Talk to Your Kids About Taxes

Here’s a common horror story… Jane’s son Adam is 19 and still lives at home. He’s a college student, and works… you know, he takes care of himself. He’s his own man. So, he takes advice from his friend and goes to a big box tax prep place, or his buddy does his taxes for him. His “preparer” marks that he claims himself, and he gets his $280 refund. EASY AS PIE!!! RIGHT? Wrong…

He only made $6,000, so really had no requirement to file. He just filed to get his $280 refund. When his parents filed, they correctly claimed him as a dependent, and claimed the school expenses that they paid for him. They got a $500 other dependent credit, AND the $2500 American Opportunity Credit, along with a dependency exemption for the CA FTB, so $3,378 additional refund just from claiming Adam. They’re excited to be able to pay the next semesters tuition with their tax refund. … then… BAM! Their return gets rejected. Their tax preparer gets to notify them that their son has been claimed as a dependent on another return. Their options are to remove him, and their $3,378 refund, or mail in their return and wait an additional couple of weeks for the refund. THEN Adam has to amend his return. Luckily he doesn’t have to pay anything back, BUT that’s not always the case. This results in additional fees, headache, and wait time.

All of this could have been avoided by #1. Communication… talk to your kids about taxes! Talk to your tax preparer about their taxes. Get informed.

#2. Going to a reputable tax preparer. Most big box places use newly licensed, inexperienced preparers that are hassled into preparing return quick quick quick. Most laymen don’t have the experience to know that Adam is considered a dependent, and needs to mark the box.

**This is a real live example of something that did happen. The names have of course been changed for privacy.