I've seen a list of disadvantages to filing a dependent's taxes on the parents' return with form 8814, versus filing a separate return for the child. Is there ever any financial _advantage_ to doing this? Or is it merely a convenience which sometimes incurs extra cost?
I'm particularly interested in this question in light of the new economic stimulus rebates. Does filing the child's taxes on the parents' return affect whether the child can receive a stimulus payment?
No it doesn't, because a child (or anyone else who is a dependent) cannot receive a stimulus payment at all.
Stimulus rebate considerations aside, though, I still prefer/recommend that a separate return be prepared for each child affected, so that said child can sign the return with the opportunity for parents to explain what that income tax return is all about. It's never too early to try to teach a kid a little something about the income tax system, esp the lesson that the reason to file a return is NOT just to get a refund.
ChEAr$, Harlan Lunsford, EA n LA
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I second Harlan's recommendation. I still remember filling out a Schedule D by hand when I was a teenager, with every single dividend reinvestment of some marginal mutual fund carefully documented...must have been two or three hand-written pages I sent to the IRS!
To answer the OP's question: no, there is never a *tax* advantage to filing child's investment income on the parents' return....but there might be an advantage due to perceived transaction cost of doing it yourself vs. forcing your kids to do it.
-Mark Bole
As others have already mentioned, there's no impact on the stimulus payment. One additional non-financial "advantage" to filing on the parents' return that I have heard is that doing so avoids having to disclose the amount of the parents' income to the child.
Ira Smilovitz
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