Does a child have to file a tax return if only income is interest income less than $1200.?

Question

Grandmother started a saving account with the child as primary holder, childs SS #. The Grandmother is secondary since the child is a minor (under 18). Who is responsible for taxes or does the interest even have to be reported?

Answer 1

The child return must be filed when the unearned income (interest, dividends, capital gains) is more than $850. Either a separate return can be file or Parents can elect to include it in their own return.

Parent can choose to include the child's interest and dividends on the parent's return if certain requirements are met. Use Form 8814, Parents' Election To Report Child's Interest and Dividends, for this purpose. Or else a separate return for the child can be filed.

If child's investment income is less than $1700 (figure for 2006; for 2007 is should be slightly more), it will be taxed at child's tax rate. If the Investment income is more than $1700 it will be taxed at Parent's tax rate, and Form 8615, Tax for Children Under Age 18 Who Have Investment Income of More Than $1,700, must be completed and attached to the child's tax return

Answer 2

If the interest is around $1,200, then the child is required to file a tax return. If this is the only income for the child, his standard deduction is $850, and he will pay 10% tax on the income over $850, or about $35.

The parent is responsible for filing the return for the child. If the parent is too young to sign the tax return, the parent can sign for the child.

Answer 3

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Answer 4

If the interest is over $850, it must be reported.

Answer 5

Bank interest is passive income. It is already withheld by the bank. No need to report it.