Final answer:
False. When the kiddie tax applies, the child will still need to file their own income tax return to report their income, even if it will be included on the parents' return.
Step-by-step explanation:
The statement that when the kiddie tax applies, the child need not file an income tax return because the child's income will be reported on the parents' return is false. Children subject to the kiddie tax may still have to file their own tax return if their income exceeds certain thresholds, and it is not automatically reported on the parents' tax returns. This tax was implemented to prevent parents from shifting large amounts of unearned income to their children, who would be taxed at a lower rate.
When the kiddie tax applies, it means that a child's unearned income (such as investment income) above a certain threshold is subject to tax at the parents' tax rate. However, the child will still need to file their own income tax return to report their income, even if it will be included on the parents' return.
For example, if a child has investment income exceeding a certain threshold, such as $2,200 for 2020, it will be subject to the kiddie tax. The parents will include the child's income on their own tax return using Form 8814, but the child will also need to file their own return to report the income and pay any applicable tax.