Important Changes

Filing requirements. The amount of gross income that many dependents with earned income (wages, tips, etc.) can have during the year without having to file a return has increased. See Filing Requirements in Part 1.

Standard deduction. The standard deduction for many dependents with earned income (wages, tips, etc.) has increased. See Standard Deduction in Part 1.

Tax computation for certain dependents. Generally, the tax computed for a dependent using the 2001 Tax Table or Tax Rate Schedules can be reduced to take into account the new 10% tax rate. To figure the reduced tax, use the Tax Computation Worksheet for Certain Dependents in the instructions for Form 1040 (line 40), Form 1040A (line 26), or Form 1040EZ (line 11).

This computation does not apply to the following.

• Dependents who received (before any offsets) an advance payment of their 2001 taxes.
• Dependents who file Form 1040NR, U.S. Nonresident Alien Income Tax Return.

Alternative minimum tax. The limit on the exemption amount for figuring the alternative minimum tax of a child filing Form 8615 has increased to the child's earned income plus $5,350. See Alternative Minimum Tax in Part 2.

Third party designee. Beginning with the 2001 tax return, a child's parent or guardian who does not sign the child's return may be authorized by the person who does sign the return to answer, as a third party designee, any questions that may arise during the processing of the return. This authorization also allows the parent to perform certain actions. See your income tax package for details. Also, see Responsibility for Child's Return, in Part 1.

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