Grandchildren's savings accounts

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Subject Author Date Grandchildren's savings accounts sandybeth 10-03-2009  Re: Grandchildren's savings accounts Arthur Kamlet 10-03-2009  Re: Grandchildren's savings accounts removeps-groups@yahoo.com 10-04-2009
Posted by sandybeth on October 3, 2009, 6:03 pm Please log in for more thread options I opened a savings account for each of my grandchildren, one 5 & the other 2. I put the savings in both names (theirs & mine) & their SS #'s. I was wondering why I got a tax form for interest and found out that they used my SS# & not the kids'. Kids cannot have savings accounts in THEIR SS numbers so I have to pay taxes on the interest at MY rate. The same is true of CD's that I open for them. I was told that this is the law. Is this true? Sandra -- << ------------------------------------------------------- >> << 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. >> << ------------------------------------------------------- >> Posted by Arthur Kamlet on October 3, 2009, 6:17 pm Please log in for more thread options >I opened a savings account for each of my grandchildren, one 5 & the >other 2. I put the savings in both names (theirs & mine) & their SS >#'s. I was wondering why I got a tax form for interest and found out >that they used my SS# & not the kids'. Kids cannot have savings >accounts in THEIR SS numbers so I have to pay taxes on the interest at >MY rate. The same is true of CD's that I open for them. I was told >that this is the law. Is this true? Gnerally minors would not be able to contract for such an account, and so a parent or grandparent might gift them some money, and open an account known as a Uniform Gifts (or Transfers) to Minors Account UGMA or UTMA. An adult custodian would also be named to manage the account for the minor. The minor's SSN would then appear on the account. Such an account is then owned by the minor and managed by the custodian, and any earnings would be reported by the minor, if reporting is required. So you might wish to close out this account and place the funds into the minor's UGMA/UTMA account. You might consider following the Nominee procedures described in IRS Publication 550 to tell the IRS these earnings reported to you really belong to the minors, but that would depend on whether the account was set up so it really did belong to them. If it's not too much money, report it as yours and consider it an additional present :^) -- ArtKamlet at a o l dot c o m Columbus OH K2PZH -- << ------------------------------------------------------- >> << 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. >> << ------------------------------------------------------- >> Posted by removeps-groups@yahoo.com on October 4, 2009, 6:36 pm Please log in for more thread options > I opened a savings account for each of my grandchildren, one 5 & the > other 2. I put the savings in both names (theirs & mine) & their SS > #'s. I was wondering why I got a tax form for interest and found out > that they used my SS# & not the kids'. Kids cannot have savings > accounts in THEIR SS numbers so I have to pay taxes on the interest at > MY rate. The same is true of CD's that I open for them. I was told > that this is the law. Is this true? > Sandra If everything is set up right, the kids would either: (1) Pay tax on the interest on their own tax return. (form 8615) (2) The people who they are a dependent of (usually the parents) would pay interest on the tax on their own tax return (form 8814) In 2008 the first $900 of investment income is tax-free, the next $900 is taxed at 10%, and the remainder is taxed at the parents' rate. For 2009, the $900 might be increased. And these forms 8615 and 8814, known as the "kiddie tax", apply too teenagers and young adults as well. -- << ------------------------------------------------------- >> << 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. >> << ------------------------------------------------------- >> Similar Threads Posted Foreign Savings Accounts-------Treasury Form 90-22-1 February 7, 2008, 5:36 pm Savings Bonds December 12, 2006, 2:34 am Talking to my son about savings June 6, 2007, 4:39 pm Health Savings Account February 25, 2007, 5:00 am Tax savings with purchasing a house June 20, 2008, 3:57 am SC 529 Plan - PassThru for tax savings? 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