I’m looking for a teensy bit of tax advice. First off, I won’t hold anyone else responsible if their advice lands me in jail. Anyway…
Next year, I’ll be a student and working at an essentially non-paying internship in China. I’ll have no wages, but I do anticipate having some interest and dividend income from a mutual fund. Anyway, does that count as “unearned income”? I don’t really understand what that term means, but if I have more than $750 of unearned income then I have to file taxes. I’ve never had a mutual fund before, so I’m not familiar with how it works yet.
I’d really like to be able to just ignore the whole situation for the year while I’m away, and not file at all, but I don’t wanna have to go to the stockades, or whatever they do to people who don’t file when they’re supposed to. Any help would be much appreciated.
According to the IRS site, yes, you do have to file. You more than likely will not pay anything, but you will have to file.
From www.irs.gov
Unearned income. Income other than earned income. This is investment-type income and includes interest, dividends, and capital gains. Distributions of interest, dividends, capital gains, and other unearned income from a trust are also unearned income to a beneficiary of the trust.
I am sure an accountant type person will be along to help you shortly.
It depends (as always).
If you are not considered anyone’s dependent, then as long as your total gross income (combined earned and unearned income) is less than the standard deduction for your filing status, then you don’t have to file. The deduction varies by year but last year, the total deduction for a single person less than 65 years of age was $7,200.
If you are a dependent, then it’s more complicated. In order not to file, you must meet income criteria regarding unearned income, earned income, and gross income. Again, for last year, in order not to file as a dependent, your unearned income must have been less than $700 and your earned income must have been less than $4,400. Your total gross income must have been less than $700 or your earned income plus $250, whichever was larger. Your total gross income must have been less than $4,400 as well.
If the deductions for your filing status don’t completely cover the income you gained, then you have to file.
Thanks for the info. But most important is what exactly “unearned income” is. Does that mean income from investments? If I get $1,000 dividend interest in a year, is that $1,000 “earned” or “unearned”? I don’t understand the distinction. What are they getting at? Should I feel guilty for spending money I didn’t “earn”? Thanks.
See Lyllyan’s definition; earned income is basically wage income. You work, you get paychecks, and at the end of the year, your employer gives you a W-2 form to file with your taxes. Money gained from a mutual fund (dividends, distributions, whatever) qualifies as unearned income, and you’ll receive a 1099 form from the mutual fund company at the end of the year reporting your earnings.