What are the consequences of amending a tax return?

Question

My parent filed for me as a dependent without my permission due to a "misunderstanding." I live in my own household and provide for myself completely for over 6 years.

My issue is, I am no longer eligible for full financial aid due to this error.

My parent does not want to be "put through" an amendment as

an amendment was also submitted for last years taxes.

Does the IRS punish tax payers for amending tax returns? Is there a limit on amending returns.

Which is the worst of two evils: Losing financial aid and parent paying out of pocket or amending and pay IRS?

Assistance and input greatly appreciated.

Answer 1

If you are really supporting yourself, you should have been claiming yourself on your own tax return all these years.  And the first time you both claimed your exemption, the IRS would  contact both you and your parent, and would have *require* one of you to amend your return (which would be your parent in this scenario).

So, was 2007 tax return this first time this happened?  Did you claim yourself on your tax return?  If so, your parent is going to have to amend the return anyway.  Might as well get it over with.

As far as the consequence, that depends on your parent's tax bracket.  For example, if parent is in 15% bracket, he/she will owe back $3400*15%=$510, plus some penalty and interest.

< additional info >

In defense of v.b., you did say that if you lose financial aid your parent will have to pay out of pocket.  Maybe it was a typo.  Of course, even if your parents do provide some support for you, that alone does not make you their dependent.  You also have to live with them (at least when you are not at school).

Reading between the lines it appears you didn't file a tax return (you said you weren't required to file).  But regardless, your parent should amend to make the return correct.  And you do receive more than $600-$700 in financial aid, don't you?

Answer 2

No, there is no "punishment" for amending your return.  The choice to do so is yours, but failure to to do so is costing you money.

Answer 3

"Which is the worst of two evils: Losing financial aid and parent paying out of pocket or amending and pay IRS?"

Excuse me, this statement is VERY telling.  You state that you support yourself in every way, but then say if you don't get the financial aid because of this, you expect mom/dad to pick up the difference.  If you were truly on your own, you would be looking at finding a loan that *you* would be paying back to pay the bills.

The IRS looks at facts and circumstances.  There is a support test worksheet in IRS publication 501.  Either you supported yourself or your parent(s) did.  When you do the worksheet, you count any money *you* provided from wages, loans, but not scholarships or grants.  You then compare this to the total cost of supporting yourself.  Unless your you have a 12-month lease and do not live at home (that includes your stuff), then you are to include your share of mom/dad's housing expenses as you are temporarily away from home.

If, when you are done, and you find that you *did* support yourself, present mom/dad with the facts and tell them they need to amend their return.  

You should have done this BEFORE you filed.

Answer 4

If your parents don't meet the requirements to claim you, and it doesn't sound like they do, then you can't GIVE them permission.

The IRS doesn't punish anyone for filing an amendment, but they will have to do the extra paperwork, and pay back whatever they saved by claiming you.