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Subject:  Re: How should kids report small DRiP dividends Date:  1/3/1999  10:58 PM
Author:  TMFTaxes Number:  7947 of 127642

[[My wife and I recently started DRiP plans (INTC and JNJ) for our Niece's two

Good for you, Greg.

[[ These are custodial accounts with one of the parents as custodians for each
child, with the child's SSN used to report to the IRS.]]

As it should be.

[[ The Dividends this year will probably be under $5 for each account.]]

Even a mighty oak begins with a little acorn...

[[ I am trying to get knowledgable about what (if any?) filings to the IRS need to
be done.]]

Good for you again, Greg. The first place to begin would be the Taxes FAQ area and read about the kiddie tax rules. It'll basically tell you that if the child is under age 14, and has ONLY unearned income (such as dividends or interest), as long as that income remains under $700 per year, there is no reporting that is required. You can simply file the dividend statements (and make sure to correctly adjust your basis in the shares).

[[ To be safe, I am going to assume that they will need to submit a
1040ez to declare the dividend income, but will owe no taxes due to personal

Again, for the case of children under age 14 and with unearned income of less than $700, NOTHING really needs to be filed. Now, if you get into the situation where you sell shares, and generate capital gains and/or losses, the rules change a bit. But for your $5 dividend this year...don't sweat it if that is the only income that the child receives. No filing is required.

[[ Information from anyone who has been through this before will be appreciated.]]

You can read all about it in the Taxes FAQ area...kiddie tax post. Check it out.

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