Claiming the Wrong Dependents
The IRS recognizes that raising kids is insanely expensive. Not to mention raising kids while supporting an elderly parent or a wayward nephew. That's why it offers tax credits to families with dependent children or relatives. But if you try to claim someone as a dependent who isn't a dependent, it will send your tax return straight to the trouble pile.
The IRS has established a long set of criteria for who qualifies as a "child." Here are the highlights [source: IRS]:
- Relationship: A "child" can either be a biological child of the taxpayer, a stepchild, an adopted or foster child, or even a sibling or stepsibling of the child. Descendants of any of these folks are also OK.
- Residence: The child must live with the taxpayer for more than half of the tax year.
- Age: The child must be under 19 on Dec. 31 of the tax year, or under 24 if a full-time student.
- Support: The taxpayer must provide more than half of the child's financial support for the year.
- Relationship: Parents, great aunts, cousins, step-brothers all qualify -- in fact, you don't have to be related to the person at all, provided they meet the other requirements.
- Residence: An actual relative does not have to live with the taxpayer, but nonrelatives like roommates or friends have to live with the taxpayer full-time.
- Age: A qualifying relative can be any age.
- Support: The taxpayer needs to provide more than half of the dependent's financial support during the tax year and the dependent's gross income must be less than the personal exemption of $3,900 in 2013. Also, the dependent cannot take the personal exemption on his or her tax return at the same time.