- 12 -
|
Page 12 of 30 Fileid: … tions/p929/2021/a/xml/cycle04/source 8:05 - 29-Dec-2021
The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.
Penalty for underpayment of estimated tax. If you line 7, whichever applies. (The amount on Form 8814,
make this election for 2021 and didn’t have enough tax line 10, may be less than the amount on Form 8814,
withheld or pay enough estimated tax to cover the tax you line 3, because lines 7 through 12 of the form divide the
owe, you may be subject to a penalty. If you plan to make $2,200 base amount on Form 8814, line 5, between the
this election for 2022, you may need to increase your fed- child's qualified dividends, capital gain distributions, and
eral income tax withholding or your estimated tax pay- other interest and dividend income, reducing each of
ments to avoid the penalty. See Pub. 505 for more infor- those amounts.)
mation.
Collectibles (28% rate) gain. If any of the child's
capital gain distributions are reported on Form 1099-DIV
Figuring Child's Income as collectibles (28% rate) gain, you must determine how
much to also include on line 4 of the 28% Rate Gain
Use Form 8814, Part I, to figure your child's interest and Worksheet in the instructions for Schedule D, line 18. Mul-
dividend income to report on your return. Only the amount tiply the child's capital gain distribution included on
over $2,200 is added to your income. The amount over Schedule D, line 13, by a fraction. The numerator is the
$2,200 is shown on Form 8814, line 6. Unless the child's part of the child's total capital gain distribution that is col-
income includes qualified dividends or capital gain distri- lectibles (28% rate) gain. The denominator is the child's
butions (discussed next), the same amount is shown on total capital gain distribution. Enter the result on line 4 of
Form 8814, line 12. Include the amount from Form 8814, the 28% Rate Gain Worksheet.
line 12, on Schedule 1 (Form 1040), line 8z. If you file
more than one Form 8814, include the total amounts from Unrecaptured section 1250 gain. If any of the child's
line 12 of all your Forms 8814 on Schedule 1 (Form 1040), capital gain distributions are reported on Form 1099-DIV
line 8z. On the dotted line next to Schedule 1 (Form as unrecaptured section 1250 gain, you must determine
1040), line 8z, enter “Form 8814” and the total of the Form how much to include on line 11 of the Unrecaptured Sec-
8814, line 12, amounts. tion 1250 Gain Worksheet in the instructions for Sched-
ule D, line 19. Multiply the child's capital gain distribution
Note. The tax on the first $2,200 is figured on Form included on Schedule D, line 13, by a fraction. The numer-
8814, Part II. See Figuring Additional Tax, later. ator is the part of the child's total capital gain distribution
that is unrecaptured section 1250 gain. The denominator
Qualified dividends. Enter on Form 8814, line 2a, any is the child's total capital gain distribution. Enter the result
ordinary dividends your child received. This amount may on the Unrecaptured Section 1250 Gain Worksheet,
include qualified dividends. Qualified dividends are those line 11.
dividends reported on Form 1040, 1040-SR, or 1040-NR,
line 3a, and are eligible for lower tax rates that apply to a Section 1202 gain. If any of the child's capital gain
net capital gain. For detailed information about qualified distributions are reported as section 1202 gain (gain on
dividends, see Pub. 550. qualified small business stock) on Form 1099-DIV, part or
If your child received qualified dividends, the amount of all of that gain may be eligible for the section 1202 exclu-
these dividends that is added to your income must be re- sion. (For information about the exclusion, see chapter 4
ported on Form 1040, 1040-SR, or 1040-NR, line 3a. You of Pub. 550.) To figure that part, multiply the child's capital
don’t include these dividends on Form 8814, line 12; or gain distribution included on Schedule D, line 13, by a
Schedule 1 (Form 1040), line 8z. fraction. The numerator is the part of the child's total capi-
Enter the child's qualified dividends on Form 8814, tal gain distribution that is section 1202 gain. The denomi-
line 2b. But don’t include this amount on Form 1040, nator is the child's total capital gain distribution. Your sec-
1040-SR, or 1040-NR, line 3a. Instead, include the tion 1202 exclusion is generally 50% of the result, but may
amount from Form 8814, line 9, on Form 1040, 1040-SR, be subject to a limit. In some cases, the exclusion is more
or 1040-NR, line 3a. (The amount on Form 8814, line 9, than 50%. See the Instructions for Schedule D for details
may be less than the amount on Form 8814, line 2b, be- and information on how to report the exclusion amount.
cause lines 7 through 12 of the form divide the $2,200
Example. Fred is 6 years old. In 2021, he received
base amount on Form 8814, line 5, between the child's
dividend income of $2,300, which included $1,725 of ordi-
qualified dividends, capital gain distributions, and other in-
nary dividends and a $575 capital gain distribution from a
terest and dividend income, reducing each of those
mutual fund. (None of the distributions were reported on
amounts.)
Form 1099-DIV as unrecaptured section 1250 gain, sec-
Capital gain distributions. Enter on Form 8814, line 3, tion 1202 gain, or collectibles (28% rate) gain.) All of the
any capital gain distributions your child received. The ordinary dividends are qualified dividends. He has no
amount of these distributions that is added to your income other income and isn’t subject to backup withholding. No
must be reported on Schedule D (Form 1040), Capital estimated tax payments were made under his name and
Gains and Losses, line 13, or, if you aren’t required to file SSN.
Schedule D, on Form 1040, 1040-SR, or 1040-NR, line 7. Fred's parents elect to include Fred's income on their
You don’t include it on Form 8814, line 12; or Schedule 1 tax return instead of filing a return for him.
(Form 1040), line 8z. They figure the amount to report on Form 1040, lines
Include the amount from Form 8814, line 10, on Sched- 3a and 3b, the amount to report on their Schedule D,
ule D, line 13; and Form 1040, 1040-SR, or 1040-NR,
Page 12 Publication 929 (2021)
|