Dependent kid/F.T. student tax question

[mamacatnv]

Ahhhhhh I'm pulling my hair out.

DS is a full time college student and we claim him as a dependent - we pay his housing, he pays his tuition which is approx 5K per year with fee's etc.
He works P.T. year round with an additional P.T. job in the summer.

Last year he made 10K total but only paid $77 in Fed. Taxes - his witholdings are Single 1 - the low withholdings has to do with the 2 different employers and he also makes commissions which are on a separate check. Thus, he never hits the thresholds for withholdings. This is the first year we have encountered this.

If I file a 1040A or EZ for him he owes $440 in taxes (the kid is a starving student for goodness sakes) this is based on income less the standard deduction.
I need to look at the tuition credits I am unclear on those although I don't think he can claim any education expenses since he is our dependent and our income is too high, we never get any benefit from his tuition etc.

Any ideas?
What am I missing?
Can I just add his income to our return and let our return offset his liability?
Should we stop claiming him and if we do what are the consequences?
BTW he was 20 at the end of 2009 if that matters

Thanks

 

[Cheshire Figment]

I have a client that is a family with two college students.

I will do the tax returns both ways, one is having the children as dependents and the parents claiming the education deductions/credits and the children limited to their standard deduction. The other way is with the children not as depndents and the students claiming the credits.

I feed both sets of numbers to the family. Iit is much better for the parents to claim them as the total family tax is lower that way. As the parents will save a very large amount on their taxes, they make up to the kids the extra amount the kids have to pay.

 

[monarchsfan16]

He can't claim the education credits if he's claimed as a dependent. Unfortunately, dependent students are excluded from everything under the sun in terms of tax credits, regardless of who pays.

As far as consequences go, check your health insurance. Some require proof that he's a dependent, some are more easy going. I know the law just changed, but it's not really in effect yet.

I'm a full time student, and this year have "covered" all of my living and education expenses (tuition waivers and stipend, because I'm a TA). My parents consider me independent at this point, but I'm only 23, so I'm still eligible to be considered a dependent. Thanks to the stupid making work pay credit, being claimed as a dependent resulted in my only getting 1/3 back of what I paid (I typically get just about everything back). Granted, my income tripled this year, but so did what I paid in withholding taxes. And trust me, going from working only part time on school breaks, to collecting a stipend from an assistantship was not enough to put me in a higher tax bracket Mom's accountant did what Cheshire Figment mentioned: he calculated the numbers with me filing independent, rather than being claimed as a dependent. It was a $775 difference. In the end, so as not to risk anything with health insurance (we filed in February), mom claimed me as a dependent one last time (I will be 24 by the end of the year), and then she wrote me a check for the difference. In a normal year, the difference wouldn't have been nearly as drastic, because, after mom chipped in the difference, I ended up with more than I paid in, but even taking the MWP credit out of the equation, it would have been a nearly $400 difference for me. And mom probably still gained, even after paying me the difference (and SHE offered, based on the recommendation from the accountant. I did NOT ask her to do that)

 

[barkley]

definatly check on the health insurance issue. with mine it's very specific that i would have to be claiming the adult child as a dependant on my taxes in order for them to retain their coverage (and with mine-once lost as an adult child, there's no going back).


for the future-he might look into changing his withholdings by re-doing his paperwork with his employers and still claiming s-1 but filling out the portion of the form where you can set a flat dollar amount to go to the feds on top of whatever the normal withholding calculation is. back in the day when i was a college student working multiple p/t jobs my cpa had me do this.

i'm not a proponant of overpaying the tax man just to get a refund the following year, but the number of people i know that have had mandatory estimated tax payments foisted on them b/c of somewhat similar situations would make me prefer the refund route.

 

[mamacatnv]

Thanks all for your replies - I use Turbo Tax and do our taxes but never until October (yep, I am a procrastinator!) I am an accounting manager by trade but taxes are not my deal, we have a CPA for that

I did call my CPA and he set me straight. He mentioned the option of changing dependent status but that is not a road I want to go down. DS really does not qualify, we still support him. I guess I was just surprised by the $500 that DS owed, he has never made 10K in a year, he is just a P.T. worker bee. Live and learn

I went ahead and filed his taxes, I paid the bill, there went my martini money for awhile . I Immediatley called him and had him change his deductions to Single 0 - then had him add an additional $15 per paycheck. The additional should cover him regardless of what he actually makes or at least come close.

Full time students should get some sort of exemption, IMO. His P.T. funds buy his groceries and pay his tuition, we pay everything else.

Anyway, thanks a ton, I really appreciate it and we won't be making that mistake again!