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Posted by frank1492 on March 30, 2007, 4:35 am
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I am considering a custodial account for an infant. It will
be set up at Smith Barney. I am told I will receive a 1099
annually.
I assume I will have to file a tax return as custodian for
the baby. I'm interested in how complicated this will be as
I am already doing my own taxes which are fairly complex.
Could anyone give me an idea of the info that would be
involved in filing such a return? I am guessing it would be
fairly simple, but I want to check before I get involved.
Thanks very much for your help!.
Frank
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Posted by joetaxpayer on March 30, 2007, 11:25 pm
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frank1492 wrote:
> I am considering a custodial account for an infant. It will
> be set up at Smith Barney. I am told I will receive a 1099
> annually.
>
> I assume I will have to file a tax return as custodian for
> the baby. I'm interested in how complicated this will be as
> I am already doing my own taxes which are fairly complex.
>
> Could anyone give me an idea of the info that would be
> involved in filing such a return? I am guessing it would be
> fairly simple, but I want to check before I get involved.
The kidde tax gives the baby a $850 tax free amount, and
$850 taxed at his rate. An oversimplification, but this
means it's a simple return until the net gain (div + int +
any cap gains) exceed $1700. Depending how you invest, it
may mean paying higher tax next year, or never. Even over
the $1700, it's not that bad.
It's the 1041 trust returns that are a pain, doesn't apply
to you.
JOE
<< ======================================================= >>
<< 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 (2006) - All rights reserved. >>
<< ======================================================= >>
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Posted by Rich Carreiro on March 30, 2007, 11:25 pm
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> I am considering a custodial account for an infant. It will
> be set up at Smith Barney. I am told I will receive a 1099
> annually.
>
> I assume I will have to file a tax return as custodian for
> the baby. I'm interested in how complicated this will be as
> I am already doing my own taxes which are fairly complex.
Until the baby has more than $850 of investment
income (assume he has no other income), you don't
even have to file a return (except for years where
there's an actual sale of securities).
--
Rich Carreiro rlcarr@animato.arlington.ma.us
<< ======================================================= >>
<< 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 (2006) - All rights reserved. >>
<< ======================================================= >>
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Posted by Bill Brown on March 30, 2007, 11:25 pm
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> I am considering a custodial account for an infant. It will
> be set up at Smith Barney. I am told I will receive a 1099
> annually.
If the child is the owner of the funds, the account should
be in the child's name and the 1099 should be sent to the
child.
> I assume I will have to file a tax return as custodian for
> the baby. I'm interested in how complicated this will be as
> I am already doing my own taxes which are fairly complex.
The parents or guardian of the child are responsible for
seeing that the child's income tax return is filed. If you
are neither then your responsibility is to provide the
parents/guardian with the information needed for the child's
tax return.
> Could anyone give me an idea of the info that would be
> involved in filing such a return? I am guessing it would be
> fairly simple, but I want to check before I get involved.
It would be as simple a return as any other for which the
only income is dividends, interest and capital gains. The
instructions for Form 1040 likely provide all the guidance
you need.
<< ======================================================= >>
<< 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 (2006) - All rights reserved. >>
<< ======================================================= >>
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Posted by Tom Russ on March 30, 2007, 11:25 pm
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> I am considering a custodial account for an infant. It will
> be set up at Smith Barney. I am told I will receive a 1099
> annually.
>
> I assume I will have to file a tax return as custodian for
> the baby. I'm interested in how complicated this will be
As with most questions on this group the real answer is that
"it depends".
The major factors that affect it are the particular types of
investments in the account and the total amount of taxable
income. If you do a lot of trading in the account, it could
get complicated to fill out the Schedule D. On the other
hand, if the account is mostly buy-and-hold with stocks and
mutual funds, then the main potential for complication is
the so-called "kiddie tax".
If a dependent child's income exceeds the threshold (this
year it's $1700 for unearned income alone), then the excess
is taxed at the parent's marginal rate. Although fairly
simple conceptually, the form for computing this is
stultifyingly complicated. If you have more than one child,
then things get even worse, because all of the tax returns
start interacting with each other.
Software from the major vendors handles a lot of this, but
so far as I know, there isn't anything (at least not
TurboTax or TaxCut) that will let you link all of the
children's forms with the parent's and transfer the
necessary information automatically. That means that you
can't effectively compute the child's tax until the parent's
return is finalized. At that point you need to partially do
each child's form until you have enough information to
transfer to all of their siblings. Then you can complete
each child's return.
Another drawback is that if anything changes on any one of
the returns, then all of the children's returns need to be
recalculated.
<< ======================================================= >>
<< 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 (2006) - All rights reserved. >>
<< ======================================================= >>
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