son's 1040 - AGI of $1,250

According to

yourson's standard deduction is $950 and there is no personal exemption,so he does have an income tax liability and thus you will need to filea tax return for him. Standard deduction for a dependent is at least $950, or, if higher, the lesser of (1) earned income (wages) + $300, or (2) $5700. In your son's case, it's $950.

What about the kiddie tax? Doesn't most of that come into the parent's tax return?

Assuming he is not blind, he has to file. See page of 10 of the instructions.

Single dependents. Were you either age 65 or older or blind? No. You must file a return if any of the following apply. ? Your unearned income was over $950. ? Your earned income was over $5,700. ? Your gross income was more than the larger of? - $950, or - Your earned income (up to $5,400) plus $300.

The first and third bullet points mean he has to file.

You normally have two choices. He can either file his own return (using 1040 and 8615), or you can include his income on your return (using form 8814). But because he has a W-2, he has to file his own return. He gets a standard deduction of $950. He has to fill out form 8615. The next $950 is taxed at 10%, and the remainder is taxed at the parent's rate. This is the kiddie tax. Line 3 of form 8615 says that if his investment income is under is under $1900 then he can stop filling out the rest of the form, but should attach it to his return.

Kiddie tax has $950 as std deduction, and $950 at kid's rate. So long as that AGI is under $1900, parent's return doesn't come into play. Looks like his tax due will be about $31, give or take that last $1.

BTW - continuing to page 2 -

AGI minus Std Deduction $1,257 - $950 = $307

and line 28 - Tax = ZERO ?

And the part that confused me on TT is that he didn't have any W-2 Fed Withholding and the ZERO for Tax lines 28, 44, 48

and lastly - it appears that the Qual Divs = $978 and the Taxable Income is only = $307 so.... the result from TT is ZERO taxes which, I've never seen before :)

When the only investment income the kid has is from interest, dividends, and 1099-DIV capital gains distributions, the parent may elect to report that income on parent's return.

Often the child will file is or her own return, and in that case, the kiddie's tax return will include the kiddie tax form, so the kiddie pays tax at the higher of kiddie or parent's income.

The kiddie tax doesn't kick in until there's $1,900 of "portfolio income."

It's the effect of the temporary zero rate on qualified dividends and LTCG. I've given up trying to keep track of the sunset dates for things, so I can't remember if that's still good for 2010 or whether it expired in 2009.

Phil Marti VITA/TCE Volunteer