IRS reminds Alaskans that PFD is taxable
The Internal Revenue Service reminds Alaskans forget that the Permanent Fund Dividend (PFD) is taxable income for Federal Income Tax returns. The IRS suggests that people set aside enough to cover the tax bill, or consider making an estimated payment upon receiving the PFD. For information on how to report the Alaska PFD on the Federal Tax Return, contact the IRS at 800-829-1040 or visit the IRS web site at IRS.gov and input the key words in quotes: “Around the Nation Alaska” in the top right search engine.
The PFD is taxable income for both adults and children, and must be reported on a federal income tax return.
Special tax rules apply to children under age 18, and certain older children who receive more than $1,900 of unearned income, including the PFD and taxable Native Corporation Dividends. Some people refer to this as the “kiddie tax.”
The 2012 PFD of $878 will not trigger the kiddie tax rules for most children this year, unless they have additional unearned income that brings their total above the $1,900 threshold. Dependents must file a tax return if they have unearned income greater than $950.
Dependent children whose only income is the 2012 PFD will not be required to file a tax return this year.
Children whose total unearned income from the PFD and other investment income, such as interest or native corporation dividends, is greater than $950 are still required to file a return. Parents can choose to file a separate Form 1040-EZ, or parents can report their children’s PFD as part of their own tax return using Form 8814. However, using Form 8814 may benefit some parents who are eligible for the Child Tax Credit, as the credit will offset the total tax amount, including the child’s portion of the tax.
Children who received income from work as well as the PFD must file if their gross income is more than the larger of: $950; or their earned income (up to $5,650) plus $300. Children with earned income, or who have had tax withheld from any source, must file a separate tax return; their parents should not use Form 8814.
For information visit www.irs.gov/taxtopics/tc553.html.