Personal Finance & Money Asked on July 24, 2021
I am a minor (16 years old) and I won $5000 from a research competition. My teacher informed me I have to pay taxes on this – is there some way to calculate how much I’d have to pay? I live in the USA.
According to the Interactive Tax Assistant, you will have to file a return:
Do I need to file a tax return?
You are required to file a tax return for 2020. Your return's gross income is equal to, or exceeds, $1,100. File your return [via paper mail, or] electronically using one of the following four options:
- Use IRS Free File (for certain low-income taxpayers) or Fillable Forms
- Use a Free Tax Return Preparation Site
- Use Commercial Software
- Find an Authorized e-File Provider
IRS is not saying you must e-file. You can always file by paper mail: download the 1040 and other relevant forms, fill them out in ink or inside your PDF viewer, print and mail.
Your parents also have to file Form 8615, because:
Form 8615 must be filed for any child who meets all of the following conditions.
- The child had more than $2,200 of unearned income.
- The child is required to file a tax return.
- through 5. (blah blah, the child is a normal dependent)
Correct answer by Orange Coast- reinstate Monica on July 24, 2021
As it doesn't seem like the award fits with IRS Topic No. 421 Scholarships, Fellowship Grants, and Other Grants),
Your research award will most likely be reported on a 1099-MISC. The tax paperwork like W-2 will be sent to you in late January/early February in the next tax year.
The big issue is that if you are being claimed as a dependent by your parents/guardians:
From: IRS Tax Topics 551 - Dependents
Dependents – If you can be claimed as a dependent by another taxpayer, your standard deduction for 2020 is limited to the greater of: (1) $1,100, or (2) your earned income plus $350 (but the total can't be more than the basic standard deduction for your filing status).
Note the above stated earned income which usually comes on a W-2 (part-time or summer job). So you won't be able to use the 'basic standard deduction' for a single taxpayer ($12,400 in 2020) if being claimed as a dependent.
As you are under 18 and made more than $2,200, Form 8615 - Tax for Certain Children Who Have Unearned Income applies so how much your parents/guardians earn affects how much tax you pay.
Answered by Morrison Chang on July 24, 2021
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