Deduction of Zero The standard deduction for the following dependents is zero. 2007 tax return online free A married dependent filing a separate return whose spouse itemizes deductions. 2007 tax return online free A dependent who files a return for a period of less than 12 months due to a change in his or her annual accounting period. 2007 tax return online free A nonresident or dual-status alien dependent, unless the dependent is married to a U. 2007 tax return online free S. 2007 tax return online free citizen or resident alien at the end of the year and chooses to be treated as a U. 2007 tax return online free S. 2007 tax return online free resident for the year. 2007 tax return online free See Publication 519, U. 2007 tax return online free S. 2007 tax return online free Tax Guide for Aliens, for information on making this choice. 2007 tax return online free Example. 2007 tax return online free Jennifer, who is a dependent of her parents, is entitled to file a joint return with her husband. 2007 tax return online free However, her husband elects to file a separate return and itemize his deductions. 2007 tax return online free Because he itemizes, Jennifer's standard deduction on her return is zero. 2007 tax return online free She can, however, itemize any of her allowable deductions. 2007 tax return online free Dependent's Own Exemption A person who can be claimed as a dependent on another taxpayer's return cannot claim his or her own exemption. 2007 tax return online free This is true even if the other taxpayer does not actually claim the exemption. 2007 tax return online free Example. 2007 tax return online free James and Barbara can claim their child, Ben, as a dependent on their return. 2007 tax return online free Ben is a college student who works during the summer and must file a tax return. 2007 tax return online free Ben cannot claim his own exemption on his return. 2007 tax return online free This is true even if James and Barbara do not claim him as a dependent on their return. 2007 tax return online free Withholding From Wages Employers generally withhold federal income tax, social security tax, and Medicare tax from an employee's wages. 2007 tax return online free If the employee claims exemption from withholding on Form W-4, the employer will not withhold federal income tax. 2007 tax return online free The exemption from withholding does not apply to social security and Medicare taxes. 2007 tax return online free Conditions for exemption from withholding. 2007 tax return online free   An employee can claim exemption from withholding for 2014 only if he or she meets both of the following conditions. 2007 tax return online free For 2013, the employee had a right to a refund of all federal income tax withheld because he or she had no tax liability. 2007 tax return online free For 2014, the employee expects a refund of all federal income tax withheld because he or she expects to have no tax liability. 2007 tax return online free Dependents. 2007 tax return online free   An employee who is a dependent ordinarily cannot claim exemption from withholding if both of the following are true. 2007 tax return online free The employee's gross income will be more than $1,000, the minimum standard deduction for 2014. 2007 tax return online free The employee's unearned income will be more than $350. 2007 tax return online free Exceptions. 2007 tax return online free   An employee may be able to claim exemption from withholding even if the employee is a dependent, if the employee: Is age 65 or older, Is blind, or Will claim on his or her 2014 tax return: Adjustments to income, Tax credits, or Itemized deductions. 2007 tax return online free The above exceptions do not apply to supplemental wages greater than $1,000,000. 2007 tax return online free For more information, see Exemption From Withholding in chapter 1 of Publication 505. 2007 tax return online free Example. 2007 tax return online free Guy is 17 and a student. 2007 tax return online free During the summer he works part time at a grocery store. 2007 tax return online free He expects to earn about $1,200 this year. 2007 tax return online free He also worked at the store last summer and received a refund of all his withheld income tax because he did not have a tax liability. 2007 tax return online free The only other income he expects during the year is $375 interest on a savings account. 2007 tax return online free He expects that his parents will be able to claim him as a dependent on their tax return. 2007 tax return online free He is not blind and will not claim adjustments to income, itemized deductions, a higher standard deduction, or tax credits on his return. 2007 tax return online free Guy cannot claim exemption from withholding when he fills out Form W-4 because his parents will be able to claim him as a dependent, his gross income will be more than $1,000 (the minimum standard deduction amount) and his unearned income will be more than $350. 2007 tax return online free Claiming exemption from withholding. 2007 tax return online free    To claim exemption from withholding, an employee must enter “Exempt” in the space provided on Form W-4, line 7. 2007 tax return online free The employee must complete the rest of the form, as explained in the form instructions, and give it to his or her employer. 2007 tax return online free Renewing an exemption from withholding. 2007 tax return online free   An exemption from withholding is good for only one year. 2007 tax return online free An employee must file a new Form W-4 by February 15 each year to continue the exemption. 2007 tax return online free Part 2. 2007 tax return online free Tax on Unearned Income of Certain Children The two rules that follow may affect the tax on the unearned income of certain children. 2007 tax return online free If the child's interest and dividend income (including capital gain distributions) total less than $10,000, the child's parent may be able to choose to include that income on the parent's return rather than file a return for the child. 2007 tax return online free (See Parent's Election To Report Child's Interest and Dividends , later. 2007 tax return online free ) If the child's interest, dividends, and other unearned income total more than $2,000, part of that income may be taxed at the parent's tax rate instead of the child's tax rate. 2007 tax return online free (See Tax for Certain Children Who Have Unearned Income , later. 2007 tax return online free ) For these rules, the term “child” includes a legally adopted child and a stepchild. 2007 tax return online free These rules apply whether or not the child is a dependent. 2007 tax return online free These rules do not apply if neither of the child's parents were living at the end of the year. 2007 tax return online free Which Parent's Return To Use If a child's parents are married to each other and file a joint return, use the joint return to figure the tax on the child's unearned income. 2007 tax return online free The tax rate and other return information from that return are used to figure the child's tax as explained later under Tax for Certain Children Who Have Unearned Income . 2007 tax return online free Parents Who Do Not File a Joint Return For parents who do not file a joint return, the following discussions explain which parent's tax return must be used to figure the tax. 2007 tax return online free Only the parent whose tax return is used can make the election described under Parent's Election To Report Child's Interest and Dividends . 2007 tax return online free Parents are married. 2007 tax return online free   If the child's parents file separate returns, use the return of the parent with the greater taxable income. 2007 tax return online free Parents not living together. 2007 tax return online free   If the child's parents are married to each other but not living together, and the parent with whom the child lives (the custodial parent) is considered unmarried, use the return of the custodial parent. 2007 tax return online free If the custodial parent is not considered unmarried, use the return of the parent with the greater taxable income. 2007 tax return online free   For an explanation of when a married person living apart from his or her spouse is considered unmarried, see Head of Household in Publication 501. 2007 tax return online free Parents are divorced. 2007 tax return online free   If the child's parents are divorced or legally separated, and the parent who had custody of the child for the greater part of the year (the custodial parent) has not remarried, use the return of the custodial parent. 2007 tax return online free Custodial parent remarried. 2007 tax return online free   If the custodial parent has remarried, the stepparent (rather than the noncustodial parent) is treated as the child's other parent. 2007 tax return online free Therefore, if the custodial parent and the stepparent file a joint return, use that joint return. 2007 tax return online free Do not use the return of the noncustodial parent. 2007 tax return online free   If the custodial parent and the stepparent are married, but file separate returns, use the return of the one with the greater taxable income. 2007 tax return online free If the custodial parent and the stepparent are married but not living together, the earlier discussion under Parents not living together applies. 2007 tax return online free Parents never married. 2007 tax return online free   If a child's parents have never been married to each other, but lived together all year, use the return of the parent with the greater taxable income. 2007 tax return online free If the parents did not live together all year, the rules explained earlier under Parents are divorced apply. 2007 tax return online free Widowed parent remarried. 2007 tax return online free   If a widow or widower remarries, the new spouse is treated as the child's other parent. 2007 tax return online free The rules explained earlier under Custodial parent remarried apply. 2007 tax return online free Parent's Election To Report Child's Interest and Dividends You may be able to elect to include your child's interest and dividend income (including capital gain distributions) on your tax return. 2007 tax return online free If you do, your child will not have to file a return. 2007 tax return online free You can make this election only if all the following conditions are met. 2007 tax return online free Your child was under age 19 (or under age 24 if a full-time student) at the end of the year. 2007 tax return online free Your child had income only from interest and dividends (including capital gain distributions and Alaska Permanent Fund dividends). 2007 tax return online free The child's gross income was less than $10,000. 2007 tax return online free The child is required to file a return unless you make this election. 2007 tax return online free The child does not file a joint return for the year. 2007 tax return online free No estimated tax payment was made for the year, and no overpayment from the previous year (or from any amended return) was applied to this year under your child's name and social security number. 2007 tax return online free No federal income tax was withheld from your child's income under the backup withholding rules. 2007 tax return online free You are the parent whose return must be used when applying the special tax rules for children. 2007 tax return online free (See Which Parent's Return To Use , earlier. 2007 tax return online free ) These conditions are also shown in Figure 1. 2007 tax return online free Certain January 1 birthdays. 2007 tax return online free   A child born on January 1, 1995, is considered to be age 19 at the end of 2013. 2007 tax return online free You cannot make this election for such a child unless the child was a full-time student. 2007 tax return online free   A child born on January 1, 1990, is considered to be age 24 at the end of 2013. 2007 tax return online free You cannot make this election for such a child. 2007 tax return online free How to make the election. 2007 tax return online free    Make the election by attaching Form 8814 to your Form 1040 or Form 1040NR. 2007 tax return online free (If you make this election, you cannot file Form 1040A or Form 1040EZ. 2007 tax return online free ) Attach a separate Form 8814 for each child for whom you make the election. 2007 tax return online free You can make the election for one or more children and not for others. 2007 tax return online free Effect of Making the Election The federal income tax on your child's income may be more if you make the Form 8814 election. 2007 tax return online free Rate may be higher. 2007 tax return online free   If your child received qualified dividends or capital gain distributions, you may pay up to $100 more tax if you make this election instead of filing a separate tax return for the child. 2007 tax return online free This is because the tax rate on the child's income between $1,000 and $2,000 is 10% if you make this election. 2007 tax return online free However, if you file a separate return for the child, the tax rate may be as low as 0% (zero percent) because of the preferential tax rates for qualified dividends and capital gain distributions. 2007 tax return online free Deductions you cannot take. 2007 tax return online free   By making the Form 8814 election, you cannot take any of the following deductions that the child would be entitled to on his or her return. 2007 tax return online free The additional standard deduction if the child is blind. 2007 tax return online free The deduction for a penalty on an early withdrawal of your child's savings. 2007 tax return online free Itemized deductions (such as your child's investment expenses or charitable contributions). 2007 tax return online free Figure 1. 2007 tax return online free Can You Include Your Child's Income On Your Tax Return? Please click here for the text description of the image. 2007 tax return online free Figure 1. 2007 tax return online free Can You Include Your Child's Income On Your Tax Return? Deductible investment interest. 2007 tax return online free   If you use Form 8814, your child's unearned income is considered your unearned income. 2007 tax return online free To figure the limit on your deductible investment interest, add the child's unearned income to yours. 2007 tax return online free However, if your child received qualified dividends, capital gain distributions, or Alaska Permanent Fund dividends, see chapter 3 of Publication 550 for information about how to figure the limit. 2007 tax return online free Alternative minimum tax. 2007 tax return online free    If your child received tax-exempt interest (or exempt-interest dividends paid by a regulated investment company) from certain private activity bonds, you must determine if that interest is a tax preference item for alternative minimum tax (AMT) purposes. 2007 tax return online free If it is, you must include it with your own tax preference items when figuring your AMT. 2007 tax return online free See Form 6251, Alternative Minimum Tax—Individuals, and its instructions for details. 2007 tax return online free Reduced deductions or credits. 2007 tax return online free   If you use Form 8814, your increased adjusted gross income may reduce certain deductions or credits on your return, including the following. 2007 tax return online free Deduction for contributions to a traditional individual retirement arrangement (IRA). 2007 tax return online free Deduction for student loan interest. 2007 tax return online free Itemized deductions for medical expenses, casualty and theft losses, and certain miscellaneous expenses. 2007 tax return online free Credit for child and dependent care expenses. 2007 tax return online free Child tax credit. 2007 tax return online free Education tax credits. 2007 tax return online free Earned income credit. 2007 tax return online free Penalty for underpayment of estimated tax. 2007 tax return online free   If you make this election for 2013 and did not have enough tax withheld or pay enough estimated tax to cover the tax you owe, you may be subject to a penalty. 2007 tax return online free If you plan to make this election for 2014, you may need to increase your federal income tax withholding or your estimated tax payments to avoid the penalty. 2007 tax return online free Get Publication 505 for more information. 2007 tax return online free Figuring Child's Income Use Form 8814, Part I, to figure your child's interest and dividend income to report on your return. 2007 tax return online free Only the amount over $2,000 is added to your income. 2007 tax return online free The amount over $2,000 is shown on Form 8814, line 6. 2007 tax return online free Unless the child's income includes qualified dividends or capital gain distributions (discussed next), the same amount is shown on Form 8814, line 12. 2007 tax return online free Include the amount from Form 8814, line 12, on Form 1040 or Form 1040NR, line 21. 2007 tax return online free If you file more than one Form 8814, include the total amounts from line 12 of all your Forms 8814 on Form 1040 or Form 1040NR, line 21. 2007 tax return online free On the dotted line next to line 21, enter “Form 8814” and the total of the Form 8814, line 12 amounts. 2007 tax return online free Note. 2007 tax return online free The tax on the first $2,000 is figured on Form 8814, Part II. 2007 tax return online free See Figuring Additional Tax , later. 2007 tax return online free Qualified dividends. 2007 tax return online free   Enter on Form 8814, line 2a, any ordinary dividends your child received. 2007 tax return online free This amount may include qualified dividends. 2007 tax return online free Qualified dividends are those dividends reported on Form 1040, line 9b, or Form 1040NR, line 10b, and are eligible for lower tax rates that apply to a net capital gain. 2007 tax return online free For detailed information about qualified dividends, see Publication 550. 2007 tax return online free   If your child received qualified dividends, the amount of these dividends that is added to your income must be reported on Form 1040, lines 9a and 9b, or Form 1040NR, lines 10a and 10b. 2007 tax return online free You do not include these dividends on Form 8814, line 12, or on line 21 of Form 1040 or Form 1040NR. 2007 tax return online free   Enter the child's qualified dividends on Form 8814, line 2b. 2007 tax return online free But do not include this amount on Form 1040, lines 9a and 9b, or Form 1040NR, lines 10a and 10b. 2007 tax return online free Instead, include the amount from Form 8814, line 9, on Form 1040, lines 9a and 9b, or Form 1040NR, lines 10a and 10b. 2007 tax return online free (The amount on Form 8814, line 9, may be less than the amount on Form 8814, line 2b, because lines 7 through 12 of the form divide the $2,000 base amount on Form 8814, line 5, between the child's qualified dividends, capital gain distributions, and other interest and dividend income, reducing each of those amounts. 2007 tax return online free ) Capital gain distributions. 2007 tax return online free   Enter on Form 8814, line 3, any capital gain distributions your child received. 2007 tax return online free The amount of these distributions that is added to your income must be reported on Schedule D (Form 1040), line 13, or, if you are not required to file Schedule D, on Form 1040, line 13, or Form 1040NR, line 14. 2007 tax return online free You do not include it on Form 8814, line 12, or on line 21 of Form 1040 or Form 1040NR. 2007 tax return online free   Include the amount from Form 8814, line 10, on Schedule D, line 13; Form 1040, line 13; or Form 1040NR, line 14, whichever applies. 2007 tax return online free (The amount on Form 8814, line 10, may be less than the amount on Form 8814, line 3, because lines 7 through 12 of the form divide the $2,000 base amount on Form 8814, line 5, between the child's qualified dividends, capital gain distributions, and other interest and dividend income, reducing each of those amounts. 2007 tax return online free ) Collectibles (28% rate) gain. 2007 tax return online free    If any of the child's capital gain distributions are reported on Form 1099-DIV as collectibles (28% rate) gain, you must determine how much to also include on line 4 of the 28% Rate Gain Worksheet, in the instructions for Schedule D, line 18. 2007 tax return online free Multiply the child's capital gain distribution included on Schedule D, line 13, by a fraction. 2007 tax return online free The numerator is the part of the child's total capital gain distribution that is collectibles (28% rate) gain. 2007 tax return online free The denominator is the child's total capital gain distribution. 2007 tax return online free Enter the result on line 4 of the 28% Rate Gain Worksheet. 2007 tax return online free Unrecaptured section 1250 gain. 2007 tax return online free   If any of the child's capital gain distributions are reported on Form 1099-DIV as unrecaptured section 1250 gain, you must determine how much to include on line 11 of the Unrecaptured Section 1250 Gain Worksheet in the instructions for Schedule D, line 19. 2007 tax return online free Multiply the child's capital gain distribution included on Schedule D, line 13, by a fraction. 2007 tax return online free The numerator is the part of the child's total capital gain distribution that is unrecaptured section 1250 gain. 2007 tax return online free The denominator is the child's total capital gain distribution. 2007 tax return online free Enter the result on the Unrecaptured Section 1250 Gain Worksheet, line 11. 2007 tax return online free Section 1202 gain. 2007 tax return online free   If any of the child's capital gain distributions are reported as section 1202 gain (gain on qualified small business stock) on Form 1099-DIV, part or all of that gain may be eligible for the section 1202 exclusion. 2007 tax return online free (For information about the exclusion, see chapter 4 of Publication 550. 2007 tax return online free ) To figure that part, multiply the child's capital gain distribution included on Schedule D, line 13, by a fraction. 2007 tax return online free The numerator is the part of the child's total capital gain distribution that is section 1202 gain. 2007 tax return online free The denominator is the child's total capital gain distribution. 2007 tax return online free Your section 1202 exclusion is generally 50% of the result, but may be subject to a limit. 2007 tax return online free In some cases, the exclusion is more than 50%. 2007 tax return online free See the instructions for Schedule D for details and information on how to report the exclusion amount. 2007 tax return online free Example. 2007 tax return online free Fred is 6 years old. 2007 tax return online free In 2013, he received dividend income of $2,100, which included $1,575 of ordinary dividends and a $525 capital gain distribution from a mutual fund. 2007 tax return online free (None of the distributions were reported on Form 1099-DIV as unrecaptured section 1250 gain, section 1202 gain, or collectibles (28% rate) gain. 2007 tax return online free ) All of the ordinary dividends are qualified dividends. 2007 tax return online free He has no other income and is not subject to backup withholding. 2007 tax return online free No estimated tax payments were made under his name and social security number. 2007 tax return online free Fred's parents elect to include Fred's income on their tax return instead of filing a return for him. 2007 tax return online free They figure the amount to report on Form 1040, lines 9a and 9b, the amount to report on their Schedule D, line 13, and the amount to report on Form 1040, line 21, as follows. 2007 tax return online free They leave lines 1a and 1b of Form 8814 blank because Fred does not have any interest income. 2007 tax return online free They enter his ordinary dividends of $1,575 on lines 2a and 2b because all of Fred's ordinary dividends are qualified dividends. 2007 tax return online free They enter the amount of Fred's capital gain distributions, $525, on line 3. 2007 tax return online free Next, they add the amounts on lines 1a, 2a, and 3 and enter the result, $2,100, on line 4. 2007 tax return online free They subtract the base amount on line 5, $2,000, from the amount on line 4, $2,100, and enter the result, $100, on line 6. 2007 tax return online free This is the total amount from Form 8814 to be reported on their return. 2007 tax return online free Next, they figure how much of this amount is qualified dividends and how much is capital gain distributions. 2007 tax return online free They divide the amount on line 2b, $1,575, by the amount on line 4, $2,100. 2007 tax return online free They enter the result, . 2007 tax return online free 75, on line 7. 2007 tax return online free They divide the amount on line 3, $525, by the amount on line 4, $2,100. 2007 tax return online free They enter the result, . 2007 tax return online free 25, on line 8. 2007 tax return online free They multiply the amount on line 6, $100, by the decimal on line 7, . 2007 tax return online free 75, and enter the result, $75, on line 9. 2007 tax return online free They multiply the amount on line 6, $100, by the decimal on line 8, . 2007 tax return online free 25, and enter the result, $25, on line 10. 2007 tax return online free They include the amount from line 9, $75, on lines 9a and 9b of their Form 1040 and enter “Form 8814 – $75” on the dotted lines next to lines 9a and 9b. 2007 tax return online free They include the amount from line 10, $25, on line 13 of their Schedule D (Form 1040) and enter “Form 8814 – $25” on the dotted line next to Schedule D, line 13. 2007 tax return online free They enter $100 ($75 + $25) on line 11 and -0- ($100 – $100) on line 12. 2007 tax return online free Because the amount on line 12 is -0-, they do not include any amount from Form 8814 on their Form 1040, line 21. 2007 tax return online free Figuring Additional Tax Use Form 8814, Part II, to figure the tax on the $2,000 of your child's interest and dividends that you do not include in your income. 2007 tax return online free This tax is added to the tax figured on your income. 2007 tax return online free This additional tax is the smaller of: 10% x (your child's gross income − $1,000), or $100. 2007 tax return online free Include the amount from line 15 of all your Forms 8814 in the total on Form 1040, line 44, or Form 1040NR, line 42. 2007 tax return online free Check box a on Form 1040, line 44, or Form 1040NR, line 42. 2007 tax return online free Tax for Certain Children Who Have Unearned Income If a child's interest, dividends, and other unearned income total more than $2,000, part of that income may be taxed at the parent's tax rate instead of the child's tax rate. 2007 tax return online free If the parent does not or cannot choose to include the child's income on the parent's return, use Form 8615 to figure the child's tax. 2007 tax return online free Attach the completed form to the child's Form 1040, Form 1040A, or Form 1040NR. 2007 tax return online free When Form 8615 must be filed. 2007 tax return online free   Form 8615 must be filed for a child if all of the following statements are true. 2007 tax return online free The child's unearned income was more than $2,000. 2007 tax return online free The child is required to file a return for 2013. 2007 tax return online free The child either: Was under age 18 at the end of the year, Was age 18 at the end of the year and did not have earned income that was more than half of his or her support, or Was over age 18 and under age 24 at the end of the year, was a full-time student, and did not have earned income that was more than half of his or her support. 2007 tax return online free At least one of the child's parents was alive at the end of 2013. 2007 tax return online free The child does not file a joint return for 2013. 2007 tax return online free These conditions are also shown in Figure 2. 2007 tax return online free Certain January 1 birthdays. 2007 tax return online free   Use the following chart to determine whether certain children with January 1 birthdays meet condition 3 under When Form 8615 must be filed. 2007 tax return online free IF a child was born on. 2007 tax return online free . 2007 tax return online free . 2007 tax return online free THEN, at the end of 2013, the child is considered to be. 2007 tax return online free . 2007 tax return online free . 2007 tax return online free January 1, 1996 18* January 1, 1995 19** January 1, 1990 24*** *This child is not under age 18. 2007 tax return online free The child meets condition 3 only if the child did not have earned income that was more than half of the child's support. 2007 tax return online free  **This child meets condition 3 only if the child was a full-time student who did not have earned income that was more than half of the child's support. 2007 tax return online free  ***Do not use Form 8615 for this child. 2007 tax return online free Figure 2. 2007 tax return online free Do You Have To Use Form 8615 To Figure Your Child's Tax? Please click here for the text description of the image. 2007 tax return online free Figure 2. 2007 tax return online free Do You Have To Use Form 8615 To Figure Your Child's Tax? Providing Parental Information (Form 8615, Lines A–C) On Form 8615, lines A and B, enter the parent's name and social security number. 2007 tax return online free (If the parents filed a joint return, enter the name and social security number listed first on the joint return. 2007 tax return online free ) On line C, check the box for the parent's filing status. 2007 tax return online free See Which Parent's Return To Use, earlier, for information on which parent's return information must be used on Form 8615. 2007 tax return online free Parent with different tax year. 2007 tax return online free   If the parent and the child do not have the same tax year, complete Form 8615 using the information on the parent's return for the tax year that ends in the child's tax year. 2007 tax return online free Example. 2007 tax return online free Kimberly must use her mother's tax and taxable income to complete her Form 8615 for calendar year 2013 (January 1 – December 31). 2007 tax return online free Kimberly's mother files her tax return on a fiscal year basis (July 1 – June 30). 2007 tax return online free Kimberly must use the information on her mother's return for the tax year ending June 30, 2013, to complete her 2013 Form 8615. 2007 tax return online free Parent's return information not known timely. 2007 tax return online free   If the information needed from the parent's return is not known by the time the child's return is due (usually April 15), you can file the return using estimates. 2007 tax return online free   You can use any reasonable estimate. 2007 tax return online free This includes using information from last year's return. 2007 tax return online free If you use an estimated amount on Form 8615, enter “Estimated” on the line next to the amount. 2007 tax return online free   When you get the correct information, file an amended return on Form 1040X, Amended U. 2007 tax return online free S. 2007 tax return online free Individual Income Tax Return. 2007 tax return online free Extension of time to file. 2007 tax return online free   Instead of using estimates, you can get an automatic 6-month extension of time to file if, by the date your return is due, you file Form 4868, Application for Automatic Extension of Time To File U. 2007 tax return online free S. 2007 tax return online free Individual Income Tax Return. 2007 tax return online free See the instructions for Form 4868 for details. 2007 tax return online free    An extension of time to file is not an extension of time to pay. 2007 tax return online free You must make an accurate estimate of the tax for 2013. 2007 tax return online free If you do not pay the full amount due by the regular due date, the child will owe interest and may also be charged penalties. 2007 tax return online free See Form 4868 and its instructions. 2007 tax return online free Parent's return information not available. 2007 tax return online free   If a child cannot get the required information about his or her parent's tax return, the child (or the child's legal representative) can request the necessary information from the Internal Revenue Service (IRS). 2007 tax return online free How to request. 2007 tax return online free   After the end of the tax year, send a signed, written request for the information to the Internal Revenue Service Center where the parent's return will be filed. 2007 tax return online free (The IRS cannot process a request received before the end of the tax year. 2007 tax return online free )    You should also consider getting an extension of time to file the child's return, because there may be a delay in getting the requested information. 2007 tax return online free   The request must contain all of the following. 2007 tax return online free A statement that you are making the request to comply with section 1(g) of the Internal Revenue Code and that you have tried to get the information from the parent. 2007 tax return online free Proof of the child's age (for example, a copy of the child's birth certificate). 2007 tax return online free Evidence the child has more than $2,000 of unearned income (for example, a copy of the child's prior year tax return or copies of Forms 1099 for the current year). 2007 tax return online free The name, address, social security number (if known), and filing status (if known) of the parent whose information is to be shown on Form 8615. 2007 tax return online free    A child's legal representative making the request should include a copy of his or her Power of Attorney, such as Form 2848, or proof of legal guardianship. 2007 tax return online free Step 1. 2007 tax return online free Figuring the Child's Net Unearned Income (Form 8615, Part I) The first step in figuring a child's tax using Form 8615 is to figure the child's net unearned income. 2007 tax return online free To do that, use Form 8615, Part I. 2007 tax return online free Line 1 (Unearned Income) If the child had no earned income, enter on this line the adjusted gross income shown on the child's return. 2007 tax return online free Adjusted gross income is shown on Form 1040, line 38; Form 1040A, line 22; or Form 1040NR, line 37. 2007 tax return online free Form 1040EZ and Form 1040NR-EZ cannot be used if Form 8615 must be filed. 2007 tax return online free If the child had earned income, figure the amount to enter on Form 8615, line 1, by using the worksheet in the instructions for the form. 2007 tax return online free However, use the following worksheet if: the child has excluded any foreign earned income, deducted a loss from self-employment, or has a net operating loss from another year. 2007 tax return online free Alternate Worksheet for Form 8615, Line 1 A. 2007 tax return online free Enter the amount from the child's Form 1040, line 22, or Form 1040NR, line 23   B. 2007 tax return online free Enter the total of any net loss  from self-employment, any net operating loss deduction, any foreign earned income exclusion, and any foreign housing exclusion from the child's Form 1040 or Form 1040NR. 2007 tax return online free Enter this total as a positive number (greater than zero)   C. 2007 tax return online free Add line A and line B and  enter the total   D. 2007 tax return online free Enter the child's earned income plus any amount from the child's Form 1040, line 30, or the child's Form 1040NR, line 30     Generally, the child's earned income is the total of the amounts reported on Form 1040, lines 7, 12, and 18 (if line 12 or 18 is a loss, use zero) or Form 1040NR, lines 8, 13, and 19 (if line 13 or 19 is a loss, use zero)   E. 2007 tax return online free Subtract line D from line C. 2007 tax return online free Enter the result here and on Form 8615, line 1   Unearned income defined. 2007 tax return online free   Unearned income is generally all income other than salaries, wages, and other amounts received as pay for work actually performed. 2007 tax return online free It includes taxable interest, dividends, capital gains (including capital gain distributions), the taxable part of social security and pension payments, certain distributions from trusts, and unemployment compensation. 2007 tax return online free Unearned income includes amounts produced by assets the child obtained with earned income (such as interest on a savings account into which the child deposited wages). 2007 tax return online free Nontaxable income. 2007 tax return online free   For this purpose, unearned income includes only amounts the child must include in gross income. 2007 tax return online free Nontaxable unearned income, such as tax-exempt interest and the nontaxable part of social security and pension payments, is not included. 2007 tax return online free Capital loss. 2007 tax return online free   A child's capital losses are taken into account in figuring the child's unearned income. 2007 tax return online free Capital losses are first applied against capital gains. 2007 tax return online free If the capital losses are more than the capital gains, the difference (up to $3,000) is subtracted from the child's interest, dividends, and other unearned income. 2007 tax return online free Any difference over $3,000 is carried to the next year. 2007 tax return online free Income from property received as a gift. 2007 tax return online free   A child's unearned income includes all income produced by property belonging to the child. 2007 tax return online free This is true even if the property was transferred to the child, regardless of when the property was transferred or purchased or who transferred it. 2007 tax return online free   A child's unearned income includes income produced by property given as a gift to the child. 2007 tax return online free This includes gifts to the child from grandparents or any other person and gifts made under the Uniform Gift to Minors Act. 2007 tax return online free Example. 2007 tax return online free Amanda Black, age 13, received the following income. 2007 tax return online free Dividends—$800 Wages—$2,100 Taxable interest—$1,200 Tax-exempt interest—$100 Capital gains—$300 Capital losses—($200) The dividends were qualified dividends on stock given to her by her grandparents. 2007 tax return online free Amanda's unearned income is $2,100. 2007 tax return online free This is the total of the dividends ($800), taxable interest ($1,200), and capital gains reduced by capital losses ($300 − $200 = $100). 2007 tax return online free Her wages are earned (not unearned) income because they are received for work actually performed. 2007 tax return online free Her tax-exempt interest is not included because it is nontaxable. 2007 tax return online free Trust income. 2007 tax return online free   If a child is the beneficiary of a trust, distributions of taxable interest, dividends, capital gains, and other unearned income from the trust are unearned income to the child. 2007 tax return online free   However, taxable distributions from a qualified disability trust are considered earned income for the purposes of completing Form 8615. 2007 tax return online free See the Form 8615 instructions for details. 2007 tax return online free Adjustment to income. 2007 tax return online free   In figuring the amount to enter on line 1, the child's unearned income is reduced by any penalty on the early withdrawal of savings. 2007 tax return online free Line 2 (Deductions) If the child does not itemize deductions on Schedule A (Form 1040 or Form 1040NR), enter $2,000 on line 2. 2007 tax return online free If the child itemizes deductions, enter on line 2 the larger of: $1,000 plus the portion of the child's itemized deductions on Schedule A (Form 1040), line 29 (or Schedule A (Form 1040NR), line 15), that are directly connected with the production of the unearned income entered on line 1, or $2,000. 2007 tax return online free Directly connected. 2007 tax return online free   Itemized deductions are directly connected with the production of unearned income if they are for expenses paid to produce or collect taxable income or to manage, conserve, or maintain property held for producing income. 2007 tax return online free These expenses include custodian fees and service charges, service fees to collect taxable interest and dividends, and certain investment counsel fees. 2007 tax return online free    These expenses are added to certain other miscellaneous itemized deductions on Schedule A (Form 1040). 2007 tax return online free Only the amount greater than 2% of the child's adjusted gross income can be deducted. 2007 tax return online free See Publication 529, Miscellaneous Deductions, for more information. 2007 tax return online free Example 1. 2007 tax return online free Roger, age 12, has unearned income of $8,000, no other income, no adjustments to income, and itemized deductions of $300 (net of the 2%-of-adjusted-gross-income limit) that are directly connected with his unearned income. 2007 tax return online free His adjusted gross income is $8,000, which is entered on Form 1040, line 38, and on Form 8615, line 1. 2007 tax return online free Roger enters $2,000 on line 2 because that is more than the total of $1,000 plus his directly-connected itemized deductions of $300. 2007 tax return online free Example 2. 2007 tax return online free Eleanor, age 8, has unearned income of $16,000 and an early withdrawal penalty of $100. 2007 tax return online free She has no other income. 2007 tax return online free She has itemized deductions of $1,050 (net of the 2%-of-adjusted-gross-income limit) that are directly connected with the production of her unearned income. 2007 tax return online free Her adjusted gross income, entered on line 1, is $15,900 ($16,000 − $100). 2007 tax return online free The amount on line 2 is $2,050. 2007 tax return online free This is the larger of: $1,000 plus the $1,050 of directly connected itemized deductions, or $2,000. 2007 tax return online free Line 3 Subtract line 2 from line 1 and enter the result on this line. 2007 tax return online free If zero or less, do not complete the rest of the form. 2007 tax return online free However, you must still attach Form 8615 to the child's tax return. 2007 tax return online free Figure the tax on the child's taxable income in the normal manner. 2007 tax return online free Line 4 (Child's Taxable Income) Enter on line 4 the child's taxable income from Form 1040, line 43; Form 1040A, line 27; or Form 1040NR, line 41. 2007 tax return online free Child files Form 2555 or 2555-EZ. 2007 tax return online free   If the child files Form 2555 or 2555-EZ to claim the foreign earned income exclusion, housing exclusion, or housing deduction, the Foreign Earned Income Tax Worksheet (in the Form 1040 instructions) is used to figure the child's tax. 2007 tax return online free Enter the amount from line 3 of the Foreign Earned Income Tax Worksheet as the child's taxable income on Form 8615, line 4. 2007 tax return online free Line 5 (Net Unearned Income) A child's net unearned income cannot be more than his or her taxable income. 2007 tax return online free Enter on Form 8615, line 5, the smaller of line 3 or line 4. 2007 tax return online free This is the child's net unearned income. 2007 tax return online free If zero or less, do not complete the rest of the form. 2007 tax return online free However, you must still attach Form 8615 to the child's tax return. 2007 tax return online free Figure the tax on the child's taxable income in the normal manner. 2007 tax return online free Step 2. 2007 tax return online free Figuring a Tentative Tax at the Parent's Tax Rate (Form 8615, Part II) The next step in completing Form 8615 is to figure a tentative tax on the child's net unearned income at the parent's tax rate. 2007 tax return online free The tentative tax at the parent's tax rate is the difference between the tax on the parent's taxable income figured with the child's net unearned income (plus the net unearned income of any other child whose Form 8615 includes the tax return information of that parent) and the tax figured without it. 2007 tax return online free When figuring the tentative tax at the parent's tax rate on Form 8615, do not refigure any of the exclusions, deductions, or credits on the parent's return because of the child's net unearned income. 2007 tax return online free For example, do not refigure the medical expense deduction. 2007 tax return online free Figure the tentative tax on Form 8615, lines 6 through 13. 2007 tax return online free Line 6 (Parent's Taxable Income) Enter on line 6 the amount from the parent's Form 1040, line 43; Form 1040A, line 27; Form 1040EZ, line 6; Form 1040NR, line 41; or Form 1040NR-EZ, line 14. 2007 tax return online free If the parent's taxable income is zero or less, enter zero on line 6. 2007 tax return online free Parent files Form 2555 or 2555-EZ. 2007 tax return online free   If the parent files Form 2555 or 2555-EZ to claim the foreign earned income exclusion, housing exclusion, or housing deduction, the Foreign Earned Income Tax Worksheet in the Form 1040 instructions is used to figure the parent's tax. 2007 tax return online free Enter the amount from line 3 of the Foreign Earned Income Tax Worksheet as the parent's taxable income, on line 6 of Form 8615. 2007 tax return online free Line 7 (Net Unearned Income of Other Children) If the tax return information of the parent is also used on any other child's Form 8615, enter on line 7 the total of the amounts from line 5 of all the other children's Forms 8615. 2007 tax return online free Do not include the amount from line 5 of the Form 8615 being completed. 2007 tax return online free (The term “other child” means any other child whose Form 8615 uses the tax information of the parent identified on Lines A and B of Form 8615. 2007 tax return online free ) Example. 2007 tax return online free Paul and Jane Persimmon have three children, Sharon, Jerry, and Mike, who must attach Form 8615 to their tax returns. 2007 tax return online free The children's net unearned income amounts on line 5 of their Forms 8615 are: Sharon—$800 Jerry—$600 Mike—$1,000 Line 7 of Sharon's Form 8615 will show $1,600, the total of the amounts on line 5 of Jerry's and Mike's Forms 8615. 2007 tax return online free Line 7 of Jerry's Form 8615 will show $1,800 ($800 + $1,000). 2007 tax return online free Line 7 of Mike's Form 8615 will show $1,400 ($800 + $600). 2007 tax return online free Other children's information not available. 2007 tax return online free   If the net unearned income of the other children is not available when the return is due, either file the return using estimates or get an extension of time to file. 2007 tax return online free Estimates and extensions are discussed earlier under Providing Parental Information (Form 8615, Lines A–C) . 2007 tax return online free Line 8 (Parent's Taxable Income Plus Children's Net Unearned Income) Enter on this line the total of lines 5, 6, and 7. 2007 tax return online free You must determine the amount of net capital gain and qualified dividends included on this line before completing Form 8615, line 9. 2007 tax return online free Net capital gain. 2007 tax return online free   Net capital gain is the smaller of the gain, if any, on Schedule D (Form 1040), line 15, or the gain, if any, on Schedule D, line 16. 2007 tax return online free If Schedule D is not required, it is the amount on Form 1040, line 13; Form 1040A, line 10; or Form 1040NR, line 14. 2007 tax return online free Qualified dividends. 2007 tax return online free   Qualified dividends are those dividends reported on line 9b of Form 1040 or Form 1040A, or line 10b of Form 1040NR. 2007 tax return online free Net capital gain and qualified dividends on line 8. 2007 tax return online free   If neither the child, nor the parent, nor any other child has net capital gain, the net capital gain on line 8 is zero. 2007 tax return online free   If neither the child, nor the parent, nor any other child has qualified dividends, the amount of qualified dividends on line 8 is zero. 2007 tax return online free   If the child, parent, or any other child has net capital gain, figure the amount of net capital gain included on line 8 by adding together the net capital gain amounts included on lines 5, 6, and 7 of Form 8615. 2007 tax return online free   If the child, parent, or any other child has qualified dividends, figure the amount of qualified dividends included on line 8 by adding together the qualified dividend amounts included on lines 5, 6, and 7. 2007 tax return online free   Use the instructions for Form 8615, line 8, including the appropriate Line 5 Worksheet, to find these amounts. 2007 tax return online free See the instructions for Form 8615 for more details. 2007 tax return online free Note. 2007 tax return online free The amount of any net capital gain or qualified dividends is not separately reported on line 8. 2007 tax return online free It is  needed, however, when figuring the tax on line 9. 2007 tax return online free Line 9 (Tax on Parent's Taxable Income Plus Children's Net Unearned Income) Figure the tax on the amount on line 8 using the Tax Table, the Tax Computation Worksheet, the Qualified Dividends and Capital Gain Tax Worksheet (in the Form 1040, 1040A, or 1040NR instructions), the Schedule D Tax Worksheet (in the Schedule D instructions), or Schedule J (Form 1040), as follows. 2007 tax return online free If line 8 does not include any net capital gain or qualified dividends, use the Tax Table or Tax Computation Worksheet to figure this tax. 2007 tax return online free But if Schedule J, Income Averaging for Farmers and Fishermen, is used to figure the tax on the parent's return, use it to figure this tax. 2007 tax return online free If line 8 includes any net capital gain or qualified dividends, use the Qualified Dividends and Capital Gain Tax Worksheet to figure this tax. 2007 tax return online free For details, see the instructions for Form 8615, line 9. 2007 tax return online free However, if the child, parent, or any other child has 28% rate gain or unrecaptured section 1250 gain, use the Schedule D Tax Worksheet. 2007 tax return online free But if Schedule J is used to figure the tax on the parent's return, use it to figure this tax. 2007 tax return online free Child files Form 2555 or 2555-EZ. 2007 tax return online free   If line 8 includes any net capital gain or qualified dividends and the child, or any other child filing Form 8615, also files Form 2555 or 2555-EZ, use Using the Schedule D Tax Worksheet for line 9 tax, next, to figure the line 9 tax. 2007 tax return online free Using the Schedule D Tax Worksheet for line 9 tax. 2007 tax return online free    Use the Schedule D Tax Worksheet (in the Schedule D instructions) to figure the line 9 tax on Form 8615 if the child, parent, or any other child has unrecaptured section 1250 gain or 28% rate gain. 2007 tax return online free If you must use the Schedule D Tax Worksheet, first complete any Schedule D and any actual Schedule D Tax Worksheet required for the child, parent, or any other child. 2007 tax return online free Then figure the line 9 tax using another Schedule D Tax Worksheet. 2007 tax return online free (Do not attach this Schedule D Tax Worksheet to the child's return. 2007 tax return online free )   Complete this Schedule D Tax Worksheet as follows. 2007 tax return online free On line 1, enter the amount from Form 8615, line 8. 2007 tax return online free On line 2, enter the qualified dividends included on Form 8615, line 8. 2007 tax return online free (See the earlier discussion for line 8. 2007 tax return online free ) On line 3, enter the total of the amounts, if any, on line 4g of all Forms 4952 filed by the child, parent, or any other child. 2007 tax return online free On line 4, enter the total of the amounts, if any, on line 4e of all Forms 4952 filed by the child, parent, or any other child. 2007 tax return online free If applicable, include instead the smaller amount entered on the dotted line next to line 4e. 2007 tax return online free On lines 5 and 6, follow the worksheet instructions. 2007 tax return online free On line 7, enter the net capital gain included on Form 8615, line 8. 2007 tax return online free (See the earlier discussion for line 8. 2007 tax return online free ) On lines 8 through 10, follow the worksheet instructions. 2007 tax return online free On line 11, enter zero if neither the child, nor the parent, nor any other child has unrecaptured section 1250 gain (Schedule D, line 19) or 28% rate gain (Schedule D, line 18). 2007 tax return online free Otherwise, enter the amount of unrecaptured section 1250 gain and 28% rate gain included in the net capital gain on line 8 of Form 8615. 2007 tax return online free Figure these amounts as explained later under Figuring unrecaptured section 1250 gain (line 11) and Figuring 28% rate gain (line 11). 2007 tax return online free If the Foreign Earned Income Tax Worksheet was used to figure the parent's tax or the tax of any child, go to step 10 below. 2007 tax return online free Otherwise, skip steps 10, 11, and 12 below, and go to step 13. 2007 tax return online free Determine whether there is a line 8 capital gain excess as follows. 2007 tax return online free Add the amounts on line 2 of all Foreign Earned Income Tax Worksheets completed by the parent or any child for whom Form 8615 is filed. 2007 tax return online free (But for each child do not add more than the excess, if any, of the amount on line 5 of the child's Form 8615 over the child's taxable income on Form 1040, line 43; Form 1040A, line 27; or Form 1040NR, line 41. 2007 tax return online free ) Subtract (a) from the amount on line 1 of this Schedule D Tax Worksheet. 2007 tax return online free Subtract (b) from the amount on line 10 of this Schedule D Tax Worksheet. 2007 tax return online free If the result is more than zero, that amount is the line 8 capital gain excess. 2007 tax return online free If the result is zero or less, there is no line 8 capital gain excess. 2007 tax return online free If there is no line 8 capital gain excess, skip step 12 below and go to step 13. 2007 tax return online free If there is a line 8 capital gain excess, complete a second Schedule D Tax Worksheet as instructed above and in step 13, but in its entirety and with the following additional modifications. 2007 tax return online free (These modifications are to be made only for purposes of filling out this additional Schedule D Tax Worksheet. 2007 tax return online free ) Reduce the amount you would otherwise enter on line 9 (but not below zero) by the line 8 capital gain excess. 2007 tax return online free Reduce the amount you would otherwise enter on line 6 (but not below zero) by any of the line 8 capital gain excess not used in (a) above. 2007 tax return online free If the child, parent, or any other child has 28% rate gain, reduce the amount you would otherwise enter on line 8 of Worksheet 1 for Line 11 of the Schedule D Tax Worksheet – 28% Rate Gain (Line 9 Tax), shown later, (but not below zero) by the line 8 capital gain excess, and refigure the amount on line 11 of this Schedule D Tax Worksheet. 2007 tax return online free If the child, parent, or any other child has unrecaptured section 1250 gain, reduce the amount you would otherwise enter on line 8 of Worksheet 2 for Line 11 of the Schedule D Tax Worksheet – Unrecaptured Section 1250 Gain (Line 9 Tax) (but not below zero) by the line 8 capital gain excess not used in 12(c), and refigure the amount on line 11 of this Schedule D Tax Worksheet. 2007 tax return online free Complete lines 12 through 45 following the worksheet instructions. 2007 tax return online free Use the parent's filing status to complete lines 15, 42, and 44. 2007 tax return online free Enter the amount from line 45 of this Schedule D Tax Worksheet on Form 8615, line 9, and check the box on that line