If a dependent child received a W-2 does the child show on their tax return a 12,000 standard deduction?
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No, unless they earned $11,650 or more. .Originally posted by arlo View PostLast edited by Rapid Robert; 07-25-2018, 04:48 PM."You said it, they'll never know the difference. Come on, we'll paint our way out!" - Moe Howard -
working dependent
I should have ask where might I get the rules for earnings by dependent?Comment
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Pub. 929, IRS.com, Form 1040 instructions, Help in your tax prep software, etc.Comment
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working dependent
Thanks gentlemen for your threads but I am talking about 2018 earned income by a dependent child. I want to know the formula used to calculate the tax if it has been released.Comment
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See §63(c)(5). The amounts have been adjusted per §63(c)(4).Originally posted by arlo View Post
Not sure if you are changing your question. First you asked about the standard deduction, now you are asking about how to calculate the tax."You said it, they'll never know the difference. Come on, we'll paint our way out!" - Moe HowardComment
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working dependent
Under old rules it for a taxpayer that can be claimed by another taxpayer as a dependent, the standard deduction is the greater of $1,050, or earned income plus $350.00 up to the regular standard deduction.
WHAT IS THE NEW RULES?Comment
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Well, the regular standard deduction for a single filer has changed to $12,000. Otherwise, no new rules.Originally posted by arlo View Post"You said it, they'll never know the difference. Come on, we'll paint our way out!" - Moe HowardComment
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working dependent
So it looks like a dependent taxpayer can make up to $12,000 tax fee.Comment
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As can any single taxpayer -- for the next eight years only. Of course, since most dependents are either full time students or under age 6, it's not easy to have legitimate earnings from work of $12K in a year. Probably will tempt lots of tax cheats to try paying their kids more through their own business for fake "jobs".Originally posted by arlo View Post"You said it, they'll never know the difference. Come on, we'll paint our way out!" - Moe HowardComment
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I already posted the "real" rule in post #7. There is no mystery or unknown here.
"See §63(c)(5). The amounts have been adjusted [for inflation] per §63(c)(4).""You said it, they'll never know the difference. Come on, we'll paint our way out!" - Moe HowardComment
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My opinion is that this is a somewhat unintended extra tax break, like so much else about the bill, the result of sloppy, last minute legislation by the political party in charge.
I look at it this way: overall tax cut is due primarily to lower tax rates over large tax brackets, raising of AMT limits, etc. And for business, the lower corp rate or the QBI deduction.
Simplification, as opposed to cuts, was trying to make some trade-offs that didn't necessary cut taxes, but simplified the reporting.
So, non-dependent single filer in 2017 gets $6,350 + 4,050 = $10,400 deduction plus personal exemption. In 2018, instead they get $12,000 std. deduction. Almost a wash. For kids claimed, they lose the dependent exemption deduction, but get increased child tax credit, or "family" tax credit of $500 per dependent not eligible for CTC. Again, almost a wash. This is what you would expect from simplification (separate from cuts).
So far, so good. However, the dependent taxpayer in 2017 loses the exemption, because the claiming taxpayer gets it instead. He can only get up to $6,350 std deduction based on earned income. In 2018, the dependent still has no exemption, but the claiming taxpayer gets a credit instead. OK, a wash. But the dependent now also gets up to DOUBLE the previous standard deduction. That is a pure tax cut, not simplification. Unlike the calculation for the non-dependent filer, it is NOT almost a wash.
What could be the justification for this? It's not like the dependent taxpayer is creating more jobs in the economy for other people, or supporting a family. It's just a pure gimme, and as I suggested, highly likely to attract new forms of tax cheating, via paying one's kids bogus "earned" income from one's own company. Let's face it, at least up through age 18, a kid is not going to be worth more than minimum wage, and it would take about 1,000 hours, or half of a full time job, to earn that full std. deduction. What full time student can also take on a half-time job during the year? Summer is not long enough, since work weeks are generally limited to 40 hours max.
Now, maybe for the college student, it makes more sense. The parent claiming the exemption in 2017 might save $1,000 or more in taxes on that $4K exemption, but now in 2018 they only get $500. So a college student, who might realistically make more than minimum wage, can earn more on their own and still get a tax break, to make up for what the parents lost.Last edited by Rapid Robert; 07-27-2018, 12:11 PM."You said it, they'll never know the difference. Come on, we'll paint our way out!" - Moe HowardComment
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Well, I'm not sure why this thread didn't end with my initial reply, post #2. It seems like all the OP's questions were answered right then.Originally posted by FEDUKE404"You said it, they'll never know the difference. Come on, we'll paint our way out!" - Moe HowardComment
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working dependent
Robert your first answer was confusing to me. The answer should have been YES. If the working dependent makes 10,000 his standard deduction is going to be 12,000 with negative taxable income. If he makes 13000 his standard deduction is going to be 12,000 with taxable income of 1000. The 11,650 and more was confusing. But until someone else comes up with something different I think we all agree the working dependent will get $12,000 standard deduction.Comment
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Arlo, you have the first part wrong, if dependent makes $10,000 his standard deduction would be $10,350. not $12,000.Originally posted by arlo View Post
There are lots of update and tax courses on the Tax Cuts and Job Act, TheTaxBook even has one.Comment
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