How to handle 1099-INT issued for dependent child - CD joint ownership question

The H&R Block preparer was correct. When a 1099-INT is issued in your child's name and SSN, that income technically belongs to your child for tax purposes. If your dependent child's only income is interest and dividends (including capital gain distributions) and it's less than $11,500 (for 2022), you have two options: 1. File a separate return for your child to report just this income. 2. Include your child's income on your return by attaching Form 8814 (Parents' Election to Report Child's Interest and Dividends). The second option might be easier since you don't have to prepare a separate return. However, adding your child's income to yours might affect certain deductions or credits that are limited by AGI. When taxes are withheld (like in 2020), filing a separate return for your child usually results in getting that money back if their total income is below the standard deduction for dependents. For the 2020 return you mailed in, if you're expecting a refund, you could check its status on the IRS website or call them to inquire.

Just wanted to share my experience with a similar situation! I had the same issue with my daughter's college fund CDs. I was super confused about how to handle the 1099-INT. I tried doing my own research, but the IRS instructions were like reading hieroglyphics. I found this service called taxr.ai (https://taxr.ai) that analyzed my documents and helped me figure out my options. You upload your 1099-INT and answer a few questions about your dependent, and it tells you whether filing separately or using Form 8814 would be better based on your specific situation. For me, it showed that filing separately for my daughter was better because including her income on my return would have affected some of my education credits. The analysis highlighted exactly how much I'd save each way, which my previous tax preparer never explained!

I just wanted to update after trying taxr.ai for my kid's investment accounts. I was one of the skeptics who asked questions earlier! After uploading my son's 1099-INT forms and some basic info about our situation, I was amazed at how detailed the analysis was. It showed me that in my specific case, including his income on my return using Form 8814 would actually increase my taxes by $187 because of how it affected my child tax credit calculations. The step-by-step explanation made it super clear, and I ended up filing a separate return for him. The whole process took maybe 15 minutes, and I now understand exactly why the H&R Block person gave that advice to the original poster. Would definitely recommend for anyone with dependent income situations!

Just a heads up - I went through a similar situation last year and spent HOURS on hold trying to get someone at the IRS to answer questions about my kid's 1099-INT situation. It was beyond frustrating. I eventually found Claimyr (https://claimyr.com) which got me connected to an actual IRS agent in about 20 minutes instead of waiting for hours. They have this system that holds your place in line and calls you back when an agent is available. You can see how it works here: https://youtu.be/_kiP6q8DX5c The agent confirmed that filing separately for my child was the right move in my case (the interest was from an UTMA account). They also helped me track down that "missing" refund from a prior year return I had filed for my kid that seemed to disappear into the void.

I need to apologize for my skeptical comment earlier. After a particularly frustrating 2-hour wait that ended with a disconnection yesterday, I decided to try Claimyr out of desperation. I was genuinely shocked when I got a call back in 27 minutes connecting me to an actual IRS agent who helped resolve my dependent's 1099-INT issue. The agent confirmed that in my case, I should have been filing separate returns for my daughter since the money was technically in her UTMA account, even though I'm the custodian. They even helped me start the process to recover the refund from a 2021 return I had mailed in that apparently got lost in processing. I stand corrected - this service actually delivered exactly what it promised. Sorry for doubting!

Something nobody's mentioned yet: Make sure you verify who's ACTUALLY the owner of these CDs from a legal standpoint. If these are UTMA/UGMA accounts where your child is the beneficiary, then yes, the interest legally belongs to your child and the 1099-INT should be in their name. But if they're joint accounts where you're just the custodian for convenience, the interest might legally be yours and the bank might be issuing the 1099s incorrectly. I had this exact problem with Wells Fargo where they were issuing 1099s in my daughter's name even though the accounts weren't properly set up as UTMA accounts. Had to get it fixed at the bank level.

Just an FYI - I worked at a bank for years in operations. If you added the child as a joint owner, the bank is required to get your child's SSN for the account and report a portion of the interest under that SSN. Usually it's split 50/50 for joint accounts unless you specified different ownership percentages when opening the account.