It will explain what to do, either file an amended return or do nothing. The other person who claimed the dependent will get the same letter. If one of you do not file an amended return that removes the child-related benefits, then you may be audited by us to determine who can claim the dependent.
If you claim them as dependents, this affects their ability to claim certain other benefits, like the Earned Income Credit (EIC). If they aren't your dependents, you should use the amended return option to remove them. Use Form 1040X to create an amended return, which you must mail to the IRS.
Because you are technically filing your taxes under penalty of perjury, everything you claim has to be true, or you can be charged with penalty of perjury. Failing to be honest by claiming a false dependent could result in 3 years of prison and fines up to $250,000.
You may receive a letter (CP87A) from the IRS, stating that your child was claimed on another return. It will tell you that if you made a mistake, to file an amended tax return, and if you didn't make a mistake, do nothing. The other person who claimed the dependent will get the same letter.
To remove a dependent, submit Form 1040-X with a new list of dependents. You may have a new refund or different "amount you owe".
An IRS notice may alert you to a mistake on your tax return or that it's being audited. You can verify the information that was processed by the IRS by viewing a transcript of the return to compare it to the return you may have signed or approved. You can access your tax records through your account.
We may be able to remove or reduce some penalties if you acted in good faith and can show reasonable cause for why you weren't able to meet your tax obligations. By law we cannot remove or reduce interest unless the penalty is removed or reduced.
It's important to note that if two or more taxpayers claim the same child, the IRS will use the “tiebreaker rule” to figure out who is eligible. You can always speak about your specific situation with your Jackson Hewitt Tax Pro when questions arise.
If you need to make a change or adjustment on a return already filed, you can file an amended return. Use Form 1040-X, Amended U.S. Individual Income Tax Return, and follow the instructions.
We recommend that you prep that documentation as soon as possible and return it to the IRS. Wait for the IRS to decide which parent can claim the child. Once the IRS makes a determination, the parent who filed incorrectly will need to return any taxes, fees or interest owed without this exemption.
If your child is earning an income and is self-sufficient, it may be time to stop claiming them as a dependent. This typically occurs when they move out of the house and are no longer relying on you for financial support.
Key Takeaways
Claiming a dependent allows you to access tax credits and deductions that reduce your overall tax liability. A dependent can be a qualifying child or a qualifying relative (such as a parent or sibling) you support. Only one taxpayer can claim a dependent in a given tax year.
A false deduction is a claim for an expense that is not actually incurred, not legally deductible, or exaggerated.
The dependent's birth certificate, and if needed, the birth and marriage certificates of any individuals, including yourself, that prove the dependent is related to you. For an adopted dependent, send an adoption decree or proof the child was lawfully placed with you or someone related to you for legal adoption.
The Bottom Line
Even though the IRS does not check all tax refunds, it is a large agency with a wide reach that has a variety of means of catching tax cheats and liars. The penalties for avoiding or lying about taxes are severe.
Tax Penalty for an Incorrect Tax Return
If you file a tax return that significantly misrepresents your financial situation you could face a 20% federal tax penalty on the amount you owe.
A paper form must be mailed in. You should consider filing an amended tax return if there is a change in your filing status, income, deductions or credits. Normally you do not need to file an amended return to correct math errors. The IRS will automatically make those changes for you.
The IRS Whistleblower Office pays monetary awards to eligible individuals whose information is used by the IRS. The award percentage depends on several factors, but generally falls between 15 and 30 percent of the proceeds collected and attributable to the whistleblower's information.
If the noncustodial parent claims your child without permission. When the noncustodial parent claims the exemption on their taxes and they don't attach the required Form 8332 signed by the custodial parent, their tax filing doesn't comply with IRS rules. The IRS may enforce its rules.
General Rule. In order to assess additional tax, the IRS has three years after the date the tax return was due or the date the return was filed, whichever is later. This rule applies regardless of whether the tax return was timely filed or filed late.
To Correct a Tax Return Mistake, File an Amendment
Your next move: file an amended tax return. Simply put, an amended return is usually filed because something was incomplete, incorrect or omitted from the original tax return.
You may get a letter or notice from the IRS saying there's a problem with your tax return or your refund will be delayed.