Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Kiddie Tax: 2008 applies to Students to age 24!!!
Old 02-06-2009, 05:29 PM   #1
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Sep 2005
Location: Northern IL
Posts: 18,265
Kiddie Tax: 2008 applies to Students to age 24!!!

http://www.irs.gov/pub/irs-pdf/i8615.pdf
Minors Taxed at Parents' Rates: The Kiddie Tax

OK, this complexity in the tax law was added because people in higher tax brackets would "shift" investments to their children to take advantage of the child's lower rate. So they put the "Kiddie Tax" into effect, which makes you fill out form 8615 if the kids have investment income above a certain $ level. Most of that then gets taxed at the parent's marginal rate. If more than one kid fits that profile, you need to cross-reference the 8615s across each kid.... fun times.

In 2007, this applied to those Under age 18.

In 2008, this applies to those under age 18, plus (and HERE IS THE KICKER) those under age 24 IF THEY ARE STUDENTS!!!

What the heck is THAT about!

On one line, I'm getting tax CREDITS for money spent educating the kids, and on another line, a kid who is a student is getting taxed at a higher rate for being a student! That's right, two children in identical circumstances would pay different taxes solely because one of them is a student, and the student would be paying a higher rate because.... they are a student

I thought the govt was trying to encourage education through these social tax initiatives, and then they go ahead and penalize it. One hand does not know what the other is doing.

No kidding, I'm gonna start a tax revolt. I'm sick of this stupidity. But first, I've got to get my taxes done.

This is friggin' insane.

-ERD50
__________________

__________________
ERD50 is online now   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 02-06-2009, 05:38 PM   #2
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Nov 2007
Posts: 7,526
Just lie on your taxes. Come on, do it! All the cool Cabinet level nominees are doing it!
__________________

__________________
FUEGO is offline   Reply With Quote
Old 02-06-2009, 06:04 PM   #3
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Sep 2005
Location: Northern IL
Posts: 18,265
Quote:
Originally Posted by FUEGO View Post
Just lie on your taxes. Come on, do it! All the cool Cabinet level nominees are doing it!
Yeah, I know. I am tempted. I tend to think I'm a little above average in the honesty department, but even if we take away the "Lake Wobegon" effect, that means half the taxpayers are less honest than me.

If I'm thinking of cheating, what do you think *they* are thinking...

tax revolt, tax revolt, tax revolt, tax revolt, tax revolt, tax revolt, tax revolt,
tax revolt,tax revolt!!!!

-ERD50
__________________
ERD50 is online now   Reply With Quote
Old 02-06-2009, 06:24 PM   #4
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Sep 2005
Location: Northern IL
Posts: 18,265
Quote:
Originally Posted by FUEGO View Post
Just lie on your taxes. Come on, do it! All the cool Cabinet level nominees are doing it!
Well, I just ran the TaxAct alerts and guess what? No warning that my student with investment income from the college fund has to fill out form 8615.

If a computer can't figure out that a person is under 24 (you enter a birth date), and is a student (I entered "full time student" somewhere along the line), and has investment income (I reported it), well then how the heck is a mere mortal supposed to figure this out?

If I don't fill out the form, I won't consider it a "lie", it was just an "honest mistake", an "oversight", yeah, that's the ticket.

Hmmm, the program *did* ask me if I had any foreign income - no way I could miss that.

-ERD50
__________________
ERD50 is online now   Reply With Quote
Old 02-06-2009, 06:36 PM   #5
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
dex's Avatar
 
Join Date: Oct 2003
Posts: 5,105
S check defines children as 30 y/o.

Tax the rich! (as long as it isn't me)
__________________
Sometimes death is not as tragic as not knowing how to live. This man knew how to live--and how to make others glad they were living. - Jack Benny at Nat King Cole's funeral
dex is offline   Reply With Quote
Old 02-06-2009, 06:49 PM   #6
Moderator
ziggy29's Avatar
 
Join Date: Oct 2005
Location: Texas
Posts: 15,612
I plead ignorance, not having any children, but does that always apply or only if you claim them as a dependent on your tax return?
__________________
"Hey, for every ten dollars, that's another hour that I have to be in the work place. That's an hour of my life. And my life is a very finite thing. I have only 'x' number of hours left before I'm dead. So how do I want to use these hours of my life? Do I want to use them just spending it on more crap and more stuff, or do I want to start getting a handle on it and using my life more intelligently?" -- Joe Dominguez (1938 - 1997)

RIP to Reemy, my avatar dog (2003 - 9/16/2017)
ziggy29 is online now   Reply With Quote
Old 02-06-2009, 08:09 PM   #7
Thinks s/he gets paid by the post
target2019's Avatar
 
Join Date: Dec 2008
Posts: 3,705
Quote:
Originally Posted by ERD50 View Post
Well, I just ran the TaxAct alerts and guess what? No warning that my student with investment income from the college fund has to fill out form 8615.

If a computer can't figure out that a person is under 24 (you enter a birth date), and is a student (I entered "full time student" somewhere along the line), and has investment income (I reported it), well then how the heck is a mere mortal supposed to figure this out?
You're finding out that there are different kinds of tax preparation software. For instance, tax-preparer brother uses Intuit ProSeries. It does put those facts together in the right way. Just added a large amount to daughter's form, and it opened appropriate worksheet and forms, and flagged the boxes with missing information.
__________________
target2019 is offline   Reply With Quote
Old 02-06-2009, 08:11 PM   #8
Thinks s/he gets paid by the post
target2019's Avatar
 
Join Date: Dec 2008
Posts: 3,705
Quote:
Originally Posted by ziggy29 View Post
I plead ignorance, not having any children, but does that always apply or only if you claim them as a dependent on your tax return?
That is another condition, yes.
__________________
target2019 is offline   Reply With Quote
Old 02-06-2009, 09:20 PM   #9
Thinks s/he gets paid by the post
 
Join Date: Jul 2002
Posts: 1,038
Yes, for the kiddie tax to apply, you must be claiming them as a dependent.Hint, do your and their taxes so that you do not claim them as a dependent, it may result in less taxes from a family basis. Of course, you don't get any education credit or tuition deduction if you do this. BTW, the kiddie tax will only apply to the dependent if they have over $1800 in unearned (investment) income.

RE2Boys
__________________
RE2Boys is online now   Reply With Quote
Old 02-07-2009, 10:34 AM   #10
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
TromboneAl's Avatar
 
Join Date: Jun 2006
Posts: 11,197
ERD50, from your posts, I've always felt that you and I are very much alike. Like me, you probably find income tax returns frustrating because you see how stupidly they were designed. Overly complex, inconsistent, ambiguous, etc.

So, I recommend that you do what I do. Take a moment to...

1. Realize that there are many situations in which you can take advantage of the poor design of the tax code.

2. Realize that if everyone were as smart as you, you probably would not have been able to retire at age 50.
__________________
Al
TromboneAl is offline   Reply With Quote
Old 02-07-2009, 11:27 AM   #11
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Sep 2005
Location: Northern IL
Posts: 18,265
Quote:
Originally Posted by TromboneAl View Post
So, I recommend that you do what I do. Take a moment to...

1. Realize that there are many situations in which you can take advantage of the poor design of the tax code.

2. Realize that if everyone were as smart as you, you probably would not have been able to retire at age 50.
I hear you T-al. Yes, I need to find a positive way to channel this frustration.

Last year I got just as worked up, and I talked about bringing this up to my Representatives. I've met my rep a couple times and she seems approachable - I just might have a shot at getting her attention.

Last year, my situation was complicated by having a large cap gain. Complaining about that probably wouldn't get a lot of sympathy. My situation this year is much more normal, pretty average income between DW part year job and my dividends. Two kids in college in 2008, another in high school. Two of those kids have college funds large enough to trigger the "Kiddie Tax" (they want us to save for college, right?).

That "Kiddie Tax" adds all sorts of complications to my taxes - the entries are really strange, not just "fill in this number in box 8", but they have you digging through forms, gathering info from a variety of places, making side notes, and then finally, after reading pages of instructions, determining which numbers you looked at should be plugged in. So it leaves with no real paper trail, other than your side notes if you want to re-evaluate what you did(*). The two kids tax forms need to cross reference numbers from the other, making it a circular affair (and causing me to sign in-and-out of the tax program numerous times).

As I mentioned in the other thread, there are so many consequences when you have complexity - it is crazy. Tax bills are different if your kids are two years apart in school rather than one year? Is that what was intended? I don't think so, but they didn't think it through - and they can't because it is too complex.

arghhhhh again. -ERD50

(*) edit/add note - It struck me as very strange that you just don't put these numbers into the form and follow the usual "multiply line 8 by 0.2 enter on line 9, subtract line 9 from line 7 enter on line 10, enter the larger of line 10 or line 6 on line 11", because they would need sooooo many lines, the form would be huge. So they bury it all in the instructions. What a mess.
__________________
ERD50 is online now   Reply With Quote
Old 02-07-2009, 03:25 PM   #12
Thinks s/he gets paid by the post
 
Join Date: Jan 2006
Posts: 2,930
Quote:
Originally Posted by RE2Boys View Post
.Hint, do your and their taxes so that you do not claim them as a dependent, it may result in less taxes from a family basis.
RE2Boys
perhaps, but if the kid files separately, he/she cannot claim a personal exemption if he/she can be claimed as a dependent by another person.....even if the other individual does not claim hi4012m/her as a dependent.

from pg c-1 of Pub 4012
__________________

__________________
kaneohe is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
AMT and the Zero Capital Gains Tax in 2008? moperry Hi, I am... 10 03-06-2009 10:09 PM
Help with 0% capital gain tax for 2008... FIREd FIRE and Money 9 10-07-2008 06:27 PM
Tax News for 2008 Economic Stimulus Pymts freebird5825 FIRE and Money 0 02-27-2008 08:18 AM
TY 2008 Tax Rates BOBOT FIRE and Money 6 07-11-2007 07:30 PM
Paying social security tax after age 66 modhatter FIRE and Money 2 03-10-2007 04:59 PM

 

 
All times are GMT -6. The time now is 01:27 PM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.