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I am an indian citizen working in USA and having US Green Card

. I file my income...
I am an indian citizen working in USA and having US Green Card . I file my income tax return jointly with my wife as Married filing jointly . I have a 11 yrs old kid studying here in USA with me . Please clarify the below :

(1) Can i transfer funds from my bank account to my kid's bank account so as to save tax on interest income as the unearned income in the name of kid's account is tax free up to $2000 a year ?

(2) Can i withdraw any amount of funds from my kid's bank account any time for any use (anyway i will be the signing authority in my kid's account till he get the age of 18 yrs ) ?

(3) Does it make any difference if i open my kid's account here in USA or in India ?

(4) Do i need to show unearned income of my kid anywhere if it is less than $2000 in a year because some people say no need to show if it is less than $1000 in a year but need to show if it is between $1000 to $2000 in year ,............... i am confused ........ please clarify in detail ?

(5) If all of us i.e., me , my husband and kid have bank account in India , will the FBAR Filing condition of $10,000 apply individually to each of us (i.e., 10K for me , 10K for my husband & 10K for my kid) or collectively $10K for us ?

(6) If my spouse does not have any signature authority in regard with my bank account in India but he is authorised to operate my Bank Locker in which i have only important papers & photographs , so do FBAR limit also apply to bank locker ?

(7) Do i need to mention my kid's unearned income anywhere in my Income Tax Return with my spouse ?
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Answered in 2 hours by:
5/31/2013
Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 30,162
Experience: Taxes, Immigration, Labor Relations
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LEV :

Hi and welcome to Just Answer!
(1) Can i transfer funds from my bank account to my kid's bank account so as to save tax on interest income as the unearned income in the name of kid's account is tax free up to $2000 a year?
"transfer funds to the child's bank account" - means - you want to gift the money to your child - correct? Yes - you may do that. Generally you may transfer up to $14,000 per person per year without any gift tax consequences. The gift above that amount will be subject of gift tax return reporting - but there will not be any gift tax as long as the lifetime limit is not reached - which is $5250,000 in 2013.
If your child will have investment income above $950 - he/she will be required to file a tax return - assuming your child is your dependent.

LEV :

2) Can i withdraw any amount of funds from my kid's bank account any time for any use (anyway i will be the signing authority in my kid's account till he get the age of 18 yrs )?
The money on your child's account are legally owned by the child - not by you. As long as the child is a minor - he/she has no authority to manage financial affair - but you as a parent will be named as a custodian for that account and will have authority to perform financial transaction on behalf of your child. As a custodian - you will be also responsible to file tax returns for your child if such tax returns are required.
After your child will reach an age of majority - he/she will take over all financial affair including bank accounts.

LEV :

(3) Does it make any difference if i open my kid's account here in USA or in India?
From US tax prospective - that would not make any difference. However you need to consider a local law in India.

LEV :

(4) Do i need to show unearned income of my kid anywhere if it is less than $2000 in a year because some people say no need to show if it is less than $1000 in a year but need to show if it is between $1000 to $2000 in year ,............... i am confused ........ please clarify in detail ?
Income earned by your child is reported on your child's tax return. Nothing is reported on your tax return.
You would need to consider filing requirements - for 2012 - dependent is required to file a tax return if total unearned income is above $950 (assuming there is no earned incomed). That threshold is adjusted every year. Please be aware that unearned income above $1900 is taxed at parent's tax rate - which might be higher.

LEV :

(5) If all of us i.e., me , my husband and kid have bank account in India , will the FBAR Filing condition of $10,000 apply individually to each of us (i.e., 10K for me , 10K for my husband & 10K for my kid) or collectively $10K for us ?
FBAR filing requirements are determined separately for each individual. Thus if three persons are listed as owners of the account - each person separately will be required to file FBAR form.
(6) If my spouse does not have any signature authority in regard with my bank account in India but he is authorised to operate my Bank Locker in which i have only important papers & photographs , so do FBAR limit also apply to bank locker ?


If you have a financial interest in or signature authority over a foreign financial account, including a bank account, brokerage account, mutual fund, trust, or other type of foreign financial account, the Bank Secrecy Act may require you to report the account yearly to the Internal Revenue Service by filing Form TD F 90-22.1, Report of Foreign Bank and Financial Accounts (FBAR).
Any other assets besides mentioned are not reported on FBAR form.




LEV :

(7) Do i need to mention my kid's unearned income anywhere in my Income Tax Return with my spouse ?
Income received by the child is NOT your income and is not reported on your tax return. Such income is reported on your child's income tax return.
However - as a parent - you may be able to avoid having to file a tax return for the child by including the child's income on the parent's tax return. A parent can elect to do this if certain conditions are met. To make this election, attach Form 8814, Parents' Election to Report Child's Interest and Dividends, to your Form 1040. Still income tax liability of the child is determined separately from your tax liability.

Customer:

(1) In regard with above query # XXXXX , so i can transfer upto $14,000 in a year to my kid's bank account without any further reporting ,................. is that correct ? and if the investment income or unearned income of my kid from that amount is less than $950 in a year , then neither me as a parent nor my kid is required to report this income anywhere and it is fully tax-free without reporting to IRS ,...................... is that correct ?

Customer:

(2) In regard with above query # XXXXX , as i understand the unearned income threshold for 2012 is $950 and it will be little higher for 2013 year , ........... am i correct ? Do i have any tax liability or reporting if my kid's unearned income is more than $950 but less than $1900 in a year because anyway if something needs to do , its only me who can do on behalf of my kid as he can not do tax things being 11 yrs old only ?

Customer:

(3) In regard with above query # XXXXX , as i understand that if me , my husband and kid all have separate bank account in India and like i have $9000 in it , my husband has $11,000 in his bank account and my kid has $9500 in his bank account , then only my husband needs to file FBAR and it does not matter whether we file taxes jointly or separately as being married ?

Customer:

(4) In regard with above query # XXXXX , as i understand that if i have a bank locker or safe deposit box facility in my name in India , i dont need any FBAR Reporting for that locker or safe deposit box as it is not financial account ,................... am i correct ?

Customer:

(5) In regard with above query # XXXXX , as i understand that if my kid's unearned income is between $950 to $1900 in a year then i need to report to IRS whether on my return or my child's separate income tax return but no tax liability to pay (here i am using the word I NEED TO REPORT because my kid is only 11 yrs old and i will have to manage this taxes on his behalf) , ..............is that correct ?

LEV :

Sorry I need to switch to Q&A mode - because the page became loo long and it takes time to refresh on my screen. I will prepare the answer on all your question.

Ask Your Own Tax Question

(1) In regard with above query # XXXXX , so i can transfer up to $14,000 in a year to my kid's bank account without any further reporting ,................. is that correct? That is correct - for INCOME tax purposes - gifts are not taxable income for the recipients - regardless of the value - so you child doesn't need to report the gift. For GIFT tax purposes - you as a donor are required to file a gift tax return only if the gift is above certain threshold. That limit is $14,000 for 2013.

 

and if the investment income or unearned income of my kid from that amount is less than $950 in a year , then neither me as a parent nor my kid is required to report this income anywhere and it is fully tax-free without reporting to IRS ,...................... is that correct?
If your child will have an income - there are filing requirements for your child to file the tax return. If your child is your dependent and has ONLY unearned income - the threshold is $950. If your child's unearned income is below that amount - the tax return is not required.

 

(2) In regard with above query # XXXXX , as i understand the unearned income threshold for 2012 is $950 and it will be little higher for 2013 year , ........... am i correct?
That is correct.

To find these limits refer to Dependents under Who Must File, in Publication 501, Exemptions, Standard Deduction and Filing Information. Please be aware that this publication si not yet updated for 2013.
http://www.irs.gov/publications/p501/index.html

 

Do i have any tax liability or reporting if my kid's unearned income is more than $950 but less than $1900 in a year because anyway if something needs to do , its only me who can do on behalf of my kid as he can not do tax things being 11 yrs old only ?
To determine the tax liability we need to prepare the tax return.
As a raw estimate - your child's tax liability will be 10% on income above $950.
Please see tax rate schedule on last page in this publication - www.irs.gov/pub/irs-pdf/i1040tt.pdf

Ask Your Own Tax Question
(3) In regard with above query #5, as I understand that if me, my husband and kid all have separate bank account in India and like I have $9000 in it , my husband has $11,000 in his bank account and my kid has $9500 in his bank account , then only my husband needs to file FBAR and it does not matter whether we file taxes jointly or separately as being married?
FBAR filing requirements are based on having a financial interest in or signature authority over a foreign financial account. Because you have a signature authority as a custodian on your child's account - you are also required to file FBAR form. Your child would not be required to file in this example.

(4) In regard with above query # XXXXX , as i understand that if I have a bank locker or safe deposit box facility in my name in India, I don’t need any FBAR Reporting for that locker or safe deposit box as it is not financial account ,................... am i correct ?
That is correct - a bank locker or safe deposit box are not foreign financial accounts and are not reported on FBAR form.

(5) In regard with above query #7, as I understand that if my kid's unearned income is between $950 to $1900 in a year then i need to report to IRS whether on my return or my child's separate income tax return but no tax liability to pay (here i am using the word I NEED TO REPORT because my kid is only 11 yrs old and i will have to manage this taxes on his behalf) , ..............is that correct?
That is correct - if your child's income is above filing requirements threshold - which is $950 in your case - your child is required to file the tax return. Because your child is a manor - you as a custodial will prepare the tax return for your child.
Ask Your Own Tax Question
Customer reply replied 4 years ago

Thanks , i m going to accept your answer . Please clarify the below :


 


(1) In regard with your above answer # XXXXX so assuming that my kid is totally dependent on me and dont have any earned income and if the only investment income or unearned income of my kid is less than $950 in a year , then neither me as a parent nor my kid is required to report this income anywhere and it is fully tax-free without reporting to IRS ,...................... is that correct?


 


(2) In regard with your above answer # XXXXX , i understand that if my kid's unearned income is between $950 to $1900 , either me on behalf of my kid or my kid himself has to file Income Tax Return or i can elect to report such unearned income of my kid in my tax return if it is between $950 to $1900 . Here , my question is will there be any tax liability to pay if such only unearned income of my kid is between $950 to $1900 because i was told by some tax expert that tax liability in such case will be zero due to Standard Deduction provided to kid and thus only simple reporting is required ?


 

(1) In regard with your above answer # XXXXX so assuming that my kid is totally dependent on me and dont have any earned income and if the only investment income or unearned income of my kid is less than $950 in a year , then neither me as a parent nor my kid is required to report this income anywhere and it is fully tax-free without reporting to IRS ,...................... is that correct?
Yes - that is correct.

(2) In regard with your above answer # XXXXX , i understand that if my kid's unearned income is between $950 to $1900 , either me on behalf of my kid or my kid himself has to file Income Tax Return or i can elect to report such unearned income of my kid in my tax return if it is between $950 to $1900 . Here , my question is will there be any tax liability to pay if such only unearned income of my kid is between $950 to $1900 because i was told by some tax expert that tax liability in such case will be zero due to Standard Deduction provided to kid and thus only simple reporting is required ?
That is correct - the standard deduction for the dependent with only unearned income is $950 - that is why the first $950 are not taxable.
Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 30,162
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Customer reply replied 4 years ago

Accepted your answer . thanks ..........


 


ok , so first $950 unearned income is tax-free and not reportable to IRS and next $950 i.e., $1900 - $950 will be reportable but tax-free . Thus , if my kid has total only unearned income $1900 , then first $950 is assumed tax-free by IRS & next $950 will be cancelled out by SD while reporting to IRS ........... thats why $1900 income is considered like tax-free ? .......... am i getting correct ?

ok , so first $950 unearned income is tax-free and not reportable to IRS and next $950 i.e., $1900 - $950 will be reportable but tax-free . Thus , if my kid has total only unearned income $1900 , then first $950 is assumed tax-free by IRS & next $950 will be canceled out by SD while reporting to IRS ........... thats why $1900 income is considered like tax-free ? .......... am i getting correct ?
There is no "not reportable income".
There are filing requirements threshold - which is $950 in your situation.
If income is below that threshold - your child is NOT required to file the tax return.
If income is above $950 - your child is required to file the tax return and MUST report ALL income.
If your child's income is $1900 - he is required to file and will report $1900 as total gross income.
As a dependent - there will be $950 standard deduction.
His taxable income will be $1900(total income) - $950(standard deduction) = $950.
His estimated tax liability will be $950*10%=$95.
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