7 Steps To Complete Tax Form 8814

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As a taxpayer, it's essential to understand how to complete tax forms accurately to avoid any potential penalties or delays in receiving your refund. One such form is the IRS Form 8814, also known as the Parents' Election to Report Child's Interest and Dividends. In this article, we will guide you through the 7 steps to complete Tax Form 8814.

What is Tax Form 8814?

Before we dive into the steps, let's understand what Tax Form 8814 is all about. This form is used by parents to report their child's interest and dividend income on their own tax return. By doing so, parents can avoid filing a separate tax return for their child, which can be beneficial for children with significant investment income.

Step 1: Determine if You Qualify

To qualify for Form 8814, you must meet certain requirements. Your child must be under the age of 18 (or under 24 if a full-time student) and have interest and dividend income below a certain threshold. For the 2022 tax year, this threshold is $10,500. If your child's income exceeds this amount, you will need to file a separate tax return for them.

Step 2: Gather Required Documents

To complete Form 8814, you will need to gather several documents, including:

• Your child's Social Security number or Individual Taxpayer Identification Number (ITIN)
• Your child's interest and dividend statements (Forms 1099-INT and 1099-DIV)
• Your own tax return (Form 1040)

Step 3: Complete Part I of Form 8814

Part I of Form 8814 requires you to provide information about your child, including their name, Social Security number, and date of birth. You will also need to report the total amount of your child's interest and dividend income.

Part I: Election to Report Child's Interest and Dividends

• Line 1: Child's name
• Line 2: Child's Social Security number
• Line 3: Child's date of birth
• Line 4: Total interest and dividend income

Step 4: Complete Part II of Form 8814

Part II of Form 8814 requires you to report the specific interest and dividend income earned by your child. You will need to complete a separate line for each type of income.

Part II: Income Reported on This Form

• Line 5: Interest income
• Line 6: Dividend income
• Line 7: Total income reported on this form

Step 5: Complete Part III of Form 8814

Part III of Form 8814 requires you to calculate the tax owed on your child's income. You will need to use the tax tables or the IRS's Tax Withholding Estimator to determine the correct amount of tax.

Part III: Tax Owed

• Line 8: Tax owed on interest income
• Line 9: Tax owed on dividend income
• Line 10: Total tax owed

Step 6: Report the Income on Your Tax Return

Once you have completed Form 8814, you will need to report the income on your own tax return (Form 1040). You will need to include the total amount of your child's interest and dividend income on Line 21 of Form 1040.

Reporting Income on Form 1040

• Line 21: Other income

Step 7: Keep Records

Finally, it's essential to keep accurate records of your child's interest and dividend income, as well as the completed Form 8814. You will need to keep these records for at least three years in case of an audit.

Final Thoughts

Completing Tax Form 8814 may seem daunting, but by following these 7 steps, you can ensure that you report your child's interest and dividend income accurately. Remember to keep accurate records and seek professional help if you need assistance. By doing so, you can avoid any potential penalties or delays in receiving your refund.