What happenes if someone claims an illegal dependant on their taxes?

Question

Such as an adult child (21) who claims himself, but so do their parents? The parents can do so legally, because the 21 year-old lived with them the previous year for a little over six months before moving out. The parent told the child to claim himself, but then found out they can claim the child. They do when they file. What will happen?

I guess what I mean is, will I get the penalty, or will my parents?

Answer 1

If the child lived with them for over half the year, was a full-time student for some part of at least 5 months of that year, and didn't provide over half of his/her support for the year, then the parents can claim the child as a dependent. Or if the child made under $3300 for the year and the parents provided over half of the child's support, then they can claim. If those conditions aren't met, the parents can't claim the child. It's not automatic that they can just because their child lived with them for over half the year.

If two people claim the same person for an exemption, and it sounds like that's what happened, the IRS sends letters to both asking for more info so they can determine who had the right to the claim - the other person will have to pay back the taxes they saved, plus interest and possible penalties.

If by the rules I list in the first paragraph of this answer you now see that they can claim you, you need to file an amended return dropping your claim to your own exemption - you'll probably owe some extra taxes with your amendment. If you do this by 4/17, there won't be any penalties. If it looks like they CAN'T legally claim you, then they should amend their return.

There won't be some HUGE penalty or fine, in either case. This happens all the time, and isn't a deliberate attempt to evade taxes. It's not tax fraud, it's just a mistake that will have to be corrected.

Answer 2

If parents are eligible to claim a child but don't, the child cannot claim himself. The IRS has a matching process that will detect the presence of the same Social Security Number taken both as a dependent on your parents' return and as an exemption on your return. Since your parents were eligible (or so you indicate) to take the dependency exemption, the correction will likely be made on your return. But it will take some contact with both of you to sort it out--the IRS does not have the facts available to determine who was eligible.

Answer 3

If the IRS audits your taxes they will see the mistake and bill your parents for the extra money owed. The government will find out regardless.