Childs 1099-B

[RLymanC]

Client is the custodian of his under age 14 children’s investment account. The children’s SS# is the account ID number.

One child has a stock sale of $3281 with a basis of $2498
Other child has stock sale of $1631 with a basis of 1238.00

Kitty tax only deals with 1099-INT and 1099-DIV. I can’t find any information on how to report 1099-B transactions.

Maybe it’s not even reportable?????

It doesn’t seem to belong on 8615 or 8814.

[Brian EA]

Client is the custodian of his under age 14 children’s investment account. The children’s SS# is the account ID number.

One child has a stock sale of $3281 with a basis of $2498
Other child has stock sale of $1631 with a basis of 1238.00

Kitty tax only deals with 1099-INT and 1099-DIV. I can’t find any information on how to report 1099-B transactions.

Maybe it’s not even reportable?????

It doesn’t seem to belong on 8615 or 8814.

File a return for each child

[RLymanC]

Childs Inc.

Based on the gross sale price of stock it seems to me that both children are not required to file a tax return.

Am I thinking right on this????

[jainen]

Filing requirement

Filing requirement for a dependent is $800 gross income.

[Bill Tubbs]

File both kids

It probably took ya longer to pose the question and check back for the comments vs. if you would have just filed both returns.

Faster time-wise isn't the only reason... returns are required since gross income > $800, and capital gains/losses cannot be included on parents return.

Bill

[Matt Sova]

Kid's returns

You will have to complete a return for each child, even though there will be no tax due. 1st child has sale of 3281 and cost of 2498 resulting in a gain of 783. This will end up being non-taxable.

2nd child only has a gain of 393. Even though there is no tax due, the IRS only knows that they sold something for 3281 and 1631. If a return is not filed, they will get a letter for tax, penalties and interest on the entire amount.

[JohnH]

Just continuing this dialogue with a slightly different set of circumstances. I'm completing a return on extension for a new client whose child has $775 of dividend income and was filling in the 8814 to mirror what the prior year's tax preparer did. Then I noticed $20K of gross proceeds (with a small cap loss) per the 1099B. I trashed the 8814 and am preparing a return for the child (still no tax liability, but I have to net out the gross on the 1099B by filing a return for the child).

After finishing up 2009, I looked back on the 2008 return supporting info and sure enough, there was an entry of about $22K on that 1099 Div/Int/B as well. Am I missing something, or am I correct in assuming that the kid is going to get a CP2000 in the next 6-18 months for the tax on $22K for 2008, plus penalties and interest?

I imagine the parents aren't going to be very happy when I tell them we need to amend 2008 to delete the 8814 and file a return for the child. One amended return, one new return, and essentially no change in tax.
(Or maybe just file the child's return for 2008 and forget the duplication on their personal return since there's only $15 in tax at stake)
(Or maybe I'll just tell them to go back to the previous preparer and get him to do it right, although he's in another town)
(Or maybe tell them, let them forget about it, and then look like a hero when they get the CP2000)

Decisions, decisions.

[veritas]

If you are saying

After finishing up 2009, I looked back on the 2008 return supporting info and sure enough, there was an entry of about $22K on that 1099 Div/Int/B as well. Am I missing something, or am I correct in assuming that the kid is going to get a CP2000 in the next 6-18 months for the tax on $22K for 2008, plus penalties and interest?



Decisions, decisions.

The 22k was for a stock sale reported as dividend income?

If so I would assume that putting it on the child's return correctly might actually reduce the tax liability.

[JohnH]

No, in looking back I didn't state that very well.

The $22K was on the 1099B section of the consolidated form and nothing was done about it, unless I later find that a return was filed for the child which reported only the mutual fund sales with no capital gain and omitted the Interest & Dividends since they were already reported on the parent's 8814 (still incorrect, but probably not a big deal if that's what happened)

[veritas]

Ahh

No, in looking back I didn't state that very well.

The $22K was on the 1099B section of the consolidated form and nothing was done about it, unless I later find that a return was filed for the child which reported only the mutual fund sales with no capital gain and omitted the Interest & Dividends since they were already reported on the parent's 8814 (still incorrect, but probably not a big deal if that's what happened)

Well most likely the sales were at a loss so you can make some lemonade out of this.

[Davc]

It probably took ya longer to pose the question and check back for the comments vs. if you would have just filed both returns.

Faster time-wise isn't the only reason... returns are required since gross income > $800, and capital gains/losses cannot be included on parents return.

Bill

The returns are not required. Gross income for filing thresholds includes capital gain, (Not netted with losses) not gross proceeds. A letter will arrive which can be taken care of with a one sentence explanation and a copy of the gain/loss statement.