taxable income ?


T

tex shalter

Do they have to file . . .
I gave my two sons stocks for Christmas last year. Should
they trade their stocks for a different company and earn a
capital gain, will they have to file. The capital gains will
be well under $ 2,000. Is there a limit before you have to
file ?

Both have worked during summers mostly and received W2s from
employers but haven't filed returns.

Thanks

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P

Phil Marti

tex shalter said:
Do they have to file . . .
I gave my two sons stocks for Christmas last year. Should
they trade their stocks for a different company and earn a
capital gain, will they have to file. The capital gains will
be well under $ 2,000. Is there a limit before you have to
file ?
Yes. Assuming that they are your dependents, unearned
income as little as $300 can trigger a filing requirement,
though. See the 1040 instructions for details.

Also remember that sale proceeds, not net gain, is what's
reported to IRS. Without a return calculating the gain they
will assume that it's all gain.
Both have worked during summers mostly and received W2s from
employers but haven't filed returns.
Have they claimed exemption from income tax withholding? If
not, they may be due refunds which they won't get without
filing.

--
Phil Marti
Clarksburg, MD

<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2007) - All rights reserved. >>
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H

Herb Smith

tex shalter said:
Do they have to file . . .
I gave my two sons stocks for Christmas last year. Should
they trade their stocks for a different company and earn a
capital gain, will they have to file. The capital gains will
be well under $ 2,000. Is there a limit before you have to
file ?

Both have worked during summers mostly and received W2s from
employers but haven't filed returns.
Since they have both earned (W-2) and unearned (1099-B,
1099-DIV) income, they need to file (and pay tax) if the
unearned income exceeds $250.

<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2007) - All rights reserved. >>
<< ------------------------------------------------------- >>
 
P

Paul Thomas, CPA

tex shalter said:
Do they have to file . . .
I gave my two sons stocks for Christmas last year. Should
they trade their stocks for a different company and earn a
capital gain, will they have to file. The capital gains will
be well under $ 2,000. Is there a limit before you have to
file ?
If their income is more than $850 then they need to file.
Here's the kicker - the IRS will only know they sold stock
at the gross amount. They have no clue as to the resulting
gain or loss, and may in fact, declare the whole gross sales
amount as gain unless and until you tell them by filing a
return reporting the sale on Schedule D.
Both have worked during summers mostly and received W2s from
employers but haven't filed returns.
Even if their total income was less than the filing limit,
they may want to file to get a refund of any federal / state
tax that was withheld.

Make them do it by hand if they are in need of being
punished.

--
Paul A. Thomas, CPA
Athens, Georgia

<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2007) - All rights reserved. >>
<< ------------------------------------------------------- >>
 
B

Benjamin Yazersky CPA

tex shalter said:
Do they have to file . . .
I gave my two sons stocks for Christmas last year. Should
they trade their stocks for a different company and earn a
capital gain, will they have to file. The capital gains will
be well under $ 2,000. Is there a limit before you have to
file ?

Both have worked during summers mostly and received W2s from
employers but haven't filed returns.
Take a look at the IRS 1040 instructions for who must file a
tax return. Also look at your state's instructions for the
same thing.

Even though there may not be a filing requirement, it still
may be advisable to file a tax return. If the kids had a
job, there may be tax withheld on the W2, any you'll have to
file a tax return to get it refunded, even if there is no
tax liability. The broker who handled the stock sale has to
issue a 1099b-and the IRS matches those to social security
numbers. Therefore, I'd advise to file a tax return, even
though you may not technically be required to. It should
avoid unnecessary correspondence and in the long run could
wind up being the more cost effective choice.

___________________________________
<<< Benjamin Yazersky, CPA [NJ & NY] >>>
-----> real address on hobokeni or hobokenx <-----

<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2007) - All rights reserved. >>
<< ------------------------------------------------------- >>
 
B

bono9763

tex shalter said:
Do they have to file . . .
I gave my two sons stocks for Christmas last year. Should
they trade their stocks for a different company and earn a
capital gain, will they have to file. The capital gains will
be well under $ 2,000. Is there a limit before you have to
file ?

Both have worked during summers mostly and received W2s from
employers but haven't filed returns.
The key is not the amount of the capital gain but the amount
of the gross proceeds, as that is the number that is
reported to the IRS. If their W-2 income plus the amount of
the gross proceeds from the stock sale is above the
threshold for filing, then they will have to file. For a
single dependent, the threshold is somewhere between $800
and $4750, depending on the amount of the unearned income
(stock sale).

<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2007) - All rights reserved. >>
<< ------------------------------------------------------- >>
 
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T

tex shalter

Thanks everyone

Take a look at the IRS 1040 instructions for who must file a
tax return. Also look at your state's instructions for the
same thing.

Even though there may not be a filing requirement, it still
may be advisable to file a tax return. If the kids had a
job, there may be tax withheld on the W2, any you'll have to
file a tax return to get it refunded, even if there is no
tax liability. The broker who handled the stock sale has to
issue a 1099b-and the IRS matches those to social security
numbers. Therefore, I'd advise to file a tax return, even
though you may not technically be required to. It should
avoid unnecessary correspondence and in the long run could
wind up being the more cost effective choice.
<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2007) - All rights reserved. >>
<< ------------------------------------------------------- >>
 

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