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IRS filing requirements for dependents

Posted by Andrew Chan  January 15, 2010 10:00 AM

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Regarding the IRS rule on when a dependent college student is required to file a federal tax return: Could you explain the reason for the first part (unearned income > $950)? It seems irrelevant. Doesn't the third part (gross income > earned income + $300) effectively set the unearned income limit to $300? This would be triggered even at zero earned income, right? Or am I missing something?

I can understand how it may seem like you are limited to $300 of unearned income in the scenario that you mentioned but there is another important part to the gross income test that you need to consider. The gross income test states that a dependent is required to file a tax return if his/her gross income exceeds the higher of $950 or his/her earned income plus $300. By allowing a dependent?s gross income to be the higher of the two numbers, a dependent with $0 earned income can have as much as $950 of unearned income before triggering the filing requirement under this rule.

(Note that the filing requirements that I am describing in this blog posting apply to single dependents that are under the age of 65 and are not blind. The filing requirements for those dependent individuals are different).

The general rule for whether or not a dependent needs to file a tax return consists of three parts which I will call the unearned income test, the earned income test, and the gross income test. For the 2009 tax year, a dependent is required to file a tax return if:
  • Their unearned income is greater than $950 (the unearned income test), or
  • Their earned income is greater than $5,700 (the earned income test), or
  • Their gross income is greater than the higher of $950 or their earned income plus $300 (the gross income test).
Earned income generally includes wages, tips, and taxable scholarships. Unearned income generally includes taxable interest, dividends, capital gain distributions, and taxable social security benefits. Gross income is the total of earned and unearned income.

An easy way to think about these filing requirements for dependents is as follows:
  • If a dependent has unearned income of $300 or less, he/she will need to file a return if their gross income exceeds $5,700.
  • If a dependent has unearned income of more than $300, he/she you will need to file a tax return if their gross income exceeds $950.
For more information on these rules as well as those for other dependents visit the IRS? web site for Publication 929 at http://www.irs.gov/publications/p929/ar02.html.
This blog is not written or edited by Boston.com or the Boston Globe.
The author is solely responsible for the content.

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