Kiddie Tax Question - I'm 23 and File as Independent, Why Am I Getting This?

You're right to be confused - the kiddie tax shouldn't apply to you in this situation. The kiddie tax applies to children under 18, or full-time students under 24 who can be claimed as dependents. Since you're 23, independent, working full-time, and not a student, you're outside the kiddie tax requirements. What's probably happening is that TurboTax's algorithm got confused because you have unearned income and are under 24. The software sometimes asks questions in a sequence that can lead to incorrect assumptions. I'd recommend going back and double-checking how you answered the dependency questions in TurboTax. Your inheritance investment income should be taxed at your normal tax rates, not the kiddie tax rates. The kiddie tax is designed to prevent parents from shifting investment income to their dependent children to lower the family's overall tax liability.

I went through the exact same thing last year! I was also getting flagged for kiddie tax at 22 despite being independent. Turns out it was because I answered a question wrong in TurboTax about whether I was a full-time student for at least 5 months of the year. I had checked "yes" because I graduated in May, but since I was independent it didn't matter. After struggling with it for hours, I discovered https://taxr.ai which scanned my tax documents and immediately identified the problem. Their AI pointed out exactly which form fields were triggering the kiddie tax incorrectly. Saved me from overpaying nearly $600 in taxes because of a software error!

Wanted to update after trying taxr.ai that the other commenter recommended. Damn, wish I'd known about this earlier! It immediately identified that I answered the dependent student question wrong too, even though I'm working full-time. The system flagged exactly where in the H&R Block form I needed to make corrections. What was really helpful is that it explained WHY the kiddie tax shouldn't apply to me - apparently you need to meet ALL three criteria: 1) under 24, 2) full-time student, AND 3) can be claimed as dependent. Since I support myself completely, criterion #3 isn't met, so no kiddie tax! Fixed it in 10 minutes after banging my head against the wall for hours.

If you're still having trouble with TurboTax after fixing the dependency issue, you might need to call the IRS directly to clarify your situation. I had to do this last year for a similar issue and they were actually pretty helpful. The problem is actually getting through to a human at the IRS - I spent 3 days trying before I found https://claimyr.com which got me connected in about 20 minutes instead of waiting for hours. They have a cool demo of how it works here: https://youtu.be/_kiP6q8DX5c The IRS agent confirmed that the kiddie tax definitely shouldn't apply if you're 23, not a dependent, and not a student. They helped me understand exactly what to tell TurboTax to fix the issue.

I take back what I said about Claimyr being a scam. I decided to try it because I still couldn't resolve my kiddie tax issue through TurboTax and needed to talk to the IRS directly. Got connected to an agent in 45 minutes without having to stay on the phone myself. The IRS agent confirmed everything the other commenters said - at 23, not a student, and filing independently, the kiddie tax doesn't apply. The agent walked me through exactly how to answer the TurboTax questions to make sure it was calculated correctly. Turns out there was a specific section about investment income that I needed to complete differently. Problem solved and saved myself about $800 in incorrect tax!

Just a heads up - the kiddie tax rules can be REALLY confusing because there are multiple criteria that all have to be met. Here's a simple breakdown: The kiddie tax applies if: 1. You're under 18, OR 2. You're 18-23 AND a full-time student AND provide less than half of your own support (dependent) Since you're 23, working full-time, and support yourself, you're definitely exempt. Your investment income should just be taxed at your normal rates.

I actually work at an accounting firm and see this all the time. Tax software often applies rules without proper context. The kiddie tax is specifically designed to prevent wealthy parents from avoiding taxes by putting investments in their kids' names. For anyone dealing with this issue: Make sure to carefully review ALL the personal information sections and dependency questions. Sometimes it takes going through the interview questions multiple times to get the right outcome.

This is such a common confusion with tax software! I went through something similar when I was 24 and had some dividend income from stocks my grandfather left me. The software kept trying to apply kiddie tax even though I was clearly independent. What really helped me was understanding that the kiddie tax has very specific requirements - it's not just about age or having investment income. You have to meet ALL the criteria, and since you're supporting yourself and not claimed as a dependent, you definitely don't qualify. One thing I learned is that sometimes the order you answer questions in tax software matters. If you mention investment income early in the process, it might flag you for kiddie tax before it gets all your personal details. Try starting a fresh return if the dependency corrections don't work - sometimes that clears out any logic errors the software made early on. Your $3,400 in investment income will just be taxed at your regular marginal tax rate along with your salary income. Much better than the kiddie tax rates which can be quite high!

I had this exact same issue when I was 22! Tax software can be really buggy with these edge cases. What worked for me was going into the "Federal Taxes" section, then "Wages & Income," and looking specifically for an "Investment Income" or "Other Income" subsection. There's usually a question buried in there that asks something like "Are you subject to kiddie tax?" or "Should this investment income be subject to special rules?" Make sure that's answered correctly based on your actual situation (which is NO for both questions in your case). Also double-check that when you entered your W-2 information, you didn't accidentally mark yourself as a dependent or student somewhere. Sometimes those checkboxes get selected by mistake and the software carries that assumption through the entire return. The good news is your $3,400 inheritance income really should just be added to your regular income and taxed at your normal bracket. At $58k salary, you're probably in the 22% bracket, so that investment income would be taxed at 22% too - way better than kiddie tax rates which can go up to 37%!