Dependent children who receive the Alaska Permanent Fund Dividend must pay taxes. But it's not always easy for taxpayers to figure out how to file for their children.
According to Internal Revenue Service guidelines, permanent fund dividend payments are considered unearned income, along with any other dividends or interest income.
Children under the age of 14 who received dividend checks in 2002 must pay on a portion of the payment at their parents' tax rate.
Parents can choose to report their child's dividend on the parents' Form 1040 using Form 8814, and the child won't have to file for 2002.
To qualify to do this, however, the child can only have unearned income for the filing year, have a gross income of no more than $7,500, have no estimated tax payments for 2002 (including any overpayment of tax from his or her 2001 return applied to 2002 estimated tax), and have no federal income tax withheld from his or her income.
Form 8814 must be attached to the return. The form is available online at www.irs.gov/formspubs/index.html, or can be requested by calling 1 (800) 829-3676.
For taxpayers who do not or cannot report their child's unearned dividend, the child must file a Form 1040 or 1040A, and a Form 8615 must be completed and attached to the return. Form 1040EZ or TeleFile (filing over the phone) cannot be used.
Children age 14 or older by Jan. 1, who received a dividend check must file Form 1040, 1040A, 1040EZ or TeleFile. Report the dividend payment on line 21 of Form 1040, line 13 of Form 1040A, line 3 of 1040EZ or line D of TeleFile. No additional form is needed.
If part of a child's permanent fund dividend was withheld because of a missing or incorrect Social Security number, be sure to claim credit for that amount on the child's tax return (line 62 of Form 1040, line 39 of Form 1040A or line 7 of Form 1040EZ).
These rules may not apply to children of taxpayers who receive public assistance, however. To check, or for more information, visit the IRS Web site at www.irs.gov, or call 1(800) 829-1040.
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