Question on how to file dependent’s interest income and penalty

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Topic Author
healthiswealth
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Question on how to file dependent’s interest income and penalty

Post by healthiswealth »

Filing taxes
Broke my daughter’s (dependent minor, 10 yrs old) cd to invest in higher interest rate account.
It incurred a penalty of $928.11 and interest income of $560.14 in 2023, but will accrue far more interest when it matures this year.

How do I file the penalty and interest? It’s her only income.
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FiveK
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Re: Question on how to file dependent’s interest income and penalty

Post by FiveK »

Because it appears she doesn't meet any of the 2023 Filing Requirements for Dependents, you/she could simply not file.
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healthiswealth
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Re: Question on how to file dependent’s interest income and penalty

Post by healthiswealth »

ok, any harm in filing both amounts under my return?
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FiveK
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Re: Question on how to file dependent’s interest income and penalty

Post by FiveK »

healthiswealth wrote: Mon Apr 01, 2024 3:40 pm ok, any harm in filing both amounts under my return?
Are you looking to get an adjustment for her early withdrawal penalty onto your return? Don't think it works that way: it's attached to her SSN, not yours, and Form 8814 doesn't have a spot for that.
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healthiswealth
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Re: Question on how to file dependent’s interest income and penalty

Post by healthiswealth »

Yes, if I enter both the interest earned and penalty on my return, it does work out favorably vs. excluding both amounts. however in reviewing form 8814, I would just enter her interest and since it's less than $1250 there is no tax incurred, but no entry to include penalty?
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FiveK
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Re: Question on how to file dependent’s interest income and penalty

Post by FiveK »

healthiswealth wrote: Mon Apr 01, 2024 4:55 pm Yes, if I enter both the interest earned and penalty on my return, it does work out favorably vs. excluding both amounts. however in reviewing form 8814, I would just enter her interest and since it's less than $1250 there is no tax incurred, but no entry to include penalty?
That looks correct, leading back to "don't bother to file for her at all" as a choice to consider.
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healthiswealth
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Re: Question on how to file dependent’s interest income and penalty

Post by healthiswealth »

Makes sense, thanks!
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