Final answer:
Annuity income for a dependent such as Virginia must be reported on tax filings, and may be subject to federal taxes. The type of annuity and the amount received influences the tax implications. It is also important to consider state taxes and their relation to federal taxes regarding retirement income.
Step-by-step explanation:
The question concerns how to report annuity income for tax purposes for an individual labeled a dependent due to age, implying that retirement income, specifically from annuities, must be accounted for when filing taxes. Even though Virginia is classified as a dependent and her age might prevent her from employment, her annuity income would still need to be reported on her tax return. Annuities are a form of retirement income that can be received from investing in a retirement plan, where the income levels and the tax implications depend on the specific type of annuity, the amount received, and other factors.
The fact that Virginia is the widow of a qualified worker and that she may receive benefits implies that these must also be considered in her tax filings. Virginia's income from these sources could potentially be subject to federal taxes. It's essential to understand that even as a dependent, her annuity and potential benefits may count as taxable income. This income would be reported alongside any other sources of revenue she may have, according to federal (and where applicable, state) taxation laws.
State taxes also play a role in how retirement income is taxed; some states do not impose an income tax, while others allow for a deduction of state taxes from federal taxable income. Preparing for financial security in retirement, which involves understanding the taxation of retirement income, is crucial for everyone.