Like the title says, from the filing process and tax questions to tax policy and reform, you can search and share All Things Tax here. This is the place to find answers to all your general questions that don't fall under the other categories. And just a reminder: questions about software or online filing should be posted in DIY Products.
03-06-2018 02:31 PM - edited 03-06-2018 02:38 PM
If the 1099 income you mentioned refers to a 1099-MISC, then according to IRS Publication 927, "a dependent whose gross income is only earned income must file a return if the gross income is more than $6,350."
"Example. William is 16. His mother claims an exemption for him on her income tax return. He worked part time on weekends during the school year and full time during the summer. He earned $7,000 in wages. He didn't have any unearned income. He must file a tax return because he has earned income only and his gross income is more than $6,350. If he is blind, he doesn't have to file a return because his gross income isn't more than $7,900."
Even though the example above mentions wages (Form W-2), if the dollar amount on the 1099-MISC is listed on box 7 for nonemployee compensation, then this is considered earned income. Since the amount is between $1,050 and $2,100, it is below the $6,350 threshold amount and thus the child does not have to file their own a tax return to claim it.
Now, if this 1099 income refers to interest and/or dividends, such as 1099-INT and 1099-DIV, then these would be considered as unearned income. According to IRS Publication 927, "a dependent whose gross income is only unearned income must file a return if the gross income is more than $1050."
If that is the case where the 1099 income is only unearned income and it is above $1,050, then a tax return must be filed for the child.
If you are using the H&R Block online product, create a separate account to list the child's personal information and unearned income amounts. On the screen called "Did any of these apply to you in 2017," click the checkbox for "I can be claimed as a dependent on someone else's return". Then, click two additional checkboxes for "[Child] is being claimed by the other person" and "[Child] is someone else's qualifying child." By clicking these checkboxes for the child's own return, you will tell the IRS that the child is a dependent on your return and this is a tax return for this dependent child showing his or her income.
If you are using the H&R Block desktop/downloadable software, create a separate return file for the child. Enter the personal information and unearned income amounts. Then, on the "Special Situations" screen in the Personal Information section of your return, click the checkbox for "I can be claimed as dependent on someone else's return." Click Next and then click Yes on the screen called "Dependent claimed by someone else" and go from there.
Tax Research Specialist