I have 5 grandkids between the ages of 3 and 13 yrs. I started an account for each of them the year they were born. I have never received a statement stating that the interest earned was taxable. This year I received an interest statement for three out of the five stating that the interest earned has to either be claimed on my tax return or their parents. Is this true ? I always thought the money was tax exempt because of their ages and did not have to be claimed until the monies were withdrawn. It can be proven that no money has ever been withdrawn since the accounts were opened . Can you advise me as to what needs to be done ?
Depends on what kind of accounts they are. If it's a 529 Plan or Coverdell IRA, those are tax deferred and tax free if used for education. If they're custodial accounts, the interest statements should have the child's social security number on them. "Kiddie Tax" may apply if the child has over $900 total in investment income. If they are joint accounts with you and the child and your social security number is on the statements, you will need to report the income. You may be able to make a "nominee interest" subtraction to avoid paying the tax. Consult a financial advisor or tax professional to handle this properly and perhaps change the registration on the accounts.
Other people asked questions on similar topics, check out the answers they received:
Other people asked questions on various topics, and are still waiting for answer. Would be great if you can take a sec and answer them