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Not for LEV or Rakhi please ! I have a family of me , my

Not for LEV or Rakhi...
Not for LEV or Rakhi please !

I have a family of me , my wife & my 11 yr old son and we all are indian citizen in USA on the US Green Card . I file my income tax return jointly with my wife as Married filing jointly . Our kid is a student here in USA and stay with us . Please clarify the below :

(I) Can i transfer funds from my own bank account to my kid's name 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 ?

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

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

(IV) 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 ?

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

(VI) 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, files & photographs , so do FBAR limit also apply to bank locker and do my husband need to file FBAR only for Bank Locker ?

(VII) 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 37 minutes by:
7/5/2013
Robin D.
Robin D., Senior Tax Advisor 4
Category: Tax
Satisfied Customers: 15,875
Experience: 15years with H & R Block. Divisional leader, Instructor
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Robin D :

Hello and thank you for using Just Answer,
(I) Can i transfer funds from my own bank account to my kid's name 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 ?
A dependent who has only unearned income must file a return if the total is more than $950. If the child's interest, dividends, and other investment income total more than $1,900, part of that income may be taxed at the parent's tax rate instead of the child's tax rate. If the parent does not or cannot choose to include the child's income on the parent's return, use Form 8615 to figure the child's tax. This is implemented by the US to stop parents from using their children to avoid taxation. So, even though your child can have a bank account and receive unearned income that does not mean there is no tax. So if your child is under 18 then the rules are not as simple as you have stated them.

Robin D :

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

That is not really a tax question so you need to ask the bank about withdraws.

Robin D :

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

Worldwide income is taxable to US persons so the reporting would not change based on where the account is but the reporting may be increased, as far as the forms potentially needed.

Robin D :

(IV) Do i need to show unearned income of my kid anywhere if it is less than $2000 in a year

I think I covered this additional question already in the first post. $950 of unearned income

Robin D :

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

This is what I touched on in III above. You each would need the FBAR

Robin D :

(VI) No, unless you are storing gold in that locker

Robin D :

(VII) Do i need to mention my kid's unearned income anywhere in my Income Tax Return with my spouse ?

I covered this too already, you may have the choice to include depending on the amount and the age of the child

Customer:

So i can say that if my child's Unearned income (assuming he has only unearned income) is less than $950 in a year , then neither me as parent nor my child need to show it either in my return or in a separate child return form , ................... am i right ?

Robin D :

If that is the only income the child has yes.

Customer:

ok , so no reporting in any form ..........right ?

Robin D :

Not totally

Robin D :

You asked about the income tax

Robin D :

You may subject yourself to Gift taxation

Customer:

yes

Robin D :

Who is funding the account?

Customer:

me

Robin D :

If you then you cannot give more than $14000

Customer:

i m the father

Robin D :

in a year without reporting

Robin D :

So you need to make sure you do not give more than $14000 to the child in ayear

Robin D :

Then no reporting

Robin D :

IF

Robin D :

their unearned income is the only income and the accounts are in the US

Robin D :

and

Robin D :

they ahve no earned income

Robin D :

have

Robin D :

sorry

Robin D :

This account has to be their account not yours

Robin D :

You can have controll over it but it is their account

Customer:

ok , you told accounts in US ............what does it mean ?

Robin D :

It means if the accounts are not in the US then you may still have to file the FBAR for teh child if the balance meets the amount for filing requirement

Robin D :

They may not need a US tax return

Robin D :

but

Customer:

ok

Robin D :

still have to file a FBAR

Customer:

and the $10,000 Limit to file FBAR applies individually to me , my wife and my kid ......thus , me , my wife & kid can have $10,000 each totally $30,000 without filing FBAR .............right ?

Robin D :

If you are on an account with your child their account balance is added to yours.

Robin D :

Do not overlook the joint or signature authority

Customer:

ok

Customer:

what about if my kid's unearned income exceeds $950 in a year ?

Robin D :

Then they have to file their own return

Robin D :

Or you add it to yours

Robin D :

I posted under #1
A dependent who has only unearned income must file a return if the total is more than $950. If the child's interest, dividends, and other investment income total more than $1,900, part of that income may be taxed at the parent's tax rate instead of the child's tax rate. If the parent does not or cannot choose to include the child's income on the parent's return, use Form 8615 to figure the child's tax. This is implemented by the US to stop parents from using their children to avoid taxation. So, even though your child can have a bank account and receive unearned income that does not mean there is no tax. So if your child is under 18 then the rules are not as simple as you have stated them.

Robin D :

I addressed each of your questions separately above.

Robin D :

I hope this CHAT has been helpful and I thank you in advance for a positive rating.

Robin D :

The systems says you are still in CHAT.

Robin D.
Robin D., Senior Tax Advisor 4
Category: Tax
Satisfied Customers: 15,875
Experience: 15years with H & R Block. Divisional leader, Instructor
Verified
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Robin D.
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Robin D., Senior Tax Advisor 4
Category: Tax
Satisfied Customers: 15,875
15,875 Satisfied Customers
Experience: 15years with H & R Block. Divisional leader, Instructor

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