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How To Do Military Taxes

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How To Do Military Taxes

How to do military taxes 2. How to do military taxes   Possession Source Income Table of Contents Types of IncomeCompensation for Labor or Personal Services Investment Income Sales or Other Dispositions of Property Scholarships, Fellowships, Grants, Prizes, and Awards Effectively Connected Income In order to determine where to file your return and which form(s) you need to complete, you must determine the source of each item of income you received during the tax year. How to do military taxes Income you received from sources within, or that was effectively connected with the conduct of a trade or business within, the relevant possession must be identified separately from U. How to do military taxes S. How to do military taxes or foreign source income. How to do military taxes This chapter discusses the rules for determining if the source of your income is from: American Samoa, The Commonwealth of the Northern Mariana Islands (CNMI), The Commonwealth of Puerto Rico (Puerto Rico), Guam, or The U. How to do military taxes S. How to do military taxes Virgin Islands (USVI). How to do military taxes Generally, the same rules that apply for determining U. How to do military taxes S. How to do military taxes source income also apply for determining possession source income. How to do military taxes However, there are some important exceptions to these rules. How to do military taxes Both the general rules and the exceptions are discussed in this chapter. How to do military taxes U. How to do military taxes S. How to do military taxes income rule. How to do military taxes   This rule states that income is not possession source income if, under the rules of Internal Revenue Code sections 861–865, it is treated as income: From sources within the United States, or Effectively connected with the conduct of a trade or business within the United States. How to do military taxes Table 2-1 shows the general rules for determining whether income is from sources within the United States. How to do military taxes Table 2-1. How to do military taxes General Rules for Determining U. How to do military taxes S. How to do military taxes Source of Income Item of Income Factor Determining Source Salaries, wages, and other compensation for labor or personal services Where labor or services performed Pensions Contributions: Where services were performed that earned the pension Investment earnings: Where pension trust is located Interest Residence of payer Dividends Where corporation created or organized Rents Location of property Royalties:   Natural resources Location of property Patents, copyrights, etc. How to do military taxes Where property is used Sale of business inventory—purchased Where sold Sale of business inventory—produced Allocation if produced and sold in different locations Sale of real property Location of property Sale of personal property Seller's tax home (but see Special Rules for Gains From Dispositions of Certain Property , later, for exceptions) Sale of natural resources Allocation based on fair market value of product at export terminal. How to do military taxes For more information, see Regulations section 1. How to do military taxes 863-1(b). How to do military taxes Types of Income This section looks at the most common types of income received by individuals, and the rules for determining the source of the income. How to do military taxes Generally, the same rules shown in Table 2-1 are used to determine if you have possession source income. How to do military taxes Compensation for Labor or Personal Services Income from labor or personal services includes wages, salaries, commissions, fees, per diem allowances, employee allowances and bonuses, and fringe benefits. How to do military taxes It also includes income earned by sole proprietors and general partners from providing personal services in the course of their trade or business. How to do military taxes Services performed wholly within a relevant possession. How to do military taxes   Generally, all pay you receive for services performed in a relevant possession is considered to be from sources within that possession. How to do military taxes However, there is an exception for income earned as a member of the U. How to do military taxes S. How to do military taxes Armed Forces or a civilian spouse. How to do military taxes U. How to do military taxes S. How to do military taxes Armed Forces. How to do military taxes   If you are a bona fide resident of a relevant possession, your military service pay will be sourced in that possession even if you perform the services in the United States or another possession. How to do military taxes However, if you are not a bona fide resident of a possession, your military service pay will be income from the  United States even if you perform services in a possession. How to do military taxes Civilian spouse of active duty member of the U. How to do military taxes S. How to do military taxes Armed Forces. How to do military taxes   If you are a bona fide resident of a U. How to do military taxes S. How to do military taxes possession and choose to keep that possession as your tax residence under MSRRA when relocating with your servicemember spouse under military orders, the source of income for your labor or personal services is considered to be that possession. How to do military taxes Likewise, if your tax residence is in one of the 50 states or the District of Columbia before relocating and you choose to keep it as your tax residence, the source of income for services performed in any of the U. How to do military taxes S. How to do military taxes possessions is considered to be the United States and, specifically, your state of residence or the District of Columbia. How to do military taxes Services performed partly inside and partly outside a relevant possession. How to do military taxes   If you are an employee and receive compensation for labor or personal services performed both inside and outside the relevant possession, special rules apply in determining the source of the compensation. How to do military taxes Compensation (other than certain fringe benefits) is sourced on a time basis. How to do military taxes Certain fringe benefits (such as housing and education) are sourced on a geographical basis. How to do military taxes   Or, you may be permitted to use an alternative basis to determine the source of compensation. How to do military taxes See Alternative basis , later. How to do military taxes   If you are self-employed, determine the source of your income for labor or personal services from self-employment on the basis that most correctly reflects the proper source of that income under the facts and circumstances of your particular case. How to do military taxes In many cases, the facts and circumstances will call for an apportionment on a time basis as explained next. How to do military taxes Time basis. How to do military taxes   Use a time basis to figure your compensation for labor or personal services from the relevant possession (other than the fringe benefits discussed later). How to do military taxes Do this by multiplying your total compensation (other than the fringe benefits discussed later) by the following fraction:   Number of days you performed  services in the relevant  possession during the year     Total number of days you  performed services during the year           You can use a unit of time less than a day in the above fraction, if appropriate. How to do military taxes The time period for which the income is made does not have to be a year. How to do military taxes Instead, you can use another distinct, separate, and continuous time period if you can establish to the satisfaction of the IRS that this other period is more appropriate. How to do military taxes Example. How to do military taxes In 2013, you worked in your employer's office in the United States for 60 days and in the Puerto Rico office for 180 days, earning a total of $80,000 for the year. How to do military taxes Your Puerto Rico source income is $60,000, figured as follows. How to do military taxes       180 days 240 days × $80,000 = $60,000                 Multi-year compensation. How to do military taxes   The source of multi-year compensation is generally determined on a time basis over the period to which the compensation is attributable. How to do military taxes Multi-year compensation is compensation that is included in your income in 1 tax year but is attributable to a period that includes 2 or more tax years. How to do military taxes You determine the period to which the income is attributable based on the facts and circumstances of your case. How to do military taxes For more information on multi-year compensation, see Treasury Decision (T. How to do military taxes D. How to do military taxes ) 9212 and Regulations section 1. How to do military taxes 861-4, 2005-35 I. How to do military taxes R. How to do military taxes B. How to do military taxes 429, available at www. How to do military taxes irs. How to do military taxes gov/irb/2005-35_IRB/ar14. How to do military taxes html. How to do military taxes Certain fringe benefits sourced on a geographical basis. How to do military taxes   If you received any of the following fringe benefits as compensation for labor or services performed as an employee partly inside and partly outside a relevant possession, you must source that income on a geographical basis. How to do military taxes Housing. How to do military taxes Education. How to do military taxes Local transportation. How to do military taxes Tax reimbursement. How to do military taxes Hazardous or hardship duty pay. How to do military taxes Moving expense reimbursement. How to do military taxes For information on determining the source of the fringe benefits listed above, see Regulations section 1. How to do military taxes 861-4. How to do military taxes Alternative basis. How to do military taxes   You can determine the source of your compensation under an alternative basis if you establish to the satisfaction of the IRS that, under the facts and circumstances of your case, the alternative basis more properly determines the source of your income than the time or geographical basis. How to do military taxes If you use an alternative basis, you must keep (and have available for inspection) records to document why the alternative basis more properly determines the source of your income. How to do military taxes De minimis exception. How to do military taxes   There is an exception to the rule for determining the source of income earned in a possession. How to do military taxes Generally, you will not have income from a possession if during a tax year you: Are a U. How to do military taxes S. How to do military taxes citizen or resident, Are not a bona fide resident of that possession, Are not employed by or under contract with an individual, partnership, or corporation that is engaged in a trade or business in that possession, Temporarily perform services in that possession for 90 days or less, and Earned $3,000 or less from such services. How to do military taxes This exception began with income earned during your 2008 tax year. How to do military taxes Pensions. How to do military taxes   Generally, pension income has two components: contributions to the pension plan and the earnings accrued from investing those contributions. How to do military taxes The contribution portion is sourced according to where services were performed that earned the pension. How to do military taxes The investment earnings portion is sourced according to the location of the pension trust. How to do military taxes Example. How to do military taxes You are a U. How to do military taxes S. How to do military taxes citizen who worked in Puerto Rico for a U. How to do military taxes S. How to do military taxes company. How to do military taxes All services were performed in Puerto Rico. How to do military taxes Upon retirement you remained in Puerto Rico and began receiving your pension from the U. How to do military taxes S. How to do military taxes pension trust of your employer. How to do military taxes Distributions from the U. How to do military taxes S. How to do military taxes pension trust must be allocated between (1) contributions, which are Puerto Rico source income, and (2) investment earnings, which are U. How to do military taxes S. How to do military taxes source income. How to do military taxes Investment Income This category includes such income as interest, dividends, rents, and royalties. How to do military taxes Interest income. How to do military taxes   The source of interest income is generally determined by the residence of the payer. How to do military taxes Interest paid by corporations created or organized in a relevant possession (possession corporation) or by individuals who are bona fide residents of a relevant possession is considered income from sources within that possession. How to do military taxes   However, there is an exception to this rule if you are a bona fide resident of a relevant possession, receive interest from a corporation created or organized in that possession, and are a shareholder of that corporation who owns, directly or indirectly, at least 10% of the total voting stock of the corporation. How to do military taxes See Regulations section 1. How to do military taxes 937-2(i) for more information. How to do military taxes Dividends. How to do military taxes   Generally, dividends paid by a corporation created or organized in a relevant possession will be considered income from sources within that possession. How to do military taxes There are additional rules for bona fide residents of a relevant possession who receive dividend income from possession corporations, and who own, directly or indirectly, at least 10% of the voting stock of the corporation. How to do military taxes For more information, see Regulations section 1. How to do military taxes 937-2(g). How to do military taxes Rental income. How to do military taxes   Rents from property located in a relevant possession are treated as income from sources within that possession. How to do military taxes Royalties. How to do military taxes   Royalties from natural resources located in a relevant possession are considered income from sources within that possession. How to do military taxes   Also considered possession source income are royalties received for the use of, or for the privilege of using, in a relevant possession, patents, copyrights, secret processes and formulas, goodwill, trademarks, trade brands, franchises, and other like property. How to do military taxes Sales or Other Dispositions of Property The source rules for sales or other dispositions of property are varied. How to do military taxes The most common situations are discussed below. How to do military taxes Real property. How to do military taxes   Real property includes land and buildings, and generally anything built on, growing on, or attached to land. How to do military taxes The location of the property generally determines the source of income from the sale. How to do military taxes For example, if you are a bona fide resident of Guam and sell your home that is located in Guam, the gain on the sale is sourced in Guam. How to do military taxes If, however, the home you sold was located in the United States, the gain is U. How to do military taxes S. How to do military taxes source income. How to do military taxes Personal property. How to do military taxes   The term “personal property” refers to property (such as machinery, equipment, or furniture) that is not real property. How to do military taxes Generally, gain (or loss) from the sale or other disposition is sourced according to the seller's tax home. How to do military taxes If personal property is sold by a bona fide resident of a relevant possession, the gain (or loss) from the sale is treated as sourced within that possession. How to do military taxes   This rule does not apply to the sale of inventory, intangible property, depreciable personal property, or property sold through a foreign office or fixed place of business. How to do military taxes The rules applying to sales of inventory are discussed below. How to do military taxes For information on sales of the other types of property mentioned, see Internal Revenue Code section 865. How to do military taxes Inventory. How to do military taxes   Your inventory is personal property that is stock in trade or that is held primarily for sale to customers in the ordinary course of your trade or business. How to do military taxes The source of income from the sale of inventory depends on whether the inventory was purchased or produced. How to do military taxes Purchased. How to do military taxes   Income from the sale of inventory that you purchased is sourced where you sell the property. How to do military taxes Generally, this is where title to the property passes to the buyer. How to do military taxes Produced. How to do military taxes   Income from the sale of inventory that you produced in a relevant possession and sold outside that possession (or vice versa) is sourced based on an allocation. How to do military taxes For information on making the allocation, see Regulations section 1. How to do military taxes 863-3(f). How to do military taxes Special Rules for Gains From Dispositions of Certain Property There are special rules for gains from dispositions of certain investment property (for example, stocks, bonds, debt instruments, diamonds, and gold) owned by a U. How to do military taxes S. How to do military taxes citizen or resident alien prior to becoming a bona fide resident of a possession. How to do military taxes You are subject to these special rules if you meet both of the following conditions. How to do military taxes For the tax year for which the source of the gain must be determined, you are a bona fide resident of the relevant possession. How to do military taxes For any of the 10 years preceding that year, you were a citizen or resident alien of the United States (other than a bona fide resident of the relevant possession). How to do military taxes If you meet these conditions, gains from the disposition of this property will not be treated as income from sources within the relevant possession for purposes of the Internal Revenue Code. How to do military taxes Accordingly, bona fide residents of American Samoa and Puerto Rico, for example, may not exclude the gain on their U. How to do military taxes S. How to do military taxes tax return. How to do military taxes (See chapter 3 for additional filing information. How to do military taxes ) With respect to the CNMI, Guam, and the USVI, the gain from the disposition of this property will not meet the requirements for certain tax rules that may allow bona fide residents of those possessions to reduce or obtain a rebate of taxes on income from sources within the relevant possessions. How to do military taxes These rules apply to dispositions after April 11, 2005. How to do military taxes For details, see Regulations section 1. How to do military taxes 937-2(f)(1) and Examples 1 and 2 of section 1. How to do military taxes 937-2(k). How to do military taxes Example 1. How to do military taxes In 2007, Cheryl Jones, a U. How to do military taxes S. How to do military taxes citizen, lived in the United States and paid $1,000 for 100 shares of stock in the Rose Corporation, a U. How to do military taxes S. How to do military taxes corporation listed on the New York Stock Exchange. How to do military taxes On March 1, 2010, she moved to Puerto Rico and changed her tax home to Puerto Rico on the same date. How to do military taxes Cheryl satisfied the presence test in 2010 and, under the year-of-move exception, she was considered a bona fide resident of Puerto Rico for the rest of 2010. How to do military taxes On March 1, 2010, the closing value of Cheryl's stock in the Rose Corporation was $2,000. How to do military taxes On January 5, 2013, while still a bona fide resident of Puerto Rico, Cheryl sold all her Rose Corporation stock for $7,000. How to do military taxes Under the earlier rules, none of Cheryl's $6,000 gain will be treated as income from sources within Puerto Rico. How to do military taxes The source rules discussed in the preceding paragraphs supplement, and may apply in conjunction with, an existing special rule. How to do military taxes This existing special rule applies if you are a U. How to do military taxes S. How to do military taxes citizen or resident alien who becomes a bona fide resident of American Samoa, the CNMI, or Guam, and who has gain from the disposition of certain U. How to do military taxes S. How to do military taxes assets during the 10-year period beginning when you became a bona fide resident. How to do military taxes The gain is U. How to do military taxes S. How to do military taxes source income that generally is subject to U. How to do military taxes S. How to do military taxes tax if the property is either (1) located in the United States; (2) stock issued by a U. How to do military taxes S. How to do military taxes corporation or a debt obligation of a U. How to do military taxes S. How to do military taxes person or of the United States, a state (or political subdivision), or the District of Columbia; or (3) property that has a basis in whole or in part by reference to property described in (1) or (2). How to do military taxes See chapter 3 for filing information. How to do military taxes Special election. How to do military taxes   For dispositions after April 11, 2005, you can choose to treat the part of gain (or loss) attributable to the time you held the property while a bona fide resident of the relevant possession (the possession holding period) as gain (or loss) from sources within that possession. How to do military taxes Make the election by reporting the gain attributable to the possession holding period on your income tax return for the year of disposition. How to do military taxes This election overrides both of the special rules discussed earlier. How to do military taxes   There are two methods for figuring the gain for the possession holding period, one for marketable securities and another for other types of investment property. How to do military taxes Marketable securities. How to do military taxes   Marketable securities are those actively traded on an established financial market, such as stock in a publicly held corporation. How to do military taxes Under the special election, allocate the gain (or loss) by figuring the appreciation separately for your possession and U. How to do military taxes S. How to do military taxes holding periods. How to do military taxes   Your possession holding period begins on the first day you do not have a tax home outside the relevant possession. How to do military taxes The gain (or loss) attributable to the possession holding period is the difference in fair market value of the security at the close of the market on the first and last days of this holding period. How to do military taxes This is your gain (or loss) that is treated as being from sources within the relevant possession. How to do military taxes If you were a bona fide resident of the relevant possession for more than one continuous period, combine the gains (or losses) from each possession holding period. How to do military taxes Example 2. How to do military taxes Assume the same facts as in Example 1, except that Cheryl makes the special election to allocate the gain between her U. How to do military taxes S. How to do military taxes and possession holding periods. How to do military taxes Cheryl's possession holding period began March 1, 2010, the date her tax home changed to Puerto Rico. How to do military taxes Therefore, the portion of gain attributable to her possession holding period is $5,000 ($7,000 sale price – $2,000 closing value on first day of the possession holding period). How to do military taxes By reporting $5,000 of her $6,000 gain as Puerto Rico source income on her 2013 Puerto Rico tax return (and the remainder as non-Puerto Rico source income), Cheryl elects to treat that amount as Puerto Rico source income. How to do military taxes Other personal property. How to do military taxes   For personal property other than marketable securities, use a time-based allocation. How to do military taxes Figure the gain (or loss) attributable to the possession holding period by multiplying your total gain (or loss) by the following fraction. How to do military taxes      Number of days in the  possession holding period     Total number of days  in your holding period         The result is your gain (or loss) that is treated as being from sources within the relevant possession. How to do military taxes Example 3. How to do military taxes In addition to the stock in Rose Corporation, Cheryl acquired a 5% interest in the Alder Partnership on January 1, 2009. How to do military taxes On March 1, 2010, when she established bona fide residency in Puerto Rico, her partnership interest was not considered a marketable security. How to do military taxes On September 16, 2013, while still a bona fide resident of Puerto Rico, Cheryl sold her interest in Alder Partnership for a $100,000 gain. How to do military taxes She had owned the interest for a total of 1,720 days. How to do military taxes Cheryl's possession holding period (from March 1, 2010, through September 16, 2013) is 1,296 days. How to do military taxes The portion of her gain attributable to Puerto Rico is $75,349 ($100,000 x (1,296 Puerto Rico days ÷ 1,720 total days)). How to do military taxes By reporting $75,349 of her $100,000 gain as Puerto Rico source income on her 2013 Puerto Rico tax return (and the remainder as non-Puerto Rico source income), Cheryl elects to treat that amount as Puerto Rico source income. How to do military taxes Scholarships, Fellowships, Grants, Prizes, and Awards The source of these types of income is generally the residence of the payer, regardless of who actually disburses the funds. How to do military taxes Therefore, in order to be possession source income, the payer must be a resident of the relevant possession, such as an individual who is a bona fide resident or a corporation created or organized in that possession. How to do military taxes These rules do not apply to amounts paid as salary or other compensation for services. How to do military taxes See Compensation for Labor or Personal Services, earlier in this chapter, for the source rules that apply. How to do military taxes Effectively Connected Income In limited circumstances, some kinds of income from sources outside the relevant possession must be treated as effectively connected with a trade or business in that possession. How to do military taxes These circumstances are listed below. How to do military taxes You have an office or other fixed place of business in the relevant possession to which the income can be attributed. How to do military taxes That office or place of business is a material factor in producing the income. How to do military taxes The income is produced in the ordinary course of the trade or business carried on through that office or other fixed place of business. How to do military taxes An office or other fixed place of business is a material factor if it significantly contributes to, and is an essential economic element in, the earning of the income. How to do military taxes The three kinds of income from sources outside the relevant possession to which these rules apply are the following. How to do military taxes Rents and royalties for the use of, or for the privilege of using, intangible personal property located outside the relevant possession or from any interest in such property. How to do military taxes Included are rents or royalties for the use of, or for the privilege of using, outside the relevant possession, patents, copyrights, secret processes and formulas, goodwill, trademarks, trade brands, franchises, and similar properties if the rents or royalties are from the active conduct of a trade or business in the relevant possession. How to do military taxes Dividends or interest from the active conduct of a banking, financing, or similar business in the relevant possession. How to do military taxes Income, gain, or loss from the sale or exchange outside the relevant possession, through the office or other fixed place of business in the relevant possession, of: Stock in trade, Property that would be included in inventory if on hand at the end of the tax year, or Property held primarily for sale to customers in the ordinary course of business. How to do military taxes Item (3) will not apply if you sold the property for use, consumption, or disposition outside the relevant possession and an office or other fixed place of business in a foreign country was a material factor in the sale. How to do military taxes Example. How to do military taxes Marcy Jackson is a bona fide resident of American Samoa. How to do military taxes Her business, which she conducts from an office in American Samoa, is developing and selling specialized computer software. How to do military taxes A software purchaser will frequently pay Marcy an additional amount to install the software on the purchaser's operating system and to ensure that the software is functioning properly. How to do military taxes Marcy installs the software at the purchaser's place of business, which may be in American Samoa, in the United States, or in another country. How to do military taxes The income from selling the software is effectively connected with the conduct of Marcy's business in American Samoa, even though the product's destination may be outside the possession. How to do military taxes However, the compensation she receives for installing the software (personal services) outside of American Samoa is not effectively connected with the conduct of her business in the possession—the income is sourced where she performs the services. How to do military taxes Prev  Up  Next   Home   More Online Publications
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Understanding Your CP232C Notice

We denied your request to extend the time to file Form 5330 because your Form 5558, Application for Extension of Time To File Certain Employee Plan Returns, wasn't signed or was signed by someone who wasn’t authorized.


What you need to do

  • File Form 5330 or a correct Form 5558 by the due date of the Form 5330. If Form 5330 is filed after the due date of the return (including any extension), the return will be considered late and subject to late filing penalties.

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Answers to Common Questions

Q. Where can I go for more information about Employee Benefit Plans?

A. For more information on Employee Benefit Plans, see Retirement Plans Community.

Q. Can I get help over the phone?

A. If you have questions and/or need help, please 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

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  • Review the Form 5558 resources at Form 5500 Corner.

 

Page Last Reviewed or Updated: 27-Jan-2014

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The How To Do Military Taxes

How to do military taxes Publication 929 - Main Content Table of Contents Part 1. How to do military taxes 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. How to do military taxes Designated as representative. How to do military taxes IRS notice. How to do military taxes Standard DeductionStandard Deduction of Zero Dependent's Own Exemption Withholding From WagesExceptions. How to do military taxes Part 2. How to do military taxes 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. How to do military taxes Figuring the Child's Net Unearned Income (Form 8615, Part I) Step 2. How to do military taxes Figuring a Tentative Tax at the Parent's Tax Rate (Form 8615, Part II) Step 3. How to do military taxes Figuring the Child's Tax (Form 8615, Part III) Alternative Minimum Tax Illustrated Example Part 1. How to do military taxes 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. How to do military taxes 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. How to do military taxes 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. How to do military taxes See Other Filing Requirements, later. How to do military taxes The following sections apply to dependents with: Earned income only, Unearned income only, and Both earned and unearned income. How to do military taxes  To find out whether a dependent must file, read the section that applies, or use Table 1. How to do military taxes 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. How to do military taxes 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). How to do military taxes Example. How to do military taxes William is 16. How to do military taxes His mother claims an exemption for him on her income tax return. How to do military taxes He worked part time on weekends during the school year and full time during the summer. How to do military taxes He earned $7,000 in wages. How to do military taxes He did not have any unearned income. How to do military taxes He must file a tax return because he has earned income only and his gross income is more than $6,100. How to do military taxes If he is blind, he does not have to file a return because his gross income is not more than $7,600. How to do military taxes 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. How to do military taxes 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). How to do military taxes Example. How to do military taxes Sarah is 18 and single. How to do military taxes Her parents can claim an exemption for her on their income tax return. How to do military taxes She received $1,970 of taxable interest and dividend income. How to do military taxes She did not work during the year. How to do military taxes She must file a tax return because she has unearned income only and her gross income is more than $1,000. How to do military taxes 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. How to do military taxes Election to report child's unearned income on parent's return. How to do military taxes   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. How to do military taxes See Parent's Election To Report Child's Interest and Dividends in Part 2. How to do military taxes If the parent makes this election, the child does not have to file a return. How to do military taxes 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. How to do military taxes Filing Requirement Worksheet for Most Dependents 1. How to do military taxes Enter dependent's earned income plus $350     2. How to do military taxes Minimum amount   $1,000 3. How to do military taxes Compare lines 1 and 2. How to do military taxes Enter the larger amount     4. How to do military taxes Maximum amount   6,100 5. How to do military taxes Compare lines 3 and 4. How to do military taxes Enter the smaller amount     6. How to do military taxes Enter the dependent's gross income. How to do military taxes If line 6 is more than line 5, the dependent must file an income tax return. How to do military taxes 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. How to do military taxes       Table 1. How to do military taxes 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. How to do military taxes   See the definitions of “dependent,”“earned income,”“unearned income,” and “gross income” in the Glossary. How to do military taxes   Single dependents—Were you either age 65 or older or blind?     No. How to do military taxes You must file a return if any of the following apply. How to do military taxes       Your unearned income was over $1,000. How to do military taxes Your earned income was over $6,100. How to do military taxes Your gross income was more than the larger of—       $1,000, or Your earned income (up to $5,750) plus $350. How to do military taxes         Yes. How to do military taxes You must file a return if any of the following apply. How to do military taxes     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). How to do military taxes       Married dependents—Were you either age 65 or older or blind?     No. How to do military taxes You must file a return if any of the following apply. How to do military taxes       Your gross income was at least $5 and your spouse files a separate return and itemizes deductions. How to do military taxes Your unearned income was over $1,000. How to do military taxes Your earned income was over $6,100. How to do military taxes Your gross income was more than the larger of—       $1,000, or Your earned income (up to $5,750) plus $350. How to do military taxes       Yes. How to do military taxes You must file a return if any of the following apply. How to do military taxes       Your gross income was at least $5 and your spouse files a separate return and itemizes deductions. How to do military taxes 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). How to do military taxes       Example 1. How to do military taxes Joe is 20, single, not blind, and a full-time college student. How to do military taxes He does not provide more than half of his own support, and his parents claim an exemption for him on their income tax return. How to do military taxes He received $200 taxable interest income and earned $2,750 from a part-time job. How to do military taxes 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). How to do military taxes Filled-in Example 1 Filing Requirement Worksheet  for Most Dependents 1. How to do military taxes Enter dependent's earned income plus $350   $ 3,100 2. How to do military taxes Minimum amount   1,000 3. How to do military taxes Compare lines 1 and 2. How to do military taxes Enter the larger amount   3,100 4. How to do military taxes Maximum amount   6,100 5. How to do military taxes Compare lines 3 and 4. How to do military taxes Enter the smaller amount   3,100 6. How to do military taxes Enter the dependent's gross income. How to do military taxes If line 6 is more than line 5, the dependent must file an income tax return. How to do military taxes 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. How to do military taxes   $ 2,950   Example 2. How to do military taxes The facts are the same as in Example 1 except that Joe had $600 taxable interest income. How to do military taxes 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). How to do military taxes Filled-in Example 2 Filing Requirement Worksheet for Most Dependents 1. How to do military taxes Enter dependent's earned income plus $350   $ 3,100 2. How to do military taxes Minimum amount   1,000 3. How to do military taxes Compare lines 1 and 2. How to do military taxes Enter the larger amount   3,100 4. How to do military taxes Maximum amount   6,100 5. How to do military taxes Compare lines 3 and 4. How to do military taxes Enter the smaller amount   3,100 6. How to do military taxes Enter the dependent's gross income. How to do military taxes If line 6 is more than line 5, the dependent must file an income tax return. How to do military taxes 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. How to do military taxes   $ 3,350   Age 65 or older or blind. How to do military taxes 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. How to do military taxes Filing Requirement Worksheet  for Dependents Who Are Age 65 or Older or Blind 1. How to do military taxes Enter dependent's earned income plus $350     2. How to do military taxes Minimum amount   $1,000 3. How to do military taxes Compare lines 1 and 2. How to do military taxes Enter the larger amount     4. How to do military taxes Maximum amount   6,100 5. How to do military taxes Compare lines 3 and 4. How to do military taxes Enter the smaller amount     6. How to do military taxes 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. How to do military taxes Add lines 5 and 6. How to do military taxes Enter the total     8. How to do military taxes Enter the dependent's gross income. How to do military taxes If line 8 is more than line 7, the dependent must file an income tax return. How to do military taxes 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. How to do military taxes The facts are the same as in Example 2 except that Joe is also blind. How to do military taxes 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). How to do military taxes   Filled-in Example 3 Filing Requirement Worksheet  for Dependents Who Are Age 65 or Older or Blind 1. How to do military taxes Enter dependent's earned income plus $350   $3,100 2. How to do military taxes Minimum amount   1,000 3. How to do military taxes Compare lines 1 and 2. How to do military taxes Enter the larger amount   3,100 4. How to do military taxes Maximum amount   6,100 5. How to do military taxes Compare lines 3 and 4. How to do military taxes Enter the smaller amount   3,100 6. How to do military taxes 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. How to do military taxes Add lines 5 and 6. How to do military taxes Enter the total   4,600 8. How to do military taxes Enter the dependent's gross income. How to do military taxes If line 8 is more than line 7, the dependent must file an income tax return. How to do military taxes 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. How to do military taxes 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. How to do military taxes But if the dependent is filing a return only because of this tax, the dependent can file Form 5329 by itself. How to do military taxes A dependent must also file a tax return if he or she: Had wages of $108. How to do military taxes 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. How to do military taxes Spouse itemizes. How to do military taxes   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). How to do military taxes 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. How to do military taxes Income tax was withheld from his or her income. How to do military taxes He or she qualifies for the earned income credit, additional child tax credit, health coverage tax credit, or refundable American opportunity education credit. How to do military taxes See the tax return instructions to find out who qualifies for these credits. How to do military taxes  By filing a return, the dependent can get a refund. How to do military taxes 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. How to do military taxes 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. How to do military taxes Signing the child's return. How to do military taxes   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. How to do military taxes ” Authority of parent or guardian. How to do military taxes   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. How to do military taxes   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. How to do military taxes 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. How to do military taxes Third party designee. How to do military taxes   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. How to do military taxes 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. How to do military taxes   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. How to do military taxes 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. How to do military taxes See the return instructions for more information. How to do military taxes Designated as representative. How to do military taxes   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. How to do military taxes Form 2848, Power of Attorney and Declaration of Representative, is used to designate a child's representative. How to do military taxes See Publication 947, Practice Before the IRS and Power of Attorney, for more information. How to do military taxes   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. How to do military taxes IRS notice. How to do military taxes   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. How to do military taxes The notice will show who to contact. How to do military taxes The IRS will try to resolve the matter with the parent(s) or guardian(s) of the child consistent with their authority. How to do military taxes Child's earnings. How to do military taxes   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. How to do military taxes This is true even if, under state law, the parent has the right to the earnings and may actually have received them. How to do military taxes If the child does not pay the tax due on this income, the parent may be liable for the tax. How to do military taxes Child's expenses. How to do military taxes   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. How to do military taxes Example. How to do military taxes You made payments on your child's behalf that are deductible as a business expense and a charitable contribution. How to do military taxes You made the payments out of your child's earnings. How to do military taxes These items can be deducted only on the child's return. How to do military taxes 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). How to do military taxes However, the standard deduction may be higher for a dependent who: Is 65 or older, or Is blind. How to do military taxes Certain dependents cannot claim any standard deduction. How to do military taxes See Standard Deduction of Zero , later. How to do military taxes Worksheet 1. How to do military taxes   Use Worksheet 1 to figure the dependent's standard deduction. How to do military taxes Worksheet 1. How to do military taxes Standard Deduction Worksheet for Dependents Use this worksheet only if someone else can claim you (or your spouse, if filing jointly) as a dependent. How to do military taxes If you were 65 or older and/or blind, check the correct number of boxes below. How to do military taxes Put the total number of boxes checked in box c and go to line 1. How to do military taxes a. How to do military taxes You 65 or older   Blind   b. How to do military taxes Your spouse, if claiming  spouse's exemption 65 or older   Blind   c. How to do military taxes Total boxes checked         1. How to do military taxes Enter your earned income (defined below) plus $350. How to do military taxes If none, enter -0-. How to do military taxes 1. How to do military taxes     2. How to do military taxes Minimum amount. How to do military taxes   2. How to do military taxes $1,000   3. How to do military taxes Compare lines 1 and 2. How to do military taxes Enter the larger of the two amounts here. How to do military taxes 3. How to do military taxes     4. How to do military taxes Enter on line 4 the amount shown below for your filing status. How to do military taxes       Single or Married filing separately—$6,100 Married filing jointly—$12,200 Head of household—$8,950 4. How to do military taxes     5. How to do military taxes Standard deduction. How to do military taxes         a. How to do military taxes Compare lines 3 and 4. How to do military taxes Enter the smaller amount here. How to do military taxes If under 65 and not blind, stop here. How to do military taxes This is your standard deduction. How to do military taxes Otherwise, go on to line 5b. How to do military taxes 5a. How to do military taxes     b. How to do military taxes If 65 or older or blind, multiply $1,500 ($1,200 if married) by the number in box c above. How to do military taxes Enter the result here. How to do military taxes 5b. How to do military taxes     c. How to do military taxes Add lines 5a and 5b. How to do military taxes This is your standard deduction for 2013. How to do military taxes 5c. How to do military taxes     Earned income includes wages, salaries, tips, professional fees, and other compensation received for personal services you performed. How to do military taxes It also includes any amount received as a scholarship that you must include in income. How to do military taxes   Example 1. How to do military taxes Michael is single, age 15, and not blind. How to do military taxes His parents can claim him as a dependent on their tax return. How to do military taxes He has taxable interest income of $800 and wages of $150. How to do military taxes He enters $500 (his earned income plus $350) on line 1 of Worksheet 1. How to do military taxes On line 3, he enters $1,000, the larger of $500 or $1,000. How to do military taxes Michael enters $6,100 on line 4. How to do military taxes On line 5a, he enters $1,000, the smaller of $1,000 or $6,100. How to do military taxes His standard deduction is $1,000. How to do military taxes Example 2. How to do military taxes Judy, a full-time student, is single, age 22, and not blind. How to do military taxes Her parents can claim her as a dependent on their tax return. How to do military taxes She has dividend income of $275 and wages of $2,500. How to do military taxes She enters $2,850 (her earned income plus $350) on line 1 of Worksheet 1. How to do military taxes On line 3, she enters $2,850, the larger of $2,850 or $1,000. How to do military taxes She enters $6,100 on line 4. How to do military taxes On line 5a, she enters $2,850 (the smaller of $2,850 or $6,100) as her standard deduction. How to do military taxes Example 3. How to do military taxes Amy, who is single, is claimed as a dependent on her parents' tax return. How to do military taxes She is 18 years old and blind. How to do military taxes She has taxable interest income of $1,000 and wages of $2,000. How to do military taxes She enters $2,350 (her earned income plus $350) on line 1 of Worksheet 1. How to do military taxes 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. How to do military taxes Because Amy is blind, she checks the box for blindness and enters “1” in box c at the top of Worksheet 1. How to do military taxes She enters $1,500 (the number in box c times $1,500) on line 5b. How to do military taxes Her standard deduction on line 5c is $3,850 ($2,350 + $1,500). How to do military taxes Standard Deduction of Zero The standard deduction for the following dependents is zero. How to do military taxes A married dependent filing a separate return whose spouse itemizes deductions. How to do military taxes 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. How to do military taxes A nonresident or dual-status alien dependent, unless the dependent is married to a U. How to do military taxes S. How to do military taxes citizen or resident alien at the end of the year and chooses to be treated as a U. How to do military taxes S. How to do military taxes resident for the year. How to do military taxes See Publication 519, U. How to do military taxes S. How to do military taxes Tax Guide for Aliens, for information on making this choice. How to do military taxes Example. How to do military taxes Jennifer, who is a dependent of her parents, is entitled to file a joint return with her husband. How to do military taxes However, her husband elects to file a separate return and itemize his deductions. How to do military taxes Because he itemizes, Jennifer's standard deduction on her return is zero. How to do military taxes She can, however, itemize any of her allowable deductions. How to do military taxes 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. How to do military taxes This is true even if the other taxpayer does not actually claim the exemption. How to do military taxes Example. How to do military taxes James and Barbara can claim their child, Ben, as a dependent on their return. How to do military taxes Ben is a college student who works during the summer and must file a tax return. How to do military taxes Ben cannot claim his own exemption on his return. How to do military taxes This is true even if James and Barbara do not claim him as a dependent on their return. How to do military taxes Withholding From Wages Employers generally withhold federal income tax, social security tax, and Medicare tax from an employee's wages. How to do military taxes If the employee claims exemption from withholding on Form W-4, the employer will not withhold federal income tax. How to do military taxes The exemption from withholding does not apply to social security and Medicare taxes. How to do military taxes Conditions for exemption from withholding. How to do military taxes   An employee can claim exemption from withholding for 2014 only if he or she meets both of the following conditions. How to do military taxes For 2013, the employee had a right to a refund of all federal income tax withheld because he or she had no tax liability. How to do military taxes For 2014, the employee expects a refund of all federal income tax withheld because he or she expects to have no tax liability. How to do military taxes Dependents. How to do military taxes   An employee who is a dependent ordinarily cannot claim exemption from withholding if both of the following are true. How to do military taxes The employee's gross income will be more than $1,000, the minimum standard deduction for 2014. How to do military taxes The employee's unearned income will be more than $350. How to do military taxes Exceptions. How to do military taxes   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. How to do military taxes The above exceptions do not apply to supplemental wages greater than $1,000,000. How to do military taxes For more information, see Exemption From Withholding in chapter 1 of Publication 505. How to do military taxes Example. How to do military taxes Guy is 17 and a student. How to do military taxes During the summer he works part time at a grocery store. How to do military taxes He expects to earn about $1,200 this year. How to do military taxes 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. How to do military taxes The only other income he expects during the year is $375 interest on a savings account. How to do military taxes He expects that his parents will be able to claim him as a dependent on their tax return. How to do military taxes He is not blind and will not claim adjustments to income, itemized deductions, a higher standard deduction, or tax credits on his return. How to do military taxes 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. How to do military taxes Claiming exemption from withholding. How to do military taxes    To claim exemption from withholding, an employee must enter “Exempt” in the space provided on Form W-4, line 7. How to do military taxes The employee must complete the rest of the form, as explained in the form instructions, and give it to his or her employer. How to do military taxes Renewing an exemption from withholding. How to do military taxes   An exemption from withholding is good for only one year. How to do military taxes An employee must file a new Form W-4 by February 15 each year to continue the exemption. How to do military taxes Part 2. How to do military taxes Tax on Unearned Income of Certain Children The two rules that follow may affect the tax on the unearned income of certain children. How to do military taxes 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. How to do military taxes (See Parent's Election To Report Child's Interest and Dividends , later. How to do military taxes ) 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. How to do military taxes (See Tax for Certain Children Who Have Unearned Income , later. How to do military taxes ) For these rules, the term “child” includes a legally adopted child and a stepchild. How to do military taxes These rules apply whether or not the child is a dependent. How to do military taxes These rules do not apply if neither of the child's parents were living at the end of the year. How to do military taxes 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. How to do military taxes 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 . How to do military taxes 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. How to do military taxes Only the parent whose tax return is used can make the election described under Parent's Election To Report Child's Interest and Dividends . How to do military taxes Parents are married. How to do military taxes   If the child's parents file separate returns, use the return of the parent with the greater taxable income. How to do military taxes Parents not living together. How to do military taxes   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. How to do military taxes If the custodial parent is not considered unmarried, use the return of the parent with the greater taxable income. How to do military taxes   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. How to do military taxes Parents are divorced. How to do military taxes   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. How to do military taxes Custodial parent remarried. How to do military taxes   If the custodial parent has remarried, the stepparent (rather than the noncustodial parent) is treated as the child's other parent. How to do military taxes Therefore, if the custodial parent and the stepparent file a joint return, use that joint return. How to do military taxes Do not use the return of the noncustodial parent. How to do military taxes   If the custodial parent and the stepparent are married, but file separate returns, use the return of the one with the greater taxable income. How to do military taxes If the custodial parent and the stepparent are married but not living together, the earlier discussion under Parents not living together applies. How to do military taxes Parents never married. How to do military taxes   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. How to do military taxes If the parents did not live together all year, the rules explained earlier under Parents are divorced apply. How to do military taxes Widowed parent remarried. How to do military taxes   If a widow or widower remarries, the new spouse is treated as the child's other parent. How to do military taxes The rules explained earlier under Custodial parent remarried apply. How to do military taxes 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. How to do military taxes If you do, your child will not have to file a return. How to do military taxes You can make this election only if all the following conditions are met. How to do military taxes Your child was under age 19 (or under age 24 if a full-time student) at the end of the year. How to do military taxes Your child had income only from interest and dividends (including capital gain distributions and Alaska Permanent Fund dividends). How to do military taxes The child's gross income was less than $10,000. How to do military taxes The child is required to file a return unless you make this election. How to do military taxes The child does not file a joint return for the year. How to do military taxes 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. How to do military taxes No federal income tax was withheld from your child's income under the backup withholding rules. How to do military taxes You are the parent whose return must be used when applying the special tax rules for children. How to do military taxes (See Which Parent's Return To Use , earlier. How to do military taxes ) These conditions are also shown in Figure 1. How to do military taxes Certain January 1 birthdays. How to do military taxes   A child born on January 1, 1995, is considered to be age 19 at the end of 2013. How to do military taxes You cannot make this election for such a child unless the child was a full-time student. How to do military taxes   A child born on January 1, 1990, is considered to be age 24 at the end of 2013. How to do military taxes You cannot make this election for such a child. How to do military taxes How to make the election. How to do military taxes    Make the election by attaching Form 8814 to your Form 1040 or Form 1040NR. How to do military taxes (If you make this election, you cannot file Form 1040A or Form 1040EZ. How to do military taxes ) Attach a separate Form 8814 for each child for whom you make the election. How to do military taxes You can make the election for one or more children and not for others. How to do military taxes Effect of Making the Election The federal income tax on your child's income may be more if you make the Form 8814 election. How to do military taxes Rate may be higher. How to do military taxes   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. How to do military taxes This is because the tax rate on the child's income between $1,000 and $2,000 is 10% if you make this election. How to do military taxes 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. How to do military taxes Deductions you cannot take. How to do military taxes   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. How to do military taxes The additional standard deduction if the child is blind. How to do military taxes The deduction for a penalty on an early withdrawal of your child's savings. How to do military taxes Itemized deductions (such as your child's investment expenses or charitable contributions). How to do military taxes Figure 1. How to do military taxes Can You Include Your Child's Income On Your Tax Return? Please click here for the text description of the image. How to do military taxes Figure 1. How to do military taxes Can You Include Your Child's Income On Your Tax Return? Deductible investment interest. How to do military taxes   If you use Form 8814, your child's unearned income is considered your unearned income. How to do military taxes To figure the limit on your deductible investment interest, add the child's unearned income to yours. How to do military taxes 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. How to do military taxes Alternative minimum tax. How to do military taxes    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. How to do military taxes If it is, you must include it with your own tax preference items when figuring your AMT. How to do military taxes See Form 6251, Alternative Minimum Tax—Individuals, and its instructions for details. How to do military taxes Reduced deductions or credits. How to do military taxes   If you use Form 8814, your increased adjusted gross income may reduce certain deductions or credits on your return, including the following. How to do military taxes Deduction for contributions to a traditional individual retirement arrangement (IRA). How to do military taxes Deduction for student loan interest. How to do military taxes Itemized deductions for medical expenses, casualty and theft losses, and certain miscellaneous expenses. How to do military taxes Credit for child and dependent care expenses. How to do military taxes Child tax credit. How to do military taxes Education tax credits. How to do military taxes Earned income credit. How to do military taxes Penalty for underpayment of estimated tax. How to do military taxes   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. How to do military taxes 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. How to do military taxes Get Publication 505 for more information. How to do military taxes Figuring Child's Income Use Form 8814, Part I, to figure your child's interest and dividend income to report on your return. How to do military taxes Only the amount over $2,000 is added to your income. How to do military taxes The amount over $2,000 is shown on Form 8814, line 6. How to do military taxes Unless the child's income includes qualified dividends or capital gain distributions (discussed next), the same amount is shown on Form 8814, line 12. How to do military taxes Include the amount from Form 8814, line 12, on Form 1040 or Form 1040NR, line 21. How to do military taxes 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. How to do military taxes On the dotted line next to line 21, enter “Form 8814” and the total of the Form 8814, line 12 amounts. How to do military taxes Note. How to do military taxes The tax on the first $2,000 is figured on Form 8814, Part II. How to do military taxes See Figuring Additional Tax , later. How to do military taxes Qualified dividends. How to do military taxes   Enter on Form 8814, line 2a, any ordinary dividends your child received. How to do military taxes This amount may include qualified dividends. How to do military taxes 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. How to do military taxes For detailed information about qualified dividends, see Publication 550. How to do military taxes   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. How to do military taxes You do not include these dividends on Form 8814, line 12, or on line 21 of Form 1040 or Form 1040NR. How to do military taxes   Enter the child's qualified dividends on Form 8814, line 2b. How to do military taxes But do not include this amount on Form 1040, lines 9a and 9b, or Form 1040NR, lines 10a and 10b. How to do military taxes Instead, include the amount from Form 8814, line 9, on Form 1040, lines 9a and 9b, or Form 1040NR, lines 10a and 10b. How to do military taxes (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. How to do military taxes ) Capital gain distributions. How to do military taxes   Enter on Form 8814, line 3, any capital gain distributions your child received. How to do military taxes 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. How to do military taxes You do not include it on Form 8814, line 12, or on line 21 of Form 1040 or Form 1040NR. How to do military taxes   Include the amount from Form 8814, line 10, on Schedule D, line 13; Form 1040, line 13; or Form 1040NR, line 14, whichever applies. How to do military taxes (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. How to do military taxes ) Collectibles (28% rate) gain. How to do military taxes    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. How to do military taxes Multiply the child's capital gain distribution included on Schedule D, line 13, by a fraction. How to do military taxes The numerator is the part of the child's total capital gain distribution that is collectibles (28% rate) gain. How to do military taxes The denominator is the child's total capital gain distribution. How to do military taxes Enter the result on line 4 of the 28% Rate Gain Worksheet. How to do military taxes Unrecaptured section 1250 gain. How to do military taxes   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. How to do military taxes Multiply the child's capital gain distribution included on Schedule D, line 13, by a fraction. How to do military taxes The numerator is the part of the child's total capital gain distribution that is unrecaptured section 1250 gain. How to do military taxes The denominator is the child's total capital gain distribution. How to do military taxes Enter the result on the Unrecaptured Section 1250 Gain Worksheet, line 11. How to do military taxes Section 1202 gain. How to do military taxes   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. How to do military taxes (For information about the exclusion, see chapter 4 of Publication 550. How to do military taxes ) To figure that part, multiply the child's capital gain distribution included on Schedule D, line 13, by a fraction. How to do military taxes The numerator is the part of the child's total capital gain distribution that is section 1202 gain. How to do military taxes The denominator is the child's total capital gain distribution. How to do military taxes Your section 1202 exclusion is generally 50% of the result, but may be subject to a limit. How to do military taxes In some cases, the exclusion is more than 50%. How to do military taxes See the instructions for Schedule D for details and information on how to report the exclusion amount. How to do military taxes Example. How to do military taxes Fred is 6 years old. How to do military taxes 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. How to do military taxes (None of the distributions were reported on Form 1099-DIV as unrecaptured section 1250 gain, section 1202 gain, or collectibles (28% rate) gain. How to do military taxes ) All of the ordinary dividends are qualified dividends. How to do military taxes He has no other income and is not subject to backup withholding. How to do military taxes No estimated tax payments were made under his name and social security number. How to do military taxes Fred's parents elect to include Fred's income on their tax return instead of filing a return for him. How to do military taxes 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. How to do military taxes They leave lines 1a and 1b of Form 8814 blank because Fred does not have any interest income. How to do military taxes They enter his ordinary dividends of $1,575 on lines 2a and 2b because all of Fred's ordinary dividends are qualified dividends. How to do military taxes They enter the amount of Fred's capital gain distributions, $525, on line 3. How to do military taxes Next, they add the amounts on lines 1a, 2a, and 3 and enter the result, $2,100, on line 4. How to do military taxes 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. How to do military taxes This is the total amount from Form 8814 to be reported on their return. How to do military taxes Next, they figure how much of this amount is qualified dividends and how much is capital gain distributions. How to do military taxes They divide the amount on line 2b, $1,575, by the amount on line 4, $2,100. How to do military taxes They enter the result, . How to do military taxes 75, on line 7. How to do military taxes They divide the amount on line 3, $525, by the amount on line 4, $2,100. How to do military taxes They enter the result, . How to do military taxes 25, on line 8. How to do military taxes They multiply the amount on line 6, $100, by the decimal on line 7, . How to do military taxes 75, and enter the result, $75, on line 9. How to do military taxes They multiply the amount on line 6, $100, by the decimal on line 8, . How to do military taxes 25, and enter the result, $25, on line 10. How to do military taxes 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. How to do military taxes 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. How to do military taxes They enter $100 ($75 + $25) on line 11 and -0- ($100 – $100) on line 12. How to do military taxes Because the amount on line 12 is -0-, they do not include any amount from Form 8814 on their Form 1040, line 21. How to do military taxes 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. How to do military taxes This tax is added to the tax figured on your income. How to do military taxes This additional tax is the smaller of: 10% x (your child's gross income − $1,000), or $100. How to do military taxes Include the amount from line 15 of all your Forms 8814 in the total on Form 1040, line 44, or Form 1040NR, line 42. How to do military taxes Check box a on Form 1040, line 44, or Form 1040NR, line 42. How to do military taxes 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. How to do military taxes 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. How to do military taxes Attach the completed form to the child's Form 1040, Form 1040A, or Form 1040NR. How to do military taxes When Form 8615 must be filed. How to do military taxes   Form 8615 must be filed for a child if all of the following statements are true. How to do military taxes The child's unearned income was more than $2,000. How to do military taxes The child is required to file a return for 2013. How to do military taxes 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. How to do military taxes At least one of the child's parents was alive at the end of 2013. How to do military taxes The child does not file a joint return for 2013. How to do military taxes These conditions are also shown in Figure 2. How to do military taxes Certain January 1 birthdays. How to do military taxes   Use the following chart to determine whether certain children with January 1 birthdays meet condition 3 under When Form 8615 must be filed. How to do military taxes IF a child was born on. How to do military taxes . How to do military taxes . How to do military taxes THEN, at the end of 2013, the child is considered to be. How to do military taxes . How to do military taxes . How to do military taxes January 1, 1996 18* January 1, 1995 19** January 1, 1990 24*** *This child is not under age 18. How to do military taxes The child meets condition 3 only if the child did not have earned income that was more than half of the child's support. How to do military taxes  **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. How to do military taxes  ***Do not use Form 8615 for this child. How to do military taxes Figure 2. How to do military taxes Do You Have To Use Form 8615 To Figure Your Child's Tax? Please click here for the text description of the image. How to do military taxes Figure 2. How to do military taxes 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. How to do military taxes (If the parents filed a joint return, enter the name and social security number listed first on the joint return. How to do military taxes ) On line C, check the box for the parent's filing status. How to do military taxes See Which Parent's Return To Use, earlier, for information on which parent's return information must be used on Form 8615. How to do military taxes Parent with different tax year. How to do military taxes   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. How to do military taxes Example. How to do military taxes Kimberly must use her mother's tax and taxable income to complete her Form 8615 for calendar year 2013 (January 1 – December 31). How to do military taxes Kimberly's mother files her tax return on a fiscal year basis (July 1 – June 30). How to do military taxes Kimberly must use the information on her mother's return for the tax year ending June 30, 2013, to complete her 2013 Form 8615. How to do military taxes Parent's return information not known timely. How to do military taxes   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. How to do military taxes   You can use any reasonable estimate. How to do military taxes This includes using information from last year's return. How to do military taxes If you use an estimated amount on Form 8615, enter “Estimated” on the line next to the amount. How to do military taxes   When you get the correct information, file an amended return on Form 1040X, Amended U. How to do military taxes S. How to do military taxes Individual Income Tax Return. How to do military taxes Extension of time to file. How to do military taxes   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. How to do military taxes S. How to do military taxes Individual Income Tax Return. How to do military taxes See the instructions for Form 4868 for details. How to do military taxes    An extension of time to file is not an extension of time to pay. How to do military taxes You must make an accurate estimate of the tax for 2013. How to do military taxes 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. How to do military taxes See Form 4868 and its instructions. How to do military taxes Parent's return information not available. How to do military taxes   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). How to do military taxes How to request. How to do military taxes   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. How to do military taxes (The IRS cannot process a request received before the end of the tax year. How to do military taxes )    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. How to do military taxes   The request must contain all of the following. How to do military taxes 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. How to do military taxes Proof of the child's age (for example, a copy of the child's birth certificate). How to do military taxes 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). How to do military taxes 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. How to do military taxes    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. How to do military taxes Step 1. How to do military taxes 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. How to do military taxes To do that, use Form 8615, Part I. How to do military taxes 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. How to do military taxes Adjusted gross income is shown on Form 1040, line 38; Form 1040A, line 22; or Form 1040NR, line 37. How to do military taxes Form 1040EZ and Form 1040NR-EZ cannot be used if Form 8615 must be filed. How to do military taxes 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. How to do military taxes 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. How to do military taxes Alternate Worksheet for Form 8615, Line 1 A. How to do military taxes Enter the amount from the child's Form 1040, line 22, or Form 1040NR, line 23   B. How to do military taxes 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. How to do military taxes Enter this total as a positive number (greater than zero)   C. How to do military taxes Add line A and line B and  enter the total   D. How to do military taxes 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. How to do military taxes Subtract line D from line C. How to do military taxes Enter the result here and on Form 8615, line 1   Unearned income defined. How to do military taxes   Unearned income is generally all income other than salaries, wages, and other amounts received as pay for work actually performed. How to do military taxes 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. How to do military taxes 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). How to do military taxes Nontaxable income. How to do military taxes   For this purpose, unearned income includes only amounts the child must include in gross income. How to do military taxes Nontaxable unearned income, such as tax-exempt interest and the nontaxable part of social security and pension payments, is not included. How to do military taxes Capital loss. How to do military taxes   A child's capital losses are taken into account in figuring the child's unearned income. How to do military taxes Capital losses are first applied against capital gains. How to do military taxes 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. How to do military taxes Any difference over $3,000 is carried to the next year. How to do military taxes Income from property received as a gift. How to do military taxes   A child's unearned income includes all income produced by property belonging to the child. How to do military taxes 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. How to do military taxes   A child's unearned income includes income produced by property given as a gift to the child. How to do military taxes This includes gifts to the child from grandparents or any other person and gifts made under the Uniform Gift to Minors Act. How to do military taxes Example. How to do military taxes Amanda Black, age 13, received the following income. How to do military taxes 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. How to do military taxes Amanda's unearned income is $2,100. How to do military taxes This is the total of the dividends ($800), taxable interest ($1,200), and capital gains reduced by capital losses ($300 − $200 = $100). How to do military taxes Her wages are earned (not unearned) income because they are received for work actually performed. How to do military taxes Her tax-exempt interest is not included because it is nontaxable. How to do military taxes Trust income. How to do military taxes   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. How to do military taxes   However, taxable distributions from a qualified disability trust are considered earned income for the purposes of completing Form 8615. How to do military taxes See the Form 8615 instructions for details. How to do military taxes Adjustment to income. How to do military taxes   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. How to do military taxes Line 2 (Deductions) If the child does not itemize deductions on Schedule A (Form 1040 or Form 1040NR), enter $2,000 on line 2. How to do military taxes 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. How to do military taxes Directly connected. How to do military taxes   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. How to do military taxes These expenses include custodian fees and service charges, service fees to collect taxable interest and dividends, and certain investment counsel fees. How to do military taxes    These expenses are added to certain other miscellaneous itemized deductions on Schedule A (Form 1040). How to do military taxes Only the amount greater than 2% of the child's adjusted gross income can be deducted. How to do military taxes See Publication 529, Miscellaneous Deductions, for more information. How to do military taxes Example 1. How to do military taxes 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. How to do military taxes His adjusted gross income is $8,000, which is entered on Form 1040, line 38, and on Form 8615, line 1. How to do military taxes 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. How to do military taxes Example 2. How to do military taxes Eleanor, age 8, has unearned income of $16,000 and an early withdrawal penalty of $100. How to do military taxes She has no other income. How to do military taxes 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. How to do military taxes Her adjusted gross income, entered on line 1, is $15,900 ($16,000 − $100). How to do military taxes The amount on line 2 is $2,050. How to do military taxes This is the larger of: $1,000 plus the $1,050 of directly connected itemized deductions, or $2,000. How to do military taxes Line 3 Subtract line 2 from line 1 and enter the result on this line. How to do military taxes If zero or less, do not complete the rest of the form. How to do military taxes However, you must still attach Form 8615 to the child's tax return. How to do military taxes Figure the tax on the child's taxable income in the normal manner. How to do military taxes 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. How to do military taxes Child files Form 2555 or 2555-EZ. How to do military taxes   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. How to do military taxes Enter the amount from line 3 of the Foreign Earned Income Tax Worksheet as the child's taxable income on Form 8615, line 4. How to do military taxes Line 5 (Net Unearned Income) A child's net unearned income cannot be more than his or her taxable income. How to do military taxes Enter on Form 8615, line 5, the smaller of line 3 or line 4. How to do military taxes This is the child's net unearned income. How to do military taxes If zero or less, do not complete the rest of the form. How to do military taxes However, you must still attach Form 8615 to the child's tax return. How to do military taxes Figure the tax on the child's taxable income in the normal manner. How to do military taxes Step 2. How to do military taxes 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. How to do military taxes 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. How to do military taxes 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. How to do military taxes For example, do not refigure the medical expense deduction. How to do military taxes Figure the tentative tax on Form 8615, lines 6 through 13. How to do military taxes 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. How to do military taxes If the parent's taxable income is zero or less, enter zero on line 6. How to do military taxes Parent files Form 2555 or 2555-EZ. How to do military taxes   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. How to do military taxes 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. How to do military taxes 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. How to do military taxes Do not include the amount from line 5 of the Form 8615 being completed. How to do military taxes (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. How to do military taxes ) Example. How to do military taxes Paul and Jane Persimmon have three children, Sharon, Jerry, and Mike, who must attach Form 8615 to their tax returns. How to do military taxes 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. How to do military taxes Line 7 of Jerry's Form 8615 will show $1,800 ($800 + $1,000). How to do military taxes Line 7 of Mike's Form 8615 will show $1,400 ($800 + $600). How to do military taxes Other children's information not available. How to do military taxes   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. How to do military taxes Estimates and extensions are discussed earlier under Providing Parental Information (Form 8615, Lines A–C) . How to do military taxes Line 8 (Parent's Taxable Income Plus Children's Net Unearned Income) Enter on this line the total of lines 5, 6, and 7. How to do military taxes You must determine the amount of net capital gain and qualified dividends included on this line before completing Form 8615, line 9. How to do military taxes Net capital gain. How to do military taxes   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. How to do military taxes If Schedule D is not required, it is the amount on Form 1040, line 13; Form 1040A, line 10; or Form 1040NR, line 14. How to do military taxes Qualified dividends. How to do military taxes   Qualified dividends are those dividends reported on line 9b of Form 1040 or Form 1040A, or line 10b of Form 1040NR. How to do military taxes Net capital gain and qualified dividends on line 8. How to do military taxes   If neither the child, nor the parent, nor any other child has net capital gain, the net capital gain on line 8 is zero. How to do military taxes   If neither the child, nor the parent, nor any other child has qualified dividends, the amount of qualified dividends on line 8 is zero. How to do military taxes   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. How to do military taxes   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. How to do military taxes   Use the instructions for Form 8615, line 8, including the appropriate Line 5 Worksheet, to find these amounts. How to do military taxes See the instructions for Form 8615 for more details. How to do military taxes Note. How to do military taxes The amount of any net capital gain or qualified dividends is not separately reported on line 8. How to do military taxes It is  needed, however, when figuring the tax on line 9. How to do military taxes 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. How to do military taxes 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. How to do military taxes 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. How to do military taxes If line 8 includes any net capital gain or qualified dividends, use the Qualified Dividends and Capital Gain Tax Worksheet to figure this tax. How to do military taxes For details, see the instructions for Form 8615, line 9. How to do military taxes However, if the child, parent, or any other child has 28% rate gain or unrecaptured section 1250 gain, use the Schedule D Tax Worksheet. How to do military taxes But if Schedule J is used to figure the tax on the parent's return, use it to figure this tax. How to do military taxes Child files Form 2555 or 2555-EZ. How to do military taxes   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. How to do military taxes Using the Schedule D Tax Worksheet for line 9 tax. How to do military taxes    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. How to do military taxes 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. How to do military taxes Then figure the line 9 tax using another Schedule D Tax Worksheet. How to do military taxes (Do not attach this Schedule D Tax Worksheet to the child's return. How to do military taxes )   Complete this Schedule D Tax Worksheet as follows. How to do military taxes On line 1, enter the amount from Form 8615, line 8. How to do military taxes On line 2, enter the qualified dividends included on Form 8615, line 8. How to do military taxes (See the earlier discussion for line 8. How to do military taxes ) 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. How to do military taxes 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. How to do military taxes If applicable, include instead the smaller amount entered on the dotted line next to line 4e. How to do military taxes On lines 5 and 6, follow the worksheet instructions. How to do military taxes On line 7, enter the net capital gain included on Form 8615, line 8. How to do military taxes (See the earlier discussion for line 8. How to do military taxes ) On lines 8 through 10, follow the worksheet instructions. How to do military taxes 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). How to do military taxes 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. How to do military taxes Figure these amounts as explained later under Figuring unrecaptured section 1250 gain (line 11) and Figuring 28% rate gain (line 11). How to do military taxes 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. How to do military taxes Otherwise, skip steps 10, 11, and 12 below, and go to step 13. How to do military taxes Determine whether there is a line 8 capital gain excess as follows. How to do military taxes 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. How to do military taxes (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. How to do military taxes ) Subtract (a) from the amount on line 1 of this Schedule D Tax Worksheet. How to do military taxes Subtract (b) from the amount on line 10 of this Schedule D Tax Worksheet. How to do military taxes If the result is more than zero, that amount is the line 8 capital gain excess. How to do military taxes If the result is zero or less, there is no line 8 capital gain excess. How to do military taxes If there is no line 8 capital gain excess, skip step 12 below and go to step 13. How to do military taxes 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. How to do military taxes (These modifications are to be made only for purposes of filling out this additional Schedule D Tax Worksheet. How to do military taxes ) Reduce the amount you would otherwise enter on line 9 (but not below zero) by the line 8 capital gain excess. How to do military taxes 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. How to do military taxes 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. How to do military taxes 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. How to do military taxes Complete lines 12 through 45 following the worksheet instructions. How to do military taxes Use the parent's filing status to complete lines 15, 42, and 44. How to do military taxes Enter the amount from line 45 of this Schedule D Tax Worksheet on Form 8615, line 9, and check the box on that line