Never, Ever Let Your Kids File A Tax Return

Income Tax Service
5200 W Market St
Greensboro, NC 27409
336-852-9505

Terry Hough
President

See our other newsletters at ElectroFile Income Tax Service Newsletters

March 12, 2016

Never, Ever Let Your Kids File A Tax Return (For Themselves)

I know, you're proud that they got a job and earned some money during the year. And they got a W2 for the year.

Make sure they know not to go online and file a return for themselves! All this advertising on TV and elsewhere saying they can do it for free is very tempting. They can, but it will hurt you every time!

I was reminded of this just yesterday. It happens a few times a year to some of our customers.

A longtime client's college age son went online and filed his own tax return and he claimed himself as a dependent. No problem for him, the IRS accepted the return and he was happy.

Then we completed the parent's return properly including the son as a dependent and claiming the son's educational expenses, etc., it was rejected by the IRS because the dependent's SSN had been filed as the primary taxpayer on another (his own) tax return, and claimed as a dependent (even though he wasn't eligible to do so).

The parent's return cames to a screeching halt!

They are faced with some choices:

Refile their return and not claim the dependen son, a college student under age 24 that they support. That will reduce their refund by over $2,000. I don't like that choice, do you?
We now have to get access to a copy of the son's tax return so that it can be amended to remove the dependency claim that was made in error. The son may or may not owe some money back depending on his income. This will take a minimum of 45 days to clear through the IRS and reopen the door for the parent's return to be filed. There isn't enough time left before the April 18th deadline to do this.
File the parent's return electronically without claiming the son as a dependent or claiming the education credits with the intent to later amend it after the son's amended return clears through the IRS. Then we will have to amend the parent's return to include the dependent and education credit claims, make a claim for the corrected refund amount and wait approximately 90 to 120 days to receive it. I've seen this take up to 6 to 8 months to process through the IRS and the refund be issued. Even so, it is the best method to handle this situation.
Amend the son's return immediately plus file a paper return for the parent's before April 18th. Then we can expect a notice from the IRS disallowing the dependency claim, and we will have to reply to the a letter explaining the situation and proving the son's amended return has been amended. The the parent will have to wait and wait and wait for the correct refund to be made.

See? This situation royally messes up the parent's tax situation. And, the "free" tax return for the son "ain't free" anymore at all!

That is one of the reasons that ElectroFile Income Tax Service has always offered to file a dependent's first tax return for free and provides a discount for subsequent returns for dependent children. The parents should always control the filing of their dependent children's tax returns to protect their own interest.

In summary, DO NOT allow a dependent child to file his own tax return. Dependent children's, including fulltime students up to the age of 24 and in some instances age 26, tax returns should be coordinated with the parent's tax return filing by a competent and trained tax preparer. Otherwise, there is almost always a real fiasco!