Third Stimulus Payment

[Charlotte7598]

Hi all,

I'm freaking out a little bit right now and hope to get some help. For my 2021 taxes, I did not receive the third stimulus payment automatically, and I thought I was eligible so I claimed it on my return last year because I thought I could no longer be claimed as a dependent. However, it has come to my attention that for purposes of the stimulus, a dependent be up to age 24 and enrolled full time in college, and living with another taxpayer who provides at least one half of support and still be claimed as a dependent (I was only 23). And, to be eligible for your own third stimulus check, I read that you must have filed for taxes for either 2019 or 2020 independently (not claimed as a dependent), which I was claimed in both of those years. So, it appears I may have erroneously claimed the credit. I may also have forgotten to claim a small amount of bank interest that wasn't enough for me to get a form 1099-INT, and left out a 1099-Q that I got for probably an even smaller amount.

What should I do?? The IRS hasn't said anything to me and it's been almost a year. Should I file an amended return, and if so, does that increase my chances of an audit? Can they charge interest and penalties on top of having me return the $1400? I really need some advice because I'm super anxious about this...thank you. 🙂

[BrittanyS]

Can you clarify whether the person who claimed you as a dependent did receive the $1,400 on your behalf?  The interest is small, so the IRS would not be too concerned with the error.  

[Charlotte7598]

Hi Brittany,

Thank you for responding! My mom said she doesn't remember if she received the extra $1400 for me, but she did not claim me on her taxes for tax year 2021 that was filed last year. But was I correct in saying I was an eligible dependent that year, and could have been claimed? Which means I was not eligible to receive my own check?

[DawnC]

That is correct.   Since you had to check the box ''someone else can claim me'', you would not be eligible for the 3rd stimulus ($1400).    If your mom didn't claim you, she would not have received the $1400 either.    Since you could have been claimed, your mom (or whoever could claim you) could file an amendment, claim you, and receive the recovery rebate.   

[Charlotte7598]

Ok. So just clarifying everything so far. I was claimed as dependent for 2019 and 2020. I could have been claimed for 2021 due to being under 24 years old in 2021 and full time college student for at least some part of 5 months of the year, and was provided more than one-half of support. So, this means I have to file an amended return? If I do so, would my mom be required to as well or only if she wants to? And when I amend, what interest and penalties are involved when paying it back? Does it increase my chances of being audited?

[DavidD66]

If you file an amended return because you could have been claimed as a dependent, you will have to pay the $1,400 stimulus back.  The IRS will assess penalty and interest.  More than likely, you can have the penalty waived under the First Time Penalty Abate and Administrative Waiver.  All you will have to do is call and ask.  As for your mother, she doesn't have to file an amended return, but if she wants to claim you as a dependent and receive the stimulus payment for you, she can.  For additional information on First Time Penalty Abate, click on the following link:  

Penalty Relief due to First Time Abate or Other Administrative Waiver  

[fanfare]

If you file an amended return for the stimulus, but stated "someone can claim me", IRS will deny the payment.

That's all there is to it. There is no penalty.

@Charlotte7598 

[Charlotte7598]

Thanks for the help everyone! If I file an amended return now, what do you think that'll do to my chances of being audited? I can't imagine the IRS would be super happy about this type of error. It would also mean that I wasn't eligible for the student loan interest deduction and education credit I received....

And, I guess I'm just trying to determine whether it's worth going back and amending at this point. I made about 24,500 that year, could I reasonably have provided half my own support with that? Although I read you had to file independently (not claimed as dependent) for 2019 and 2020 as well to qualify for the third payment, I don't know if that's true or not.

[DaveF1006]

Yes, to be eligible for the third stimulus payment, the IRS stipulates If you were claimed as a dependent on someone else's tax return for 2020, you were not eligible for the third Economic Impact payment.

No, filing an amended return will not increase your risk of being audited. As far the amount of money that you  made, you may have been able to claim your own dependency but only you can determine if the money made provided for more than 1/2 of your living expenses. 

[Charlotte7598]

I appreciate all of the advice. I'm glad the first time penalty abate may be an option...although if it's not, I fear the interest and penalties will be very substantial given the amount of money I received. So I'm definitely afraid at this point, but I feel like amending is the right thing to do. The IRS would definitely catch on to a mistake like this eventually anyway, would they not?

[AmyC]

yes. The IRS is running about 4 years behind right now. By the time they add 4 years of penalties and interest, it would be overwhelming.

You do not need to claim the interest since it was below the $10 threshold.

A 1099-Q is only reported if it was not used on qualified expenses for room and board, along with tuition. If it was used on qualified expenses, no need to include it.

[Charlotte7598]

Ok, it sounds like I definitely need to amend and get this straightened out as  I also may have gotten a student loan interest deduction and education credit that I wasn't qualified for either. Although I've heard the general IRS statute of limitations is 3 years in most cases? 

My tax pro said I could claim my student loan interest deduction this year as well since I am definitely no longer a dependent for tax year 2022. However, I was a dependent the year the loan was taken out and my mom was a cosigner. I was right to be able to claim that this year, correct?

[Vanessa A]

You are correct.  The Statute of limitations, in general, is three years for the IRS to assess your taxes unless you omitted income or filed a false or fraudulent return.  

Yes, if you claimed the student loan interest deduction and education credits, you should amend your returns to remove them.  If your mom was a consignor on the loans, she can amend her returns to claim the interest if she paid on the loan and an education credit if she did not take one. 

Yes, since you are no longer a dependent, you can claim the interest yourself this year. 

[Charlotte7598]

Great, even if she paid some of the interest?

[DawnC]

Yes, even if she paid some of the interest.    As long as only one of you takes the credit, you should not have any issues with claiming that credit.