Should I file a tax return for my child who has under $1250 in unearned income?

If I file for my kid who's in a similar situation, does that somehow impact my ability to claim them as a dependent on my own taxes? Also wondering if there's any benefit for her long term credit history or something?

Filing a separate return for your child won't affect your ability to claim them as a dependent on your tax return, as long as they still meet all the dependent tests. You'll just need to check the box on their return indicating someone else can claim them as a dependent. Tax returns don't directly impact credit history or credit scores. Credit bureaus don't receive tax filing information. However, teaching financial responsibility early, including understanding taxes, can help develop good financial habits that benefit credit indirectly in the future.

How does taxr.ai work exactly? Is it just for dependent filing questions or can it handle more complicated tax situations? I've got some self-employment income alongside my W-2 job and always struggle with that part.

Sounds interesting, but is it actually giving advice that's different from what you'd get from TurboTax or H&R Block? Those big companies already have decision trees for these kinds of questions.

It works by analyzing your specific tax scenario against IRS rules and past cases. You upload documents or describe your situation, and it provides analysis with cited sources. It's definitely not limited to dependent filing - it handles complex situations including mixed income types. The difference from TurboTax or H&R Block is it's focused on analysis and planning rather than just form-filling. It doesn't just tell you what boxes to check - it explains why and gives you options with pros and cons of each approach based on your specific numbers.

Wait how does this actually work? Do they have some special connection to the IRS or something? I don't understand how they can get through faster than if I just called myself.

Sounds like BS honestly. If the IRS lines are jammed, they're jammed for everyone. How would some third party service magically get priority? Probably just taking your money for something you could do yourself for free if you're patient enough.

No special connection - they use technology to navigate the phone trees and wait on hold so you don't have to. It's the same wait time, but their system handles the waiting part while you go about your day. When an agent finally answers, their system calls you and connects you directly to that agent. It's not about getting through faster than everyone else - it's about not having to personally sit through the hold time. They call you only when an actual human picks up, so you're not wasting hours listening to the hold music and checking if someone's there yet.

Did you do the return yourself or use a software/service? I'm wondering if it's worth paying for TurboTax or something similar for such a simple return, or if I should just do it manually to show her the forms.

We used the free version of one of the major tax software programs. It was simple enough that we didn't need to pay for anything. I thought about doing it manually to show her all the forms, but the software actually made it easier to explain each step as we went through it. We printed out copies of all the completed forms at the end so she could see what the actual tax documents look like. Best of both worlds - easy guided process but still educational about the forms themselves.

This is such an important point! The same thing happened with my niece. She had about $40 withheld from some bond interest, and the only way to get that back was to file. The threshold for required filing doesn't change the fact that she was entitled to get her withholding back.