J.K. Lasser's Your Income Tax 2013: For Preparing Your 2012 Tax Return

24.4 Parent’s Election To Report Child’s Dividends and Interest

Instead of filing a separate return for your child (24.3) whose income is subject to the “kiddie tax,” you may elect on Form 8814 to compute the kiddie tax on your own 2012 return if all of the following tests are met:

• The child’s only 2012 income is from interest and dividends (including mutual-fund capital gain distributions and Alaska Permanent Fund dividends);
• The total interest and dividends are over $950 but less than $9,500;
• Estimated tax payments were not made in the child’s name and Social Security number for 2012 and there was no overpayment from the child’s 2011 return applied to his or her 2012 estimated tax; and
• The child was not subject to 2012 backup withholding.

On Form 8814, you determine the portion of the child’s qualified dividends and capital gain distributions that you report on your own return, where they are eligible for the preferential rates (5.3) for qualified dividends/net capital gains. You report the balance of the child’s investment income over $1,900 as “other income” on Line 21 of your Form 1040. You also figure an additional tax equal to the smaller of $95 or 10% of your child’s income over $950, which is included in the regular income tax liability you enter on Line 44 of your Form 1040.

If the parents are married filing separately, or are divorced, separated, unmarried, or living apart for the last six months of the year, the parent whose taxable income would be taken into account ...