Everyone is looking for a way to lower their tax bill and maybe even get a little refund back. I see lots of people attempting to be really… “creative” in coming up with a few dependents to help them achieve this goal. Before you get too carried away with how easy it can be to claim someone as a dependent just because he/she is not filing taxes, is not working, and happens to be living off of your good grace for the time being, stop and get a better understanding of how the IRS defines “dependent”. The last thing you want to happen is for the IRS to remove your dependent, making the exemption (the money break) you received invalid, and then require you to repay thousands of dollars back. Sometimes it may take the IRS a few years to catch up to what has happened; and usually by then you’ve grown quite comfortable claiming this particular dependent. With the rise and mandate of e-file, the IRS is positioning its-self to catch up with folks who inappropriately claim dependents. Make sure you know the rules about who you can claim as a dependent, and fight the urge to skirt around the law in this area.
I want to give you two tools to determine if you can actually claim someone as a dependent:
ONE – the clearly and properly defined explanation of “dependent”. Take a look at Bankrate’s article in which they give you the two scenarios: (1) If the dependent is your biological child and (2) if the dependent is your qualifying relative.
TWO – the IRS’s online Interactive Tax Assistant that will take you through a series of questions. If you answer them correctly and completely factual, you will be able to determine with great accuracy whether or not you can claim this person.
After you’ve worked through these qualifying steps, next you will have to explicitly summarize information about your and your dependent’s finances to determine if the IRS considers you to have “supported” this dependent. IF both of these requirements pan out, THEN you should be able to claim your dependent free and clear.
Use the tools!