A 10 years old child, his dad died in 2015. In Feb, 2016 he moved in with his aunt. He inherited 40,000 pension from his dad and received a 1099-R in 2016. He also received 15,000 social security in 2016. His aunt only made 4000 in 2016. Anyone has a good suggestion what is the best way to file for him? Single or as his aunt's dependent? She has not touch the child's pension money yet. But she use his social security money to care for him.
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Last edited by liberty; 02-06-2017, 11:54 AM. -
Did the child pay for over 50% of his own support? Using his Social Security counts as him paying for his own support. If so, the aunt can not claim him as a dependent.
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The boy will file Single no matter what (unless he's married !!).
As TaxGuyBill explained, you check to see if he takes his own dependency exemption or not, whether or not he provided more than 50% of his own support.
The same if you're filing the aunt's return, check to see if she can claim him based on whether or not he provided more than 50% of his own support and the other dependency tests.
You can find support worksheets in your software, in the instructions, and on IRS.gov.Comment
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When I claim him as single , form 8516 come up asking for his parents' income. But his dad died in 2015, mom was not in the picture. May be his age , if you claim yourself, form 8516 need to be filed to decide his tax bracket. But his aunt is his legal guardian. Do I have to put his aunt's name and income on his form 8516?Comment
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No, don't enter the aunt. It would be based on the mother. Is the mother able to be contacted to get this information? If not, you may need to just guess.
From the Instructions: If the parent's taxable income, filing status, or the net unearned income of the parent's other children is not known by the due date of the child's return, reasonable estimates can be used. Enter “Estimated” next to the appropriate line(s) of Form 8615. When the correct information is available, file Form 1040X, Amended U.S. Individual Income Tax Return.
As a side note, the requirement for Form 8615 doesn't depend on if he claims his own exemption or if he is a dependent.
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Mother is an alcoholic and never worked.
I use proseries and when I entered 47000 pension and 29000(include half was paid in 2016 for 2015), with single and no other income, the AMT kick in. I thought AMT need to have preference items which he did not. Any suggestions?Comment
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I didn't realize this, but kids under age 24 often don't get the large AMT exemption that most people get (they only get $7400 versus $53,900). From the Instructions for Form 6251:
Certain Children Under Age 24
Your exemption amount is limited to the amount of your earned income plus $7,400 if condition 1, 2, or 3 below applies to you.
You were under age 18 at the end of 2016.
You were age 18 at the end of 2016 and didn’t have earned income that was more than half of your support.
You were a full-time student over age 18 and under age 24 at the end of 2016 and did not have earned income that was more than half of your support.
If condition 1, 2, or 3 applies to you, complete the Exemption Worksheet, including lines 7 through 10, to figure the amount to enter on Form 6251, line 29.
Exception. If you filed a joint return for 2016 or neither of your parents was alive at the end of 2016, don’t complete lines 7 through 10 of the Exemption Worksheet. However, you still must complete lines 1 through 6 of the worksheet if Form 6251, line 28, is more than the amount shown for your filing status in the middle column of the chart on line 29 (or the chart earlier in the line 29 instructions if you file Form 1040NR).
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I was shocked to find out his exemption is only 7400. Dad's pension does not counted as earned income. So AGI-7400x26%-regular tax will be his AMT. So with 20% of withholding, he still has to pay additional 5000 AMT.Comment
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Did he get the 47K in cash? Isn't this an untaxable inheritance?Believe nothing you have not personally researched and verified.Comment
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Sounds like the $47,000 is retirement funds which is taxable.Comment
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Prime evidence that no financial or tax planning was done prior to the receipt of a lump-sum pension. It could have been spread out over the child's lifetime if he was the named beneficiary.Comment
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It's pension, not IRA. I am not sure if you can rollover an inherited pension to an inherited IRA?Comment
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It cannot be a rollover, but he could have elected to take distributions by another method. If this was an employer-sponsored plan, they are required by law to furnish the options to the beneficiary. Was this done? If they did not provide the option for him to take distributions over his lifetime, then the funds could have been transferred directly into an inherited IRA where this could have been done through another custodian. Options depend on whether deceased was already taking RMD's.Last edited by Burke; 02-07-2017, 02:06 PM.Comment
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