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Filing State Tax For Free

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Filing State Tax For Free

Filing state tax for free 9. Filing state tax for free   Dispositions of Property Used in Farming Table of Contents Introduction Topics - This chapter discusses: Useful Items - You may want to see: Section 1231 Gains and LossesNonrecaptured section 1231 losses. Filing state tax for free Depreciation RecaptureSection 1245 Property Section 1250 Property Installment Sale Other Dispositions Other GainsExceptions. Filing state tax for free Amount to report as ordinary income. Filing state tax for free Applicable percentage. Filing state tax for free Amount to report as ordinary income. Filing state tax for free Applicable percentage. Filing state tax for free Introduction When you dispose of property used in your farm business, your taxable gain or loss is usually treated as ordinary income (which is taxed at the same rates as wages and interest income) or capital gain (which is generally taxed at lower rates) under the rules for section 1231 transactions. Filing state tax for free When you dispose of depreciable property (section 1245 property or section 1250 property) at a gain, you may have to recognize all or part of the gain as ordinary income under the depreciation recapture rules. Filing state tax for free Any gain remaining after applying the depreciation recapture rules is a section 1231 gain, which may be taxed as a capital gain. Filing state tax for free Gains and losses from property used in farming are reported on Form 4797, Sales of Business Property. Filing state tax for free Table 9-1 contains examples of items reported on Form 4797 and refers to the part of that form on which they first should be reported. Filing state tax for free Topics - This chapter discusses: Section 1231 gains and losses Depreciation recapture Other gains Useful Items - You may want to see: Publication 544 Sales and Other Dispositions of Assets Form (and Instructions) 4797 Sales of Business Property See chapter 16 for information about getting publications and forms. Filing state tax for free Section 1231 Gains and Losses Section 1231 gains and losses are the taxable gains and losses from section 1231 transactions (explained below). Filing state tax for free Their treatment as ordinary or capital gains depends on whether you have a net gain or a net loss from all of your section 1231 transactions in the tax year. Filing state tax for free Table 9-1. Filing state tax for free Where to First Report Certain Items on Form 4797 Type of property Held 1 year  or less Held more than  1 year 1 Depreciable trade or business property:       a Sold or exchanged at a gain Part II Part III (1245, 1250)   b Sold or exchanged at a loss Part II Part I 2 Farmland held less than 10 years for which soil, water, or land clearing expenses were deducted:       a Sold at a gain Part II Part III (1252)   b Sold at a loss Part II Part I 3 All other farmland Part II Part I 4 Disposition of cost-sharing payment property described in section 126 Part II Part III (1255) 5 Cattle and horses used in a trade or business for draft, breeding, dairy, or sporting purposes: Held less  than 24 mos. Filing state tax for free Held 24 mos. Filing state tax for free  or more   a Sold at a gain Part II Part III (1245)   b Sold at a loss Part II Part I   c Raised cattle and horses sold at a gain Part II Part I 6 Livestock other than cattle and horses used in a trade or business for draft, breeding, dairy, or sporting purposes: Held less  than 12 mos. Filing state tax for free Held 12 mos. Filing state tax for free   or more   a Sold at a gain Part II Part III (1245)   b Sold at a loss Part II Part I   c Raised livestock sold at a gain Part II Part I If you have a gain from a section 1231 transaction, first determine whether any of the gain is ordinary income under the depreciation recapture rules (explained later). Filing state tax for free Do not take that gain into account as section 1231 gain. Filing state tax for free Section 1231 transactions. Filing state tax for free   Gain or loss on the following transactions is subject to section 1231 treatment. Filing state tax for free Sale or exchange of cattle and horses. Filing state tax for free The cattle and horses must be held for draft, breeding, dairy, or sporting purposes and held for 24 months or longer. Filing state tax for free Sale or exchange of other livestock. Filing state tax for free This livestock must be held for draft, breeding, dairy, or sporting purposes and held for 12 months or longer. Filing state tax for free Other livestock includes hogs, mules, sheep, goats, donkeys, and other fur-bearing animals. Filing state tax for free Other livestock does not include poultry. Filing state tax for free Sale or exchange of depreciable personal property. Filing state tax for free This property must be used in your business and held longer than 1 year. Filing state tax for free Generally, property held for the production of rents or royalties is considered to be used in a trade or business. Filing state tax for free Examples of depreciable personal property include farm machinery and trucks. Filing state tax for free It also includes amortizable section 197 intangibles. Filing state tax for free Sale or exchange of real estate. Filing state tax for free This property must be used in your business and held longer than 1 year. Filing state tax for free Examples are your farm or ranch (including barns and sheds). Filing state tax for free Sale or exchange of unharvested crops. Filing state tax for free The crop and land must be sold, exchanged, or involuntarily converted at the same time and to the same person, and the land must have been held longer than 1 year. Filing state tax for free You cannot keep any right or option to reacquire the land directly or indirectly (other than a right customarily incident to a mortgage or other security transaction). Filing state tax for free Growing crops sold with a leasehold on the land, even if sold to the same person in a single transaction, are not included. Filing state tax for free Distributive share of partnership gains and losses. Filing state tax for free Your distributive share must be from the sale or exchange of property listed above and held longer than 1 year (or for the required period for certain livestock). Filing state tax for free Cutting or disposal of timber. Filing state tax for free Special rules apply if you owned the timber longer than 1 year and elect to treat timber cutting as a sale or exchange, or you enter into a cutting contract, as described in chapter 8 under Timber . Filing state tax for free Condemnation. Filing state tax for free The condemned property (defined in chapter 11) must have been held longer than 1 year. Filing state tax for free It must be business property or a capital asset held in connection with a trade or business or a transaction entered into for profit, such as investment property. Filing state tax for free It cannot be property held for personal use. Filing state tax for free Casualty or theft. Filing state tax for free The casualty or theft must have affected business property, property held for the production of rents or royalties, or investment property (such as notes and bonds). Filing state tax for free You must have held the property longer than 1 year. Filing state tax for free However, if your casualty or theft losses are more than your casualty or theft gains, neither the gains nor the losses are taken into account in the section 1231 computation. Filing state tax for free Section 1231 does not apply to personal casualty gains and losses. Filing state tax for free See chapter 11 for information on how to treat those gains and losses. Filing state tax for free If the property is not held for the required holding period, the transaction is not subject to section 1231 treatment, and any gain or loss is ordinary income reported in Part II of Form 4797. Filing state tax for free See Table 9-1. Filing state tax for free Property for sale to customers. Filing state tax for free   A sale, exchange, or involuntary conversion of property held mainly for sale to customers is not a section 1231 transaction. Filing state tax for free If you will get back all, or nearly all, of your investment in the property by selling it rather than by using it up in your business, it is property held mainly for sale to customers. Filing state tax for free Treatment as ordinary or capital. Filing state tax for free   To determine the treatment of section 1231 gains and losses, combine all of your section 1231 gains and losses for the year. Filing state tax for free If you have a net section 1231 loss, it is an ordinary loss. Filing state tax for free If you have a net section 1231 gain, it is ordinary income up to your nonrecaptured section 1231 losses from previous years, explained next. Filing state tax for free The rest, if any, is long-term capital gain. Filing state tax for free Nonrecaptured section 1231 losses. Filing state tax for free   Your nonrecaptured section 1231 losses are your net section 1231 losses for the previous 5 years that have not been applied against a net section 1231 gain by treating the gain as ordinary income. Filing state tax for free These losses are applied against your net section 1231 gain beginning with the earliest loss in the 5-year period. Filing state tax for free Example. Filing state tax for free In 2013, Ben has a $2,000 net section 1231 gain. Filing state tax for free To figure how much he has to report as ordinary income and long-term capital gain, he must first determine his section 1231 gains and losses from the previous 5-year period. Filing state tax for free From 2008 through 2012 he had the following section 1231 gains and losses. Filing state tax for free Year Amount 2008 -0- 2009 -0- 2010 ($2,500) 2011 -0- 2012 $1,800   Ben uses this information to figure how to report his net section 1231 gain for 2013 as shown below. Filing state tax for free 1) Net section 1231 gain (2013) $2,000 2) Net section 1231 loss (2010) ($2,500)   3) Net section 1231 gain (2012) 1,800   4) Remaining net section 1231 loss from prior 5 years ($700)   5) Gain treated as  ordinary income $700 6) Gain treated as long-term  capital gain $1,300 His remaining net section 1231 loss from 2010 is completely recaptured in 2013. Filing state tax for free Depreciation Recapture If you dispose of depreciable or amortizable property at a gain, you may have to treat all or part of the gain (even if it is otherwise nontaxable) as ordinary income. Filing state tax for free To figure any gain that must be reported as ordinary income, you must keep permanent records of the facts necessary to figure the depreciation or amortization allowed or allowable on your property. Filing state tax for free For more information, see chapter 3 of Publication 544. Filing state tax for free Section 1245 Property A gain on the disposition of section 1245 property is treated as ordinary income to the extent of depreciation allowed or allowable. Filing state tax for free Any recognized gain that is more than the part that is ordinary income is a section 1231 gain. Filing state tax for free See Treatment as ordinary or capital under Section 1231 Gains and Losses , earlier. Filing state tax for free Section 1245 property includes any property that is or has been subject to an allowance for depreciation or amortization and that is any of the following types of property. Filing state tax for free Personal property (either tangible or intangible). Filing state tax for free Other tangible property (except buildings and their structural components) used as any of the following. Filing state tax for free See Buildings and structural components below. Filing state tax for free An integral part of manufacturing, production, or extraction, or of furnishing certain services. Filing state tax for free A research facility in any of the activities in (a). Filing state tax for free A facility in any of the activities in (a) above, for the bulk storage of fungible commodities (discussed later). Filing state tax for free That part of real property (not included in (2)) with an adjusted basis reduced by (but not limited to) the following. Filing state tax for free Amortization of certified pollution control facilities. Filing state tax for free The section 179 expense deduction. Filing state tax for free Deduction for clean-fuel vehicles and certain refueling property. Filing state tax for free Expenditures to remove architectural and transportation barriers to the handicapped and elderly. Filing state tax for free Certain reforestation expenditures (as described under Reforestation Costs in chapter 7. Filing state tax for free Single purpose agricultural (livestock) or horticultural structures. Filing state tax for free Storage facilities (except buildings and their structural components) used in distributing petroleum or any primary product of petroleum. Filing state tax for free Buildings and structural components. Filing state tax for free   Section 1245 property does not include buildings and structural components. Filing state tax for free The term building includes a house, barn, warehouse, or garage. Filing state tax for free The term structural component includes walls, floors, windows, doors, central air conditioning systems, light fixtures, etc. Filing state tax for free   Do not treat a structure that is essentially machinery or equipment as a building or structural component. Filing state tax for free Also, do not treat a structure that houses property used as an integral part of an activity as a building or structural component if the structure's use is so closely related to the property's use that the structure can be expected to be replaced when the property it initially houses is replaced. Filing state tax for free   The fact that the structure is specially designed to withstand the stress and other demands of the property and cannot be used economically for other purposes indicates it is closely related to the use of the property it houses. Filing state tax for free Structures such as oil and gas storage tanks, grain storage bins, and silos are not treated as buildings, but as section 1245 property. Filing state tax for free Facility for bulk storage of fungible commodities. Filing state tax for free   This is a facility used mainly for the bulk storage of fungible commodities. Filing state tax for free Bulk storage means storage of a commodity in a large mass before it is used. Filing state tax for free For example, if a facility is used to store oranges that have been sorted and boxed, it is not used for bulk storage. Filing state tax for free To be fungible, a commodity must be such that one part may be used in place of another. Filing state tax for free Gain Treated as Ordinary Income The gain treated as ordinary income on the sale, exchange, or involuntary conversion of section 1245 property, including a sale and leaseback transaction, is the lesser of the following amounts. Filing state tax for free The depreciation (which includes any section 179 deduction claimed) and amortization allowed or allowable on the property. Filing state tax for free The gain realized on the disposition (the amount realized from the disposition minus the adjusted basis of the property). Filing state tax for free For any other disposition of section 1245 property, ordinary income is the lesser of (1) above or the amount by which its fair market value (FMV) is more than its adjusted basis. Filing state tax for free For details, see chapter 3 of Publication 544. Filing state tax for free Use Part III of Form 4797 to figure the ordinary income part of the gain. Filing state tax for free Depreciation claimed on other property or claimed by other taxpayers. Filing state tax for free   Depreciation and amortization include the amounts you claimed on the section 1245 property as well as the following depreciation and amortization amounts. Filing state tax for free Amounts you claimed on property you exchanged for, or converted to, your section 1245 property in a like-kind exchange or involuntary conversion. Filing state tax for free For details on exchanges of property that are not taxable, see Like-Kind Exchanges in chapter 8. Filing state tax for free Amounts a previous owner of the section 1245 property claimed if your basis is determined with reference to that person's adjusted basis (for example, the donor's depreciation deductions on property you received as a gift and part of the transfer is a sale or exchange). Filing state tax for free Example. Filing state tax for free Jeff Free paid $120,000 for a tractor in 2012. Filing state tax for free On February 23, 2013, he traded it for a chopper and paid an additional $30,000. Filing state tax for free To figure his depreciation deduction on the chopper for the current year, Jeff continues to use the basis of the tractor as he would have before the trade. Filing state tax for free Jeff can also depreciate the additional $30,000 for the chopper. Filing state tax for free Depreciation and amortization. Filing state tax for free   Depreciation and amortization deductions that must be recaptured as ordinary income include (but are not limited to) the following items. Filing state tax for free See Depreciation Recapture in chapter 3 of Publication 544 for more details. Filing state tax for free Ordinary depreciation deductions. Filing state tax for free Section 179 deduction (see chapter 7). Filing state tax for free Any special depreciation allowance. Filing state tax for free Amortization deductions for all the following costs. Filing state tax for free Acquiring a lease. Filing state tax for free Lessee improvements. Filing state tax for free Pollution control facilities. Filing state tax for free Reforestation expenses. Filing state tax for free Section 197 intangibles. Filing state tax for free Qualified disaster expenses. Filing state tax for free Franchises, trademarks, and trade names acquired before August 11, 1993. Filing state tax for free Example. Filing state tax for free You file your returns on a calendar year basis. Filing state tax for free In February 2011, you bought and placed in service for 100% use in your farming business a light-duty truck (5-year property) that cost $10,000. Filing state tax for free You used the half-year convention and your MACRS deductions for the truck were $1,500 in 2011 and $2,550 in 2012. Filing state tax for free You did not claim the section 179 expense deduction for the truck. Filing state tax for free You sold it in May 2013 for $7,000. Filing state tax for free The MACRS deduction in 2013, the year of sale, is $893 (½ of $1,785). Filing state tax for free Figure the gain treated as ordinary income as follows. Filing state tax for free 1) Amount realized $7,000 2) Cost (February 2011) $10,000   3) Depreciation allowed or allowable (MACRS deductions: $1,500 + $2,550 + $893) 4,943   4) Adjusted basis (subtract line 3 from line 2) $5,057 5) Gain realized (subtract line 4 from line 1) 1,943 6) Gain treated as ordinary income (lesser of line 3 or line 5) $1,943 Depreciation allowed or allowable. Filing state tax for free   You generally use the greater of the depreciation allowed or allowable when figuring the part of gain to report as ordinary income. Filing state tax for free If, in prior years, you have consistently taken proper deductions under one method, the amount allowed for your prior years will not be increased even though a greater amount would have been allowed under another proper method. Filing state tax for free If you did not take any deduction at all for depreciation, your adjustments to basis for depreciation allowable are figured by using the straight line method. Filing state tax for free This treatment applies only when figuring what part of the gain is treated as ordinary income under the rules for section 1245 depreciation recapture. Filing state tax for free Disposition of plants and animals. Filing state tax for free   If you elect not to use the uniform capitalization rules (see chapter 6), you must treat any plant you produce as section 1245 property. Filing state tax for free If you have a gain on the property's disposition, you must recapture the pre-productive expenses you would have capitalized if you had not made the election by treating the gain, up to the amount of these expenses, as ordinary income. Filing state tax for free For section 1231 transactions, show these expenses as depreciation on Form 4797, Part III, line 22. Filing state tax for free For plant sales that are reported on Schedule F (1040), Profit or Loss From Farming, this recapture rule does not change the reporting of income because the gain is already ordinary income. Filing state tax for free You can use the farm-price method or the unit-livestock-price method discussed in  chapter 2 to figure these expenses. Filing state tax for free Example. Filing state tax for free Janet Maple sold her apple orchard in 2013 for $80,000. Filing state tax for free Her adjusted basis at the time of sale was $60,000. Filing state tax for free She bought the orchard in 2006, but the trees did not produce a crop until 2009. Filing state tax for free Her pre-productive expenses were $6,000. Filing state tax for free She elected not to use the uniform capitalization rules. Filing state tax for free Janet must treat $6,000 of the gain as ordinary income. Filing state tax for free Section 1250 Property Section 1250 property includes all real property subject to an allowance for depreciation that is not and never has been section 1245 property. Filing state tax for free It includes buildings and structural components that are not section 1245 property (discussed earlier). Filing state tax for free It includes a leasehold of land or section 1250 property subject to an allowance for depreciation. Filing state tax for free A fee simple interest in land is not section 1250 property because, like land, it is not depreciable. Filing state tax for free Gain on the disposition of section 1250 property is treated as ordinary income to the extent of additional depreciation allowed or allowable. Filing state tax for free To determine the additional depreciation on section 1250 property, see Depreciation Recapture in chapter 3 of Publication 544. Filing state tax for free You will not have additional depreciation if any of the following apply to the property disposed of. Filing state tax for free You figured depreciation for the property using the straight line method or any other method that does not result in depreciation that is more than the amount figured by the straight line method and you have held the property longer than 1 year. Filing state tax for free You chose the alternate ACRS (straight line) method for the property, which was a type of 15-, 18-, or 19-year real property covered by the section 1250 rules. Filing state tax for free The property was nonresidential real property placed in service after 1986 (or after July 31, 1986, if the choice to use MACRS was made) and you held it longer than 1 year. Filing state tax for free These properties are depreciated using the straight line method. Filing state tax for free Installment Sale If you report the sale of property under the installment method, any depreciation recapture under section 1245 or 1250 is taxable as ordinary income in the year of sale. Filing state tax for free This applies even if no payments are received in that year. Filing state tax for free If the gain is more than the depreciation recapture income, report the rest of the gain using the rules of the installment method. Filing state tax for free For this purpose, include the recapture income in your installment sale basis to determine your gross profit on the installment sale. Filing state tax for free If you dispose of more than one asset in a single transaction, you must separately figure the gain on each asset so that it may be properly reported. Filing state tax for free To do this, allocate the selling price and the payments you receive in the year of sale to each asset. Filing state tax for free Report any depreciation recapture income in the year of sale before using the installment method for any remaining gain. Filing state tax for free For more information on installment sales, see chapter 10. Filing state tax for free Other Dispositions Chapter 3 of Publication 544 discusses the tax treatment of the following transfers of depreciable property. Filing state tax for free By gift. Filing state tax for free At death. Filing state tax for free In like-kind exchanges. Filing state tax for free In involuntary conversions. Filing state tax for free Publication 544 also explains how to handle a single transaction involving multiple properties. Filing state tax for free Other Gains This section discusses gain on the disposition of farmland for which you were allowed either of the following. Filing state tax for free Deductions for soil and water conservation expenditures (section 1252 property). Filing state tax for free Exclusions from income for certain cost sharing payments (section 1255 property). Filing state tax for free Section 1252 property. Filing state tax for free   If you disposed of farmland you held more than 1 year and less than 10 years at a gain and you were allowed deductions for soil and water conservation expenses for the land, as discussed in chapter 5, you must treat part of the gain as ordinary income and treat the balance as section 1231 gain. Filing state tax for free Exceptions. Filing state tax for free   Do not treat gain on the following transactions as gain on section 1252 property. Filing state tax for free Disposition of farmland by gift. Filing state tax for free Transfer of farm property at death (except for income in respect of a decedent). Filing state tax for free For more information, see Regulations section 1. Filing state tax for free 1252-2. Filing state tax for free Amount to report as ordinary income. Filing state tax for free   You report as ordinary income the lesser of the following amounts. Filing state tax for free Your gain (determined by subtracting the adjusted basis from the amount realized from a sale, exchange, or involuntary conversion, or the FMV for all other dispositions). Filing state tax for free The total deductions allowed for soil and water conservation expenses multiplied by the applicable percentage, discussed next. Filing state tax for free Applicable percentage. Filing state tax for free   The applicable percentage is based on the length of time you held the land. Filing state tax for free If you dispose of your farmland within 5 years after the date you acquired it, the percentage is 100%. Filing state tax for free If you dispose of the land within the 6th through 9th year after you acquired it, the applicable percentage is reduced by 20% a year for each year or part of a year you hold the land after the 5th year. Filing state tax for free If you dispose of the land 10 or more years after you acquired it, the percentage is 0%, and the entire gain is a section 1231 gain. Filing state tax for free Example. Filing state tax for free You acquired farmland on January 19, 2005. Filing state tax for free On October 3, 2013, you sold the land at a $30,000 gain. Filing state tax for free Between January 1 and October 3, 2013, you incur soil and water conservation expenditures of $15,000 for the land that are fully deductible in 2013. Filing state tax for free The applicable percentage is 40% since you sold the land within the 8th year after you acquired it. Filing state tax for free You treat $6,000 (40% of $15,000) of the $30,000 gain as ordinary income and the $24,000 balance as a section 1231 gain. Filing state tax for free Section 1255 property. Filing state tax for free   If you receive certain cost-sharing payments on property and you exclude those payments from income (as discussed in chapter 3), you may have to treat part of any gain as ordinary income and treat the balance as a section 1231 gain. Filing state tax for free If you chose not to exclude these payments, you will not have to recognize ordinary income under this provision. Filing state tax for free Amount to report as ordinary income. Filing state tax for free   You report as ordinary income the lesser of the following amounts. Filing state tax for free The applicable percentage of the total excluded cost-sharing payments. Filing state tax for free The gain on the disposition of the property. Filing state tax for free You do not report ordinary income under this rule to the extent the gain is recognized as ordinary income under sections 1231 through 1254, 1256, and 1257. Filing state tax for free However, if applicable, gain reported under this rule must be reported regardless of any contrary provisions (including nonrecognition provisions) under any other section. Filing state tax for free Applicable percentage. Filing state tax for free   The applicable percentage of the excluded cost-sharing payments to be reported as ordinary income is based on the length of time you hold the property after receiving the payments. Filing state tax for free If the property is held less than 10 years after you receive the payments, the percentage is 100%. Filing state tax for free After 10 years, the percentage is reduced by 10% a year, or part of a year, until the rate is 0%. Filing state tax for free Form 4797, Part III. Filing state tax for free   Use Form 4797, Part III, to figure the ordinary income part of a gain from the sale, exchange, or involuntary conversion of section 1252 property and section 1255 property. 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Understanding Your CP211E Notice

We denied your request to extend the time to file your Exempt Organization Return because your Form 8868, Application for Extension of Time To File an Exempt Organization Return, didn't meet one or more of the requirements.


Your request didn’t meet one or more of the requirements:

  • Postmark your request by the previously established due date.
  • Have your request signed by an authorized person.
  • Deposit estimated tax due by the previously established due date.
  • Show reasonable cause for requiring another extension.
  • Establish reasons that prevented you from filing by the extended due date.

Your previous due date still applies.


What you need to do

  • File your required Exempt Organization Return immediately to limit any late filing penalties. If your Exempt Organization Return is filed after the due date of the return (including any extensions), the return is considered late and subject to late filing penalties.
  • We encourage you to use electronic filing – the fastest and easiest way to file.

You may want to

  • Visit www.irs.gov/Charities-&-Non-Profits to learn about approved e-File providers, what types of returns can be filed electronically, and whether you are required to file electronically.

Answers to Common Questions

Q. Where can I go for more information about tax-exempt organizations?

A. For more information on Employee Benefit Plans, see Tax Information for Charities & Other Non-Profits.

Q. Can I get help over the phone?

A. If you have questions and/or need help, you can call 1-877-829-5500. Personal assistance is available Monday through Friday, 7:00 a.m. to 7:00 p.m. CT.


Tips for next year

Be sure to sign and mail your Form 8868 with a reason you need an additional 3-month extension on or before the due date of your first extension.

Page Last Reviewed or Updated: 24-Jan-2014

Printable samples of this notice (PDF)

 

 

How to get help

  • Call the 1-800 number listed on the top right corner of your notice.
  • Authorize someone (e.g., accountant) to contact the IRS on your behalf using Form 2848.
  • See if you qualify for help from a Low Income Taxpayer Clinic.
     

The Filing State Tax For Free

Filing state tax for free Publication 929 - Main Content Table of Contents Part 1. Filing state tax for 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. Filing state tax for free Designated as representative. Filing state tax for free IRS notice. Filing state tax for free Standard DeductionStandard Deduction of Zero Dependent's Own Exemption Withholding From WagesExceptions. Filing state tax for free Part 2. Filing state tax for 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. Filing state tax for free Figuring the Child's Net Unearned Income (Form 8615, Part I) Step 2. Filing state tax for free Figuring a Tentative Tax at the Parent's Tax Rate (Form 8615, Part II) Step 3. Filing state tax for free Figuring the Child's Tax (Form 8615, Part III) Alternative Minimum Tax Illustrated Example Part 1. Filing state tax for 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. Filing state tax for 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. Filing state tax for 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. Filing state tax for free See Other Filing Requirements, later. Filing state tax for free The following sections apply to dependents with: Earned income only, Unearned income only, and Both earned and unearned income. Filing state tax for free  To find out whether a dependent must file, read the section that applies, or use Table 1. Filing state tax for 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. Filing state tax for 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). Filing state tax for free Example. Filing state tax for free William is 16. Filing state tax for free His mother claims an exemption for him on her income tax return. Filing state tax for free He worked part time on weekends during the school year and full time during the summer. Filing state tax for free He earned $7,000 in wages. Filing state tax for free He did not have any unearned income. Filing state tax for free He must file a tax return because he has earned income only and his gross income is more than $6,100. Filing state tax for free If he is blind, he does not have to file a return because his gross income is not more than $7,600. Filing state tax for 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. Filing state tax for 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). Filing state tax for free Example. Filing state tax for free Sarah is 18 and single. Filing state tax for free Her parents can claim an exemption for her on their income tax return. Filing state tax for free She received $1,970 of taxable interest and dividend income. Filing state tax for free She did not work during the year. Filing state tax for free She must file a tax return because she has unearned income only and her gross income is more than $1,000. Filing state tax for 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. Filing state tax for free Election to report child's unearned income on parent's return. Filing state tax for 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. Filing state tax for free See Parent's Election To Report Child's Interest and Dividends in Part 2. Filing state tax for free If the parent makes this election, the child does not have to file a return. Filing state tax for 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. Filing state tax for free Filing Requirement Worksheet for Most Dependents 1. Filing state tax for free Enter dependent's earned income plus $350     2. Filing state tax for free Minimum amount   $1,000 3. Filing state tax for free Compare lines 1 and 2. Filing state tax for free Enter the larger amount     4. Filing state tax for free Maximum amount   6,100 5. Filing state tax for free Compare lines 3 and 4. Filing state tax for free Enter the smaller amount     6. Filing state tax for free Enter the dependent's gross income. Filing state tax for free If line 6 is more than line 5, the dependent must file an income tax return. Filing state tax for 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. Filing state tax for free       Table 1. Filing state tax for 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. Filing state tax for free   See the definitions of “dependent,”“earned income,”“unearned income,” and “gross income” in the Glossary. Filing state tax for free   Single dependents—Were you either age 65 or older or blind?     No. Filing state tax for free You must file a return if any of the following apply. Filing state tax for free       Your unearned income was over $1,000. Filing state tax for free Your earned income was over $6,100. Filing state tax for free Your gross income was more than the larger of—       $1,000, or Your earned income (up to $5,750) plus $350. Filing state tax for free         Yes. Filing state tax for free You must file a return if any of the following apply. Filing state tax for 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). Filing state tax for free       Married dependents—Were you either age 65 or older or blind?     No. Filing state tax for free You must file a return if any of the following apply. Filing state tax for free       Your gross income was at least $5 and your spouse files a separate return and itemizes deductions. Filing state tax for free Your unearned income was over $1,000. Filing state tax for free Your earned income was over $6,100. Filing state tax for free Your gross income was more than the larger of—       $1,000, or Your earned income (up to $5,750) plus $350. Filing state tax for free       Yes. Filing state tax for free You must file a return if any of the following apply. Filing state tax for free       Your gross income was at least $5 and your spouse files a separate return and itemizes deductions. Filing state tax for 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). Filing state tax for free       Example 1. Filing state tax for free Joe is 20, single, not blind, and a full-time college student. Filing state tax for 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. Filing state tax for free He received $200 taxable interest income and earned $2,750 from a part-time job. Filing state tax for 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). Filing state tax for free Filled-in Example 1 Filing Requirement Worksheet  for Most Dependents 1. Filing state tax for free Enter dependent's earned income plus $350   $ 3,100 2. Filing state tax for free Minimum amount   1,000 3. Filing state tax for free Compare lines 1 and 2. Filing state tax for free Enter the larger amount   3,100 4. Filing state tax for free Maximum amount   6,100 5. Filing state tax for free Compare lines 3 and 4. Filing state tax for free Enter the smaller amount   3,100 6. Filing state tax for free Enter the dependent's gross income. Filing state tax for free If line 6 is more than line 5, the dependent must file an income tax return. Filing state tax for 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. Filing state tax for free   $ 2,950   Example 2. Filing state tax for free The facts are the same as in Example 1 except that Joe had $600 taxable interest income. Filing state tax for 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). Filing state tax for free Filled-in Example 2 Filing Requirement Worksheet for Most Dependents 1. Filing state tax for free Enter dependent's earned income plus $350   $ 3,100 2. Filing state tax for free Minimum amount   1,000 3. Filing state tax for free Compare lines 1 and 2. Filing state tax for free Enter the larger amount   3,100 4. Filing state tax for free Maximum amount   6,100 5. Filing state tax for free Compare lines 3 and 4. Filing state tax for free Enter the smaller amount   3,100 6. Filing state tax for free Enter the dependent's gross income. Filing state tax for free If line 6 is more than line 5, the dependent must file an income tax return. Filing state tax for 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. Filing state tax for free   $ 3,350   Age 65 or older or blind. Filing state tax for 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. Filing state tax for free Filing Requirement Worksheet  for Dependents Who Are Age 65 or Older or Blind 1. Filing state tax for free Enter dependent's earned income plus $350     2. Filing state tax for free Minimum amount   $1,000 3. Filing state tax for free Compare lines 1 and 2. Filing state tax for free Enter the larger amount     4. Filing state tax for free Maximum amount   6,100 5. Filing state tax for free Compare lines 3 and 4. Filing state tax for free Enter the smaller amount     6. Filing state tax for 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. Filing state tax for free Add lines 5 and 6. Filing state tax for free Enter the total     8. Filing state tax for free Enter the dependent's gross income. Filing state tax for free If line 8 is more than line 7, the dependent must file an income tax return. Filing state tax for 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. Filing state tax for free The facts are the same as in Example 2 except that Joe is also blind. Filing state tax for 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). Filing state tax for free   Filled-in Example 3 Filing Requirement Worksheet  for Dependents Who Are Age 65 or Older or Blind 1. Filing state tax for free Enter dependent's earned income plus $350   $3,100 2. Filing state tax for free Minimum amount   1,000 3. Filing state tax for free Compare lines 1 and 2. Filing state tax for free Enter the larger amount   3,100 4. Filing state tax for free Maximum amount   6,100 5. Filing state tax for free Compare lines 3 and 4. Filing state tax for free Enter the smaller amount   3,100 6. Filing state tax for 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. Filing state tax for free Add lines 5 and 6. Filing state tax for free Enter the total   4,600 8. Filing state tax for free Enter the dependent's gross income. Filing state tax for free If line 8 is more than line 7, the dependent must file an income tax return. Filing state tax for 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. Filing state tax for 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. Filing state tax for free But if the dependent is filing a return only because of this tax, the dependent can file Form 5329 by itself. Filing state tax for free A dependent must also file a tax return if he or she: Had wages of $108. Filing state tax for 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. Filing state tax for free Spouse itemizes. Filing state tax for 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). Filing state tax for 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. Filing state tax for free Income tax was withheld from his or her income. Filing state tax for free He or she qualifies for the earned income credit, additional child tax credit, health coverage tax credit, or refundable American opportunity education credit. Filing state tax for free See the tax return instructions to find out who qualifies for these credits. Filing state tax for free  By filing a return, the dependent can get a refund. Filing state tax for 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. Filing state tax for 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. Filing state tax for free Signing the child's return. Filing state tax for 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. Filing state tax for free ” Authority of parent or guardian. Filing state tax for 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. Filing state tax for 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. Filing state tax for 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. Filing state tax for free Third party designee. Filing state tax for 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. Filing state tax for 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. Filing state tax for 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. Filing state tax for 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. Filing state tax for free See the return instructions for more information. Filing state tax for free Designated as representative. Filing state tax for 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. Filing state tax for free Form 2848, Power of Attorney and Declaration of Representative, is used to designate a child's representative. Filing state tax for free See Publication 947, Practice Before the IRS and Power of Attorney, for more information. Filing state tax for 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. Filing state tax for free IRS notice. Filing state tax for 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. Filing state tax for free The notice will show who to contact. Filing state tax for free The IRS will try to resolve the matter with the parent(s) or guardian(s) of the child consistent with their authority. Filing state tax for free Child's earnings. Filing state tax for 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. Filing state tax for free This is true even if, under state law, the parent has the right to the earnings and may actually have received them. Filing state tax for free If the child does not pay the tax due on this income, the parent may be liable for the tax. Filing state tax for free Child's expenses. Filing state tax for 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. Filing state tax for free Example. Filing state tax for free You made payments on your child's behalf that are deductible as a business expense and a charitable contribution. Filing state tax for free You made the payments out of your child's earnings. Filing state tax for free These items can be deducted only on the child's return. Filing state tax for 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). Filing state tax for free However, the standard deduction may be higher for a dependent who: Is 65 or older, or Is blind. Filing state tax for free Certain dependents cannot claim any standard deduction. Filing state tax for free See Standard Deduction of Zero , later. Filing state tax for free Worksheet 1. Filing state tax for free   Use Worksheet 1 to figure the dependent's standard deduction. Filing state tax for free Worksheet 1. Filing state tax for 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. Filing state tax for free If you were 65 or older and/or blind, check the correct number of boxes below. Filing state tax for free Put the total number of boxes checked in box c and go to line 1. Filing state tax for free a. Filing state tax for free You 65 or older   Blind   b. Filing state tax for free Your spouse, if claiming  spouse's exemption 65 or older   Blind   c. Filing state tax for free Total boxes checked         1. Filing state tax for free Enter your earned income (defined below) plus $350. Filing state tax for free If none, enter -0-. Filing state tax for free 1. Filing state tax for free     2. Filing state tax for free Minimum amount. Filing state tax for free   2. Filing state tax for free $1,000   3. Filing state tax for free Compare lines 1 and 2. Filing state tax for free Enter the larger of the two amounts here. Filing state tax for free 3. Filing state tax for free     4. Filing state tax for free Enter on line 4 the amount shown below for your filing status. Filing state tax for free       Single or Married filing separately—$6,100 Married filing jointly—$12,200 Head of household—$8,950 4. Filing state tax for free     5. Filing state tax for free Standard deduction. Filing state tax for free         a. Filing state tax for free Compare lines 3 and 4. Filing state tax for free Enter the smaller amount here. Filing state tax for free If under 65 and not blind, stop here. Filing state tax for free This is your standard deduction. Filing state tax for free Otherwise, go on to line 5b. Filing state tax for free 5a. Filing state tax for free     b. Filing state tax for free If 65 or older or blind, multiply $1,500 ($1,200 if married) by the number in box c above. Filing state tax for free Enter the result here. Filing state tax for free 5b. Filing state tax for free     c. Filing state tax for free Add lines 5a and 5b. Filing state tax for free This is your standard deduction for 2013. Filing state tax for free 5c. Filing state tax for free     Earned income includes wages, salaries, tips, professional fees, and other compensation received for personal services you performed. Filing state tax for free It also includes any amount received as a scholarship that you must include in income. Filing state tax for free   Example 1. Filing state tax for free Michael is single, age 15, and not blind. Filing state tax for free His parents can claim him as a dependent on their tax return. Filing state tax for free He has taxable interest income of $800 and wages of $150. Filing state tax for free He enters $500 (his earned income plus $350) on line 1 of Worksheet 1. Filing state tax for free On line 3, he enters $1,000, the larger of $500 or $1,000. Filing state tax for free Michael enters $6,100 on line 4. Filing state tax for free On line 5a, he enters $1,000, the smaller of $1,000 or $6,100. Filing state tax for free His standard deduction is $1,000. Filing state tax for free Example 2. Filing state tax for free Judy, a full-time student, is single, age 22, and not blind. Filing state tax for free Her parents can claim her as a dependent on their tax return. Filing state tax for free She has dividend income of $275 and wages of $2,500. Filing state tax for free She enters $2,850 (her earned income plus $350) on line 1 of Worksheet 1. Filing state tax for free On line 3, she enters $2,850, the larger of $2,850 or $1,000. Filing state tax for free She enters $6,100 on line 4. Filing state tax for free On line 5a, she enters $2,850 (the smaller of $2,850 or $6,100) as her standard deduction. Filing state tax for free Example 3. Filing state tax for free Amy, who is single, is claimed as a dependent on her parents' tax return. Filing state tax for free She is 18 years old and blind. Filing state tax for free She has taxable interest income of $1,000 and wages of $2,000. Filing state tax for free She enters $2,350 (her earned income plus $350) on line 1 of Worksheet 1. Filing state tax for 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. Filing state tax for free Because Amy is blind, she checks the box for blindness and enters “1” in box c at the top of Worksheet 1. Filing state tax for free She enters $1,500 (the number in box c times $1,500) on line 5b. Filing state tax for free Her standard deduction on line 5c is $3,850 ($2,350 + $1,500). Filing state tax for free Standard Deduction of Zero The standard deduction for the following dependents is zero. Filing state tax for free A married dependent filing a separate return whose spouse itemizes deductions. Filing state tax for 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. Filing state tax for free A nonresident or dual-status alien dependent, unless the dependent is married to a U. Filing state tax for free S. Filing state tax for free citizen or resident alien at the end of the year and chooses to be treated as a U. Filing state tax for free S. Filing state tax for free resident for the year. Filing state tax for free See Publication 519, U. Filing state tax for free S. Filing state tax for free Tax Guide for Aliens, for information on making this choice. Filing state tax for free Example. Filing state tax for free Jennifer, who is a dependent of her parents, is entitled to file a joint return with her husband. Filing state tax for free However, her husband elects to file a separate return and itemize his deductions. Filing state tax for free Because he itemizes, Jennifer's standard deduction on her return is zero. Filing state tax for free She can, however, itemize any of her allowable deductions. Filing state tax for 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. Filing state tax for free This is true even if the other taxpayer does not actually claim the exemption. Filing state tax for free Example. Filing state tax for free James and Barbara can claim their child, Ben, as a dependent on their return. Filing state tax for free Ben is a college student who works during the summer and must file a tax return. Filing state tax for free Ben cannot claim his own exemption on his return. Filing state tax for free This is true even if James and Barbara do not claim him as a dependent on their return. Filing state tax for free Withholding From Wages Employers generally withhold federal income tax, social security tax, and Medicare tax from an employee's wages. Filing state tax for free If the employee claims exemption from withholding on Form W-4, the employer will not withhold federal income tax. Filing state tax for free The exemption from withholding does not apply to social security and Medicare taxes. Filing state tax for free Conditions for exemption from withholding. Filing state tax for free   An employee can claim exemption from withholding for 2014 only if he or she meets both of the following conditions. Filing state tax for 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. Filing state tax for free For 2014, the employee expects a refund of all federal income tax withheld because he or she expects to have no tax liability. Filing state tax for free Dependents. Filing state tax for free   An employee who is a dependent ordinarily cannot claim exemption from withholding if both of the following are true. Filing state tax for free The employee's gross income will be more than $1,000, the minimum standard deduction for 2014. Filing state tax for free The employee's unearned income will be more than $350. Filing state tax for free Exceptions. Filing state tax for 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. Filing state tax for free The above exceptions do not apply to supplemental wages greater than $1,000,000. Filing state tax for free For more information, see Exemption From Withholding in chapter 1 of Publication 505. Filing state tax for free Example. Filing state tax for free Guy is 17 and a student. Filing state tax for free During the summer he works part time at a grocery store. Filing state tax for free He expects to earn about $1,200 this year. Filing state tax for 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. Filing state tax for free The only other income he expects during the year is $375 interest on a savings account. Filing state tax for free He expects that his parents will be able to claim him as a dependent on their tax return. Filing state tax for free He is not blind and will not claim adjustments to income, itemized deductions, a higher standard deduction, or tax credits on his return. Filing state tax for 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. Filing state tax for free Claiming exemption from withholding. Filing state tax for free    To claim exemption from withholding, an employee must enter “Exempt” in the space provided on Form W-4, line 7. Filing state tax for free The employee must complete the rest of the form, as explained in the form instructions, and give it to his or her employer. Filing state tax for free Renewing an exemption from withholding. Filing state tax for free   An exemption from withholding is good for only one year. Filing state tax for free An employee must file a new Form W-4 by February 15 each year to continue the exemption. Filing state tax for free Part 2. Filing state tax for free Tax on Unearned Income of Certain Children The two rules that follow may affect the tax on the unearned income of certain children. Filing state tax for 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. Filing state tax for free (See Parent's Election To Report Child's Interest and Dividends , later. Filing state tax for 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. Filing state tax for free (See Tax for Certain Children Who Have Unearned Income , later. Filing state tax for free ) For these rules, the term “child” includes a legally adopted child and a stepchild. Filing state tax for free These rules apply whether or not the child is a dependent. Filing state tax for free These rules do not apply if neither of the child's parents were living at the end of the year. Filing state tax for 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. Filing state tax for 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 . Filing state tax for 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. Filing state tax for 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 . Filing state tax for free Parents are married. Filing state tax for free   If the child's parents file separate returns, use the return of the parent with the greater taxable income. Filing state tax for free Parents not living together. Filing state tax for 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. Filing state tax for free If the custodial parent is not considered unmarried, use the return of the parent with the greater taxable income. Filing state tax for 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. Filing state tax for free Parents are divorced. Filing state tax for 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. Filing state tax for free Custodial parent remarried. Filing state tax for free   If the custodial parent has remarried, the stepparent (rather than the noncustodial parent) is treated as the child's other parent. Filing state tax for free Therefore, if the custodial parent and the stepparent file a joint return, use that joint return. Filing state tax for free Do not use the return of the noncustodial parent. Filing state tax for 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. Filing state tax for free If the custodial parent and the stepparent are married but not living together, the earlier discussion under Parents not living together applies. Filing state tax for free Parents never married. Filing state tax for 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. Filing state tax for free If the parents did not live together all year, the rules explained earlier under Parents are divorced apply. Filing state tax for free Widowed parent remarried. Filing state tax for free   If a widow or widower remarries, the new spouse is treated as the child's other parent. Filing state tax for free The rules explained earlier under Custodial parent remarried apply. Filing state tax for 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. Filing state tax for free If you do, your child will not have to file a return. Filing state tax for free You can make this election only if all the following conditions are met. Filing state tax for free Your child was under age 19 (or under age 24 if a full-time student) at the end of the year. Filing state tax for free Your child had income only from interest and dividends (including capital gain distributions and Alaska Permanent Fund dividends). Filing state tax for free The child's gross income was less than $10,000. Filing state tax for free The child is required to file a return unless you make this election. Filing state tax for free The child does not file a joint return for the year. Filing state tax for 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. Filing state tax for free No federal income tax was withheld from your child's income under the backup withholding rules. Filing state tax for free You are the parent whose return must be used when applying the special tax rules for children. Filing state tax for free (See Which Parent's Return To Use , earlier. Filing state tax for free ) These conditions are also shown in Figure 1. Filing state tax for free Certain January 1 birthdays. Filing state tax for free   A child born on January 1, 1995, is considered to be age 19 at the end of 2013. Filing state tax for free You cannot make this election for such a child unless the child was a full-time student. Filing state tax for free   A child born on January 1, 1990, is considered to be age 24 at the end of 2013. Filing state tax for free You cannot make this election for such a child. Filing state tax for free How to make the election. Filing state tax for free    Make the election by attaching Form 8814 to your Form 1040 or Form 1040NR. Filing state tax for free (If you make this election, you cannot file Form 1040A or Form 1040EZ. Filing state tax for free ) Attach a separate Form 8814 for each child for whom you make the election. Filing state tax for free You can make the election for one or more children and not for others. Filing state tax for 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. Filing state tax for free Rate may be higher. Filing state tax for 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. Filing state tax for 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. Filing state tax for 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. Filing state tax for free Deductions you cannot take. Filing state tax for 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. Filing state tax for free The additional standard deduction if the child is blind. Filing state tax for free The deduction for a penalty on an early withdrawal of your child's savings. Filing state tax for free Itemized deductions (such as your child's investment expenses or charitable contributions). Filing state tax for free Figure 1. Filing state tax for free Can You Include Your Child's Income On Your Tax Return? Please click here for the text description of the image. Filing state tax for free Figure 1. Filing state tax for free Can You Include Your Child's Income On Your Tax Return? Deductible investment interest. Filing state tax for free   If you use Form 8814, your child's unearned income is considered your unearned income. Filing state tax for free To figure the limit on your deductible investment interest, add the child's unearned income to yours. Filing state tax for 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. Filing state tax for free Alternative minimum tax. Filing state tax for 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. Filing state tax for free If it is, you must include it with your own tax preference items when figuring your AMT. Filing state tax for free See Form 6251, Alternative Minimum Tax—Individuals, and its instructions for details. Filing state tax for free Reduced deductions or credits. Filing state tax for free   If you use Form 8814, your increased adjusted gross income may reduce certain deductions or credits on your return, including the following. Filing state tax for free Deduction for contributions to a traditional individual retirement arrangement (IRA). Filing state tax for free Deduction for student loan interest. Filing state tax for free Itemized deductions for medical expenses, casualty and theft losses, and certain miscellaneous expenses. Filing state tax for free Credit for child and dependent care expenses. Filing state tax for free Child tax credit. Filing state tax for free Education tax credits. Filing state tax for free Earned income credit. Filing state tax for free Penalty for underpayment of estimated tax. Filing state tax for 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. Filing state tax for 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. Filing state tax for free Get Publication 505 for more information. Filing state tax for free Figuring Child's Income Use Form 8814, Part I, to figure your child's interest and dividend income to report on your return. Filing state tax for free Only the amount over $2,000 is added to your income. Filing state tax for free The amount over $2,000 is shown on Form 8814, line 6. Filing state tax for 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. Filing state tax for free Include the amount from Form 8814, line 12, on Form 1040 or Form 1040NR, line 21. Filing state tax for 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. Filing state tax for free On the dotted line next to line 21, enter “Form 8814” and the total of the Form 8814, line 12 amounts. Filing state tax for free Note. Filing state tax for free The tax on the first $2,000 is figured on Form 8814, Part II. Filing state tax for free See Figuring Additional Tax , later. Filing state tax for free Qualified dividends. Filing state tax for free   Enter on Form 8814, line 2a, any ordinary dividends your child received. Filing state tax for free This amount may include qualified dividends. Filing state tax for 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. Filing state tax for free For detailed information about qualified dividends, see Publication 550. Filing state tax for 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. Filing state tax for free You do not include these dividends on Form 8814, line 12, or on line 21 of Form 1040 or Form 1040NR. Filing state tax for free   Enter the child's qualified dividends on Form 8814, line 2b. Filing state tax for free But do not include this amount on Form 1040, lines 9a and 9b, or Form 1040NR, lines 10a and 10b. Filing state tax for free Instead, include the amount from Form 8814, line 9, on Form 1040, lines 9a and 9b, or Form 1040NR, lines 10a and 10b. Filing state tax for 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. Filing state tax for free ) Capital gain distributions. Filing state tax for free   Enter on Form 8814, line 3, any capital gain distributions your child received. Filing state tax for 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. Filing state tax for free You do not include it on Form 8814, line 12, or on line 21 of Form 1040 or Form 1040NR. Filing state tax for 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. Filing state tax for 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. Filing state tax for free ) Collectibles (28% rate) gain. Filing state tax for 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. Filing state tax for free Multiply the child's capital gain distribution included on Schedule D, line 13, by a fraction. Filing state tax for free The numerator is the part of the child's total capital gain distribution that is collectibles (28% rate) gain. Filing state tax for free The denominator is the child's total capital gain distribution. Filing state tax for free Enter the result on line 4 of the 28% Rate Gain Worksheet. Filing state tax for free Unrecaptured section 1250 gain. Filing state tax for 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. Filing state tax for free Multiply the child's capital gain distribution included on Schedule D, line 13, by a fraction. Filing state tax for free The numerator is the part of the child's total capital gain distribution that is unrecaptured section 1250 gain. Filing state tax for free The denominator is the child's total capital gain distribution. Filing state tax for free Enter the result on the Unrecaptured Section 1250 Gain Worksheet, line 11. Filing state tax for free Section 1202 gain. Filing state tax for 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. Filing state tax for free (For information about the exclusion, see chapter 4 of Publication 550. Filing state tax for free ) To figure that part, multiply the child's capital gain distribution included on Schedule D, line 13, by a fraction. Filing state tax for free The numerator is the part of the child's total capital gain distribution that is section 1202 gain. Filing state tax for free The denominator is the child's total capital gain distribution. Filing state tax for free Your section 1202 exclusion is generally 50% of the result, but may be subject to a limit. Filing state tax for free In some cases, the exclusion is more than 50%. Filing state tax for free See the instructions for Schedule D for details and information on how to report the exclusion amount. Filing state tax for free Example. Filing state tax for free Fred is 6 years old. Filing state tax for 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. Filing state tax for free (None of the distributions were reported on Form 1099-DIV as unrecaptured section 1250 gain, section 1202 gain, or collectibles (28% rate) gain. Filing state tax for free ) All of the ordinary dividends are qualified dividends. Filing state tax for free He has no other income and is not subject to backup withholding. Filing state tax for free No estimated tax payments were made under his name and social security number. Filing state tax for free Fred's parents elect to include Fred's income on their tax return instead of filing a return for him. Filing state tax for 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. Filing state tax for free They leave lines 1a and 1b of Form 8814 blank because Fred does not have any interest income. Filing state tax for free They enter his ordinary dividends of $1,575 on lines 2a and 2b because all of Fred's ordinary dividends are qualified dividends. Filing state tax for free They enter the amount of Fred's capital gain distributions, $525, on line 3. Filing state tax for free Next, they add the amounts on lines 1a, 2a, and 3 and enter the result, $2,100, on line 4. Filing state tax for 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. Filing state tax for free This is the total amount from Form 8814 to be reported on their return. Filing state tax for free Next, they figure how much of this amount is qualified dividends and how much is capital gain distributions. Filing state tax for free They divide the amount on line 2b, $1,575, by the amount on line 4, $2,100. Filing state tax for free They enter the result, . Filing state tax for free 75, on line 7. Filing state tax for free They divide the amount on line 3, $525, by the amount on line 4, $2,100. Filing state tax for free They enter the result, . Filing state tax for free 25, on line 8. Filing state tax for free They multiply the amount on line 6, $100, by the decimal on line 7, . Filing state tax for free 75, and enter the result, $75, on line 9. Filing state tax for free They multiply the amount on line 6, $100, by the decimal on line 8, . Filing state tax for free 25, and enter the result, $25, on line 10. Filing state tax for 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. Filing state tax for 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. Filing state tax for free They enter $100 ($75 + $25) on line 11 and -0- ($100 – $100) on line 12. Filing state tax for free Because the amount on line 12 is -0-, they do not include any amount from Form 8814 on their Form 1040, line 21. Filing state tax for 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. Filing state tax for free This tax is added to the tax figured on your income. Filing state tax for free This additional tax is the smaller of: 10% x (your child's gross income − $1,000), or $100. Filing state tax for 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. Filing state tax for free Check box a on Form 1040, line 44, or Form 1040NR, line 42. Filing state tax for 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. Filing state tax for 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. Filing state tax for free Attach the completed form to the child's Form 1040, Form 1040A, or Form 1040NR. Filing state tax for free When Form 8615 must be filed. Filing state tax for free   Form 8615 must be filed for a child if all of the following statements are true. Filing state tax for free The child's unearned income was more than $2,000. Filing state tax for free The child is required to file a return for 2013. Filing state tax for 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. Filing state tax for free At least one of the child's parents was alive at the end of 2013. Filing state tax for free The child does not file a joint return for 2013. Filing state tax for free These conditions are also shown in Figure 2. Filing state tax for free Certain January 1 birthdays. Filing state tax for free   Use the following chart to determine whether certain children with January 1 birthdays meet condition 3 under When Form 8615 must be filed. Filing state tax for free IF a child was born on. Filing state tax for free . Filing state tax for free . Filing state tax for free THEN, at the end of 2013, the child is considered to be. Filing state tax for free . Filing state tax for free . Filing state tax for free January 1, 1996 18* January 1, 1995 19** January 1, 1990 24*** *This child is not under age 18. Filing state tax for 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. Filing state tax for 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. Filing state tax for free  ***Do not use Form 8615 for this child. Filing state tax for free Figure 2. Filing state tax for free Do You Have To Use Form 8615 To Figure Your Child's Tax? Please click here for the text description of the image. Filing state tax for free Figure 2. Filing state tax for 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. Filing state tax for free (If the parents filed a joint return, enter the name and social security number listed first on the joint return. Filing state tax for free ) On line C, check the box for the parent's filing status. Filing state tax for free See Which Parent's Return To Use, earlier, for information on which parent's return information must be used on Form 8615. Filing state tax for free Parent with different tax year. Filing state tax for 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. Filing state tax for free Example. Filing state tax for free Kimberly must use her mother's tax and taxable income to complete her Form 8615 for calendar year 2013 (January 1 – December 31). Filing state tax for free Kimberly's mother files her tax return on a fiscal year basis (July 1 – June 30). Filing state tax for 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. Filing state tax for free Parent's return information not known timely. Filing state tax for 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. Filing state tax for free   You can use any reasonable estimate. Filing state tax for free This includes using information from last year's return. Filing state tax for free If you use an estimated amount on Form 8615, enter “Estimated” on the line next to the amount. Filing state tax for free   When you get the correct information, file an amended return on Form 1040X, Amended U. Filing state tax for free S. Filing state tax for free Individual Income Tax Return. Filing state tax for free Extension of time to file. Filing state tax for 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. Filing state tax for free S. Filing state tax for free Individual Income Tax Return. Filing state tax for free See the instructions for Form 4868 for details. Filing state tax for free    An extension of time to file is not an extension of time to pay. Filing state tax for free You must make an accurate estimate of the tax for 2013. Filing state tax for 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. Filing state tax for free See Form 4868 and its instructions. Filing state tax for free Parent's return information not available. Filing state tax for 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). Filing state tax for free How to request. Filing state tax for 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. Filing state tax for free (The IRS cannot process a request received before the end of the tax year. Filing state tax for 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. Filing state tax for free   The request must contain all of the following. Filing state tax for 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. Filing state tax for free Proof of the child's age (for example, a copy of the child's birth certificate). Filing state tax for 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). Filing state tax for 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. Filing state tax for 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. Filing state tax for free Step 1. Filing state tax for 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. Filing state tax for free To do that, use Form 8615, Part I. Filing state tax for 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. Filing state tax for free Adjusted gross income is shown on Form 1040, line 38; Form 1040A, line 22; or Form 1040NR, line 37. Filing state tax for free Form 1040EZ and Form 1040NR-EZ cannot be used if Form 8615 must be filed. Filing state tax for 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. Filing state tax for 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. Filing state tax for free Alternate Worksheet for Form 8615, Line 1 A. Filing state tax for free Enter the amount from the child's Form 1040, line 22, or Form 1040NR, line 23   B. Filing state tax for 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. Filing state tax for free Enter this total as a positive number (greater than zero)   C. Filing state tax for free Add line A and line B and  enter the total   D. Filing state tax for 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. Filing state tax for free Subtract line D from line C. Filing state tax for free Enter the result here and on Form 8615, line 1   Unearned income defined. Filing state tax for free   Unearned income is generally all income other than salaries, wages, and other amounts received as pay for work actually performed. Filing state tax for 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. Filing state tax for 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). Filing state tax for free Nontaxable income. Filing state tax for free   For this purpose, unearned income includes only amounts the child must include in gross income. Filing state tax for free Nontaxable unearned income, such as tax-exempt interest and the nontaxable part of social security and pension payments, is not included. Filing state tax for free Capital loss. Filing state tax for free   A child's capital losses are taken into account in figuring the child's unearned income. Filing state tax for free Capital losses are first applied against capital gains. Filing state tax for 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. Filing state tax for free Any difference over $3,000 is carried to the next year. Filing state tax for free Income from property received as a gift. Filing state tax for free   A child's unearned income includes all income produced by property belonging to the child. Filing state tax for 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. Filing state tax for free   A child's unearned income includes income produced by property given as a gift to the child. Filing state tax for free This includes gifts to the child from grandparents or any other person and gifts made under the Uniform Gift to Minors Act. Filing state tax for free Example. Filing state tax for free Amanda Black, age 13, received the following income. Filing state tax for 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. Filing state tax for free Amanda's unearned income is $2,100. Filing state tax for free This is the total of the dividends ($800), taxable interest ($1,200), and capital gains reduced by capital losses ($300 − $200 = $100). Filing state tax for free Her wages are earned (not unearned) income because they are received for work actually performed. Filing state tax for free Her tax-exempt interest is not included because it is nontaxable. Filing state tax for free Trust income. Filing state tax for 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. Filing state tax for free   However, taxable distributions from a qualified disability trust are considered earned income for the purposes of completing Form 8615. Filing state tax for free See the Form 8615 instructions for details. Filing state tax for free Adjustment to income. Filing state tax for 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. Filing state tax for 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. Filing state tax for 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. Filing state tax for free Directly connected. Filing state tax for 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. Filing state tax for free These expenses include custodian fees and service charges, service fees to collect taxable interest and dividends, and certain investment counsel fees. Filing state tax for free    These expenses are added to certain other miscellaneous itemized deductions on Schedule A (Form 1040). Filing state tax for free Only the amount greater than 2% of the child's adjusted gross income can be deducted. Filing state tax for free See Publication 529, Miscellaneous Deductions, for more information. Filing state tax for free Example 1. Filing state tax for 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. Filing state tax for free His adjusted gross income is $8,000, which is entered on Form 1040, line 38, and on Form 8615, line 1. Filing state tax for 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. Filing state tax for free Example 2. Filing state tax for free Eleanor, age 8, has unearned income of $16,000 and an early withdrawal penalty of $100. Filing state tax for free She has no other income. Filing state tax for 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. Filing state tax for free Her adjusted gross income, entered on line 1, is $15,900 ($16,000 − $100). Filing state tax for free The amount on line 2 is $2,050. Filing state tax for free This is the larger of: $1,000 plus the $1,050 of directly connected itemized deductions, or $2,000. Filing state tax for free Line 3 Subtract line 2 from line 1 and enter the result on this line. Filing state tax for free If zero or less, do not complete the rest of the form. Filing state tax for free However, you must still attach Form 8615 to the child's tax return. Filing state tax for free Figure the tax on the child's taxable income in the normal manner. Filing state tax for 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. Filing state tax for free Child files Form 2555 or 2555-EZ. Filing state tax for 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. Filing state tax for 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. Filing state tax for free Line 5 (Net Unearned Income) A child's net unearned income cannot be more than his or her taxable income. Filing state tax for free Enter on Form 8615, line 5, the smaller of line 3 or line 4. Filing state tax for free This is the child's net unearned income. Filing state tax for free If zero or less, do not complete the rest of the form. Filing state tax for free However, you must still attach Form 8615 to the child's tax return. Filing state tax for free Figure the tax on the child's taxable income in the normal manner. Filing state tax for free Step 2. Filing state tax for 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. Filing state tax for 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. Filing state tax for 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. Filing state tax for free For example, do not refigure the medical expense deduction. Filing state tax for free Figure the tentative tax on Form 8615, lines 6 through 13. Filing state tax for 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. Filing state tax for free If the parent's taxable income is zero or less, enter zero on line 6. Filing state tax for free Parent files Form 2555 or 2555-EZ. Filing state tax for 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. Filing state tax for 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. Filing state tax for 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. Filing state tax for free Do not include the amount from line 5 of the Form 8615 being completed. Filing state tax for 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. Filing state tax for free ) Example. Filing state tax for free Paul and Jane Persimmon have three children, Sharon, Jerry, and Mike, who must attach Form 8615 to their tax returns. Filing state tax for 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. Filing state tax for free Line 7 of Jerry's Form 8615 will show $1,800 ($800 + $1,000). Filing state tax for free Line 7 of Mike's Form 8615 will show $1,400 ($800 + $600). Filing state tax for free Other children's information not available. Filing state tax for 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. Filing state tax for free Estimates and extensions are discussed earlier under Providing Parental Information (Form 8615, Lines A–C) . Filing state tax for 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. Filing state tax for free You must determine the amount of net capital gain and qualified dividends included on this line before completing Form 8615, line 9. Filing state tax for free Net capital gain. Filing state tax for 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. Filing state tax for 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. Filing state tax for free Qualified dividends. Filing state tax for free   Qualified dividends are those dividends reported on line 9b of Form 1040 or Form 1040A, or line 10b of Form 1040NR. Filing state tax for free Net capital gain and qualified dividends on line 8. Filing state tax for 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. Filing state tax for 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. Filing state tax for 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. Filing state tax for 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. Filing state tax for free   Use the instructions for Form 8615, line 8, including the appropriate Line 5 Worksheet, to find these amounts. Filing state tax for free See the instructions for Form 8615 for more details. Filing state tax for free Note. Filing state tax for free The amount of any net capital gain or qualified dividends is not separately reported on line 8. Filing state tax for free It is  needed, however, when figuring the tax on line 9. Filing state tax for 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. Filing state tax for 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. Filing state tax for 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. Filing state tax for 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. Filing state tax for free For details, see the instructions for Form 8615, line 9. Filing state tax for 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. Filing state tax for free But if Schedule J is used to figure the tax on the parent's return, use it to figure this tax. Filing state tax for free Child files Form 2555 or 2555-EZ. Filing state tax for 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. Filing state tax for free Using the Schedule D Tax Worksheet for line 9 tax. Filing state tax for 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. Filing state tax for 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. Filing state tax for free Then figure the line 9 tax using another Schedule D Tax Worksheet. Filing state tax for free (Do not attach this Schedule D Tax Worksheet to the child's return. Filing state tax for free )   Complete this Schedule D Tax Worksheet as follows. Filing state tax for free On line 1, enter the amount from Form 8615, line 8. Filing state tax for free On line 2, enter the qualified dividends included on Form 8615, line 8. Filing state tax for free (See the earlier discussion for line 8. Filing state tax for 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. Filing state tax for 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. Filing state tax for free If applicable, include instead the smaller amount entered on the dotted line next to line 4e. Filing state tax for free On lines 5 and 6, follow the worksheet instructions. Filing state tax for free On line 7, enter the net capital gain included on Form 8615, line 8. Filing state tax for free (See the earlier discussion for line 8. Filing state tax for free ) On lines 8 through 10, follow the worksheet instructions. Filing state tax for 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). Filing state tax for 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. Filing state tax for free Figure these amounts as explained later under Figuring unrecaptured section 1250 gain (line 11) and Figuring 28% rate gain (line 11). Filing state tax for 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. Filing state tax for free Otherwise, skip steps 10, 11, and 12 below, and go to step 13. Filing state tax for free Determine whether there is a line 8 capital gain excess as follows. Filing state tax for 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. Filing state tax for 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. Filing state tax for free ) Subtract (a) from the amount on line 1 of this Schedule D Tax Worksheet. Filing state tax for free Subtract (b) from the amount on line 10 of this Schedule D Tax Worksheet. Filing state tax for free If the result is more than zero, that amount is the line 8 capital gain excess. Filing state tax for free If the result is zero or less, there is no line 8 capital gain excess. Filing state tax for free If there is no line 8 capital gain excess, skip step 12 below and go to step 13. Filing state tax for 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. Filing state tax for free (These modifications are to be made only for purposes of filling out this additional Schedule D Tax Worksheet. Filing state tax for free ) Reduce the amount you would otherwise enter on line 9 (but not below zero) by the line 8 capital gain excess. Filing state tax for 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. Filing state tax for 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. Filing state tax for 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. Filing state tax for free Complete lines 12 through 45 following the worksheet instructions. Filing state tax for free Use the parent's filing status to complete lines 15, 42, and 44. Filing state tax for 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