Liquidating distribution detailed example
This is because only one name and SSN can be shown on Form 1099.
If your child is the actual owner of an account that is recorded in your name as custodian for the child, give the child's SSN to the payer.However, the parent can choose to include the child's interest and dividends on the parent's return if certain requirements are met. For more information about the tax on unearned income of children and the parents' election, see Pub. You should receive a Schedule K-1 (Form 1041), Beneficiary's Share of Income, Deductions, Credits, etc., from the fiduciary.Your copy of Schedule K-1 (Form 1041) and its instructions will tell you where to report the income on your Form 1040. You must give your name and SSN or individual tax identification number (ITIN) to any person required by federal tax law to make a return, statement, or other document that relates to you. If you do not give your SSN or ITIN to the payer of interest, you may have to pay a penalty.If the funds in a joint account belong to one person, list that person's name first on the account and give that person's SSN to the payer.(For information on who owns the funds in a joint account, see , later.) If the joint account contains combined funds, give the SSN of the person whose name is listed first on the account.You should keep a list showing sources and investment income amounts you receive during the year. The NIIT is a 3.8% tax on the lesser of your net investment income or the amount of your modified adjusted gross income (MAGI) that is over a threshold amount based on your filing status.
Also keep the forms you receive showing your investment income (Forms 1099-INT, Interest Income, and 1099-DIV, Dividends and Distributions, for example) as an important part of your records. A child born on January 1, 1998, is considered to be age 18 at the end of 2015; a child born on January 1, 1997, is considered to be age 19 at the end of 2015; a child born on January 1, 1992, is considered to be age 24 at the end of 2015.
If all of these statements are true, Form 8615 must be completed and attached to the child's tax return.
If any of these statements is not true, Form 8615 is not required and the child's income is taxed at his or her own tax rate. Interest, dividends, and other investment income you receive as a beneficiary of an estate or trust is generally taxable income.
For example, you must give your child's SSN to the payer of dividends on stock owned by your child, even though the dividends are paid to you as custodian.
The penalty is $50 for each failure up to a maximum penalty of $100,000 for any calendar year.
You will not be subject to this penalty if you can show that your failure to provide the SSN was due to reasonable cause and not to willful neglect.