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Tax Refund for Dependent Child Making $12,000 a year?
My father lists me as a dependent on his tax return based on the fact that I am under 24 years old and am currently enrolled as a full-time student. If I am making $12,000 over the course of the summer at an internship and the company is withholding Federal income taxes as well as Medicare and SS taxes am I eligible for a tax refund if I file a tax return separately?
A little more info: He is in the upper income tax bracket and pays my tuition without any scholarships or grants which are eligible for exemptions.
I have done a bit of research but there seems to be conflicting information on the internet with regards to the "Kiddie Tax" laws and what constitutes unearned and earned income.
Any insight into this is much appreciated.
Refund? Refund? You don't get a refund. You owe income tax.
Unless your $12,000 of wages and any loans you take out is enough to pay for more than half of your total support, you are his dependent. As his dependent, you don't get to claim your exemption, he does.
Your $12,000 will be reduced by $5800 to $6200. Your tax will be $620, provided this is all from wages. If your withholding is more than $620, you will get a refund, but it's a refund of your money. If your withholding is less, you will owe at tax time. Fica/Mc is never refunded.
Yes, you have to file a return because you have a filing requirement.
"I have done a bit of research but there seems to be conflicting information on the internet with regards to the "Kiddie Tax" laws and what constitutes unearned and earned income. "
Then your research is faulty. For kiddie tax purposes, earned income is money from a W-2 or from a schedule C. EVERYTHING else is unearned. That includes the usual (interest, dividends, capital gains) as well as taxable social security benefits, unemployment, inherited IRAs, for kiddie tax purposes only.
The reason the refund is not big deal can be summed up using Judy's old example. You go to Wal-mart and buy a $5 item. If you pay with a $20, you get $15 back. if you pay with a $10, you get $5 back. The $5 item still costs you $5. Think of the price as your tax bill and think of your payment as your withholding.
you are too old for the "kiddie tax'
as a dependent, which from your description you are, you are not taxed on the first $5800(2011) of your income
earned income is working for wages or income from self employment
if you make $12000, $6200 will be taxable and that will probably be at least $620 income tax, hopefully your employer is withholding enough to cover that
the "kiddie tax" only applies to UNEARNED income such as interest on a bank account or something. You are EARNING this income by working for it as an intern, so it counts as EARNED income. You will be required to report it on your own income tax return and your father should NOT report any of it.
Your tax return will have $12,000 of income. You'll get a standard deduction of $5800 leaving you with $6200 taxable and a federal tax liability of about $620. If your federal income tax withheld is more than that, you'll get the difference refunded when you file. If FIT withheld is less, you'll owe the difference when you file.
Note: social security and medicare withholding is separate. It is NOT part of the federal income tax withholding so it doesn't count toward your federal income tax liability and its never refunded.
The rule for your dad to claim you as a "qualifying child" requires that you do not provide more than half of your own support. Take a look at publication 501 and the support worksheets to make sure you meet this test and be prepared to prove it in case your dad is audited.
To correct some of the misinformation in some posts, you aren't too old for kiddie tax to apply. What is applicable is you made over half the current personal exemption amount in earned income, so that is why it doesn't apply to your unearned income.
Also, the income you make is not the qualifier, it is how much you actually spend on your own support regardless of source as long as it's yours, that is important in determining if you are a qualifying child of your father.
The $12,000 is earned income.
You are not entitled to the "earned income credit".
For an unmarried dependent making $12,000 per year, with no other income, the government keeps all the medicare and SS taxes and approximately $630 of the income tax. If more than this was withheld, then you are eligible for a refund.
Your internship is earned income. Any refund entirely depends on how much is withheld.by the kid - 3 years ago
Kiddie tax applies to investment income, not to earned income, so doesn't apply here.
If you put single/zero allowances on your W-4, or maybe even if you put a higher number, they will likely withhold more than you owe so you should get a refund if that's your only income for the year. You will need to file a return whether or not you have a refund coming.