taxable income ?

Yes. Assuming that they are your dependents, unearned income as little as $300 can trigger a filing requirement, though. See the 1040 instructions for details. Also remember that sale proceeds, not net gain, is what's reported to IRS. Without a return calculating the gain they will assume that it's all gain.

Have they claimed exemption from income tax withholding? If not, they may be due refunds which they won't get without filing.

-- Phil Marti Clarksburg, MD

Since they have both earned (W-2) and unearned (1099-B,

"tex shalter" wrote

If their income is more than $850 then they need to file. Here's the kicker - the IRS will only know they sold stock at the gross amount. They have no clue as to the resulting gain or loss, and may in fact, declare the whole gross sales amount as gain unless and until you tell them by filing a return reporting the sale on Schedule D.

Even if their total income was less than the filing limit, they may want to file to get a refund of any federal / state tax that was withheld. Make them do it by hand if they are in need of being punished.

-- Paul A. Thomas, CPA Athens, Georgia

Take a look at the IRS 1040 instructions for who must file a tax return. Also look at your state's instructions for the same thing. Even though there may not be a filing requirement, it still may be advisable to file a tax return. If the kids had a job, there may be tax withheld on the W2, any you'll have to file a tax return to get it refunded, even if there is no tax liability. The broker who handled the stock sale has to issue a 1099b-and the IRS matches those to social security numbers. Therefore, I'd advise to file a tax return, even though you may not technically be required to. It should avoid unnecessary correspondence and in the long run could wind up being the more cost effective choice. ___________________________________

-----> real address on hobokeni or hobokenx

The key is not the amount of the capital gain but the amount of the gross proceeds, as that is the number that is reported to the IRS. If their W-2 income plus the amount of the gross proceeds from the stock sale is above the threshold for filing, then they will have to file. For a single dependent, the threshold is somewhere between $800 and $4750, depending on the amount of the unearned income (stock sale).