Page 58 - 2020 Publication 17

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The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.
You may be able to deduct expenses you Taxpayer Identification Number (TIN). You the Uniform Gifts to Minors Act, or any similar
have in earning this income on Schedule A must give your name and TIN (either a social law becomes the child's property.
(Form 1040) if you itemize your deductions. See security number (SSN), an employer identifica- Income from the property is taxable to the
Money borrowed to invest in certificate of de- tion number (EIN), or an individual tax identifi- child, except that any part used to satisfy a legal
posit, later, and chapter 12. cation number (ITIN)) to any person required by obligation to support the child is taxable to the
federal tax law to make a return, statement, or parent or guardian having that legal obligation.
Useful Items other document that relates to you. This in- Savings account with parent as trustee.
You may want to see: cludes payers of interest. If you don't give your
TIN to the payer of interest, you may have to Interest income from a savings account opened
pay a penalty or be subject to backup withhold- for a minor child, but placed in the name and
Publication ing. subject to the order of the parents as trustees,
537 537 Installment Sales TIN for joint account. If the funds in a joint is taxable to the child if, under the law of the
state in which the child resides, both of the fol-
550 550 Investment Income and Expenses account belong to one person, list that person's lowing are true.
1212 1212 Guide to Original Issue Discount name first on the account and give that person's • The savings account legally belongs to the
TIN to the payer. (For information on who owns
(OID) Instruments the funds in a joint account, see Joint accounts, child.
Form (and Instructions) later.) If the joint account contains combined • The parents aren't legally permitted to use
funds, give the TIN of the person whose name
any of the funds to support the child.
Schedule A (Form 1040) Schedule A (Form 1040) Itemized is listed first on the account. This is because
Deductions only one name and SSN can be shown on Form Form 1099-INT. Interest income is generally
reported to you on Form 1099-INT, or a similar
Schedule B (Form 1040) Schedule B (Form 1040) Interest and 1099. statement, by banks, savings and loans, and
These rules apply to both joint ownership by
Ordinary Dividends a married couple and to joint ownership by other payers of interest. This form shows you
8615 8615 Tax for Certain Children Who Have other individuals. For example, if you open a the interest income you received during the
year. Keep this form for your records. You don't
Unearned Income joint savings account with your child using have to attach it to your tax return.
8814 8814 Parents' Election To Report Child's funds belonging to the child, list the child's Report on your tax return the total interest
name first on the account and give the child's
Interest and Dividends TIN. income you receive for the tax year. See the in-
8815 8815 Exclusion of Interest From Series structions for Form 1099-INT to see whether
EE and I U.S. Savings Bonds Issued Custodian account for your child. If your you need to adjust any of the amounts reported
After 1989 child is the actual owner of an account that is to you.
8818 8818 Optional Form To Record recorded in your name as custodian for the Interest not reported on Form 1099-INT.
child, give the child's TIN to the payer. For ex-
Redemption of Series EE and I U.S. ample, you must give your child's SSN to the Even if you don't receive a Form 1099-INT, you
Savings Bonds Issued After 1989 payer of interest on an account owned by your must still report all of your interest income. For
For these and other useful items, go to IRS.gov/ child, even though the interest is paid to you as example, you may receive distributive shares of
interest from partnerships or S corporations.
Forms. custodian. This interest is reported to you on Schedule K-1
Penalty for failure to supply TIN. If you
General Information don't give your TIN to the payer of interest, you (Form 1065), Partner's Share of Income, De-
duction, Credits, etc.; or Schedule K-1 (Form
may have to pay a penalty. See Failure to sup- 1120-S), Shareholder's Share of Income, De-
A few items of general interest are covered ply SSN under Penalties in chapter 1. Backup ductions, Credits, etc.
here. withholding may also apply. Nominees. Generally, if someone receives
Recordkeeping. You should keep a Backup withholding. Your interest income is interest as a nominee for you, that person must
list showing sources of interest income generally not subject to regular withholding. give you a Form 1099-INT showing the interest
RECORDS and interest amounts received during However, it may be subject to backup withhold- received on your behalf.
the year. Also, keep the forms you receive ing to ensure that income tax is collected on the If you receive a Form 1099-INT that includes
showing your interest income (Forms 1099-INT, income. Under backup withholding, the payer of amounts belonging to another person, see the
for example) as an important part of your re- interest must withhold, as income tax, on the discussion on nominee distributions under How
cords. amount you are paid, by applying the appropri- To Report Interest Income in chapter 1 of Pub.
ate withholding rate. 550, or the Schedule B (Form 1040) instruc-
Tax on unearned income of certain chil- Backup withholding may also be required if tions.
dren. Part of a child's 2020 unearned income the IRS has determined that you underreported
may be taxed at the parent's tax rate. If so, your interest or dividend income. For more in- Incorrect amount. If you receive a Form
Form 8615 must be completed and attached to formation, see Backup Withholding in chap- 1099-INT that shows an incorrect amount or
the child's tax return. If not, Form 8615 isn't re- ter 4. other incorrect information, you should ask the
quired and the child's income is taxed at his or issuer for a corrected form. The new Form
her own tax rate. Reporting backup withholding. If backup 1099-INT you receive will have the “CORREC-
Some parents can choose to include the withholding is deducted from your interest in- TED” box checked.
child's interest and dividends on the parent's re- come, the payer must give you a Form Form 1099-OID. Reportable interest income
turn. If you can, use Form 8814 for this purpose. 1099-INT for the year indicating the amount may also be shown on Form 1099-OID, Original
For more information about the tax on un- withheld. The Form 1099-INT will show any Issue Discount. For more information about
backup withholding as “Federal income tax
earned income of children and the parents' withheld.” amounts shown on this form, see Original Issue
election, go to Form 8615. Discount (OID), later in this chapter.
Beneficiary of an estate or trust. Interest Joint accounts. If two or more persons hold Exempt-interest dividends. Exempt-interest
property (such as a savings account or bond)
you receive as a beneficiary of an estate or trust as joint tenants, tenants by the entirety, or ten- dividends you receive from a mutual fund or
is generally taxable income. You should receive ants in common, each person's share of any in- other regulated investment company, including
a Schedule K-1 (Form 1041), Beneficiary's terest from the property is determined by local those received from a qualified fund of funds in
Share of Income, Deductions, Credits, etc., law. any tax year beginning after December 22,
from the fiduciary. Your copy of Schedule K-1 2010, aren't included in your taxable income.
(Form 1041) and its instructions will tell you Income from property given to a child. (However, see Information-reporting require-
where to report the income on your Form 1040 Property you give as a parent to your child un- ment next.) Exempt-interest dividends should
or 1040-SR. der the Model Gifts of Securities to Minors Act, be shown on Form 1099-DIV, box 11. You don't
Page 54 Chapter 6 Interest Income