By Cynthia Umstattd, June 25th, 2015
If your child claims himself on his tax return when he is still your dependent, you could be in for 9 months of tax return trouble and high CPA bills.
It’s a trap!
Many young adults who are filing their own tax returns for the first time do not know that they often cannot claim their personal exemption. They may think that since they are old enough to file a tax return that they are not going to be claimed as a dependent on their parents’ tax return.
If your child claims himself, you cannot file your tax return until your child has filed an amended tax return (Form 1040X), and it has been processed by the IRS. This process can be 9 months of headaches and frustration. Your CPA firm must also spend lots of extra time sorting everything out with the IRS, which increases their bill.
In 1978 when Tom was in college he filed his first tax return. Since he had not yet taken his first Income Tax class, he thought that of course he could claim himself on his return. He had lived at home for only 4 months, been at school for 8 months, and worked full-time for 3 months; however, he did not provide for over ½ of his support. Instead of asking his parents if he should claim himself, he just did, which caused problems with his parent’s return. It took Fred Sublett, CPA 9 months to sort everything out with the IRS for both his and his parents’ returns. We have seen this story play out over and over again through the years with different clients.
What should you do?
We highly recommend that you sit down with your child and talk to him about whether or not you can claim him on your tax return each year. If you can claim your child as a dependent, then he cannot claim himself. If you are not sure if you can claim him, ask your CPA or read this link. Make it clear to your child what year he is officially able to claim himself on his tax return.