I get the impression your dependent is an undergraduate college student. When it comes to education expenses and other stuff, including the stimulus, there are two completely separate determinations that have to be made.
1) Who can claim the student as a dependent.
2) Who can claim all the education expenses and credits.
Item #1 is the deciding factor on the stimulus, and has nothing to do with item #2 when it comes to the stimulus. Here's what needs to be understood on that front.
If the parent *QUALIFIES* to claim the student as a dependent and the dependent is required to file a tax return, then the student must indicate on their tax return that the *can* be claimed as a dependent on another tax return. It *does* *not* *matter* if the parent actually claims them as a dependent or not. The key word here is *QUALIFY*.
The student qualifies as a dependent if the following conditions are met.
1) The student was under the age of 24 on Dec 31 of the tax year and;
2) The student was enrolled as a full time student for *any* *one* *semester* that started in the tax year. (This includes the last year of high school) and;
3) The student was enrolled in an accredited institution (this includes high school) and;
4) The student is enrolled in a course of study that will lead to a degree or credentialed certification and;
5) The student did not provide more than half of their own support for the *entire* tax year.
For #5, understand that scholarships, grants, 529 distributions, gifts from Aunt Mary, money from mom and dad, and *any* *other* third party income received by the student *do* *not* *count* for the student providing their own support. Ther are only two possible ways the student can have any claim to providing more than half of their own support.
1) The student was self-employed or had a job and earned sufficient income to justify a claim to providing more than half of their own support. That earned income must also exceed the total of any and all third party support (scholarships, 529 distros, etc) received in the same tax year. Additionally, all costs must be reasonable and within the guidelines set forth by the IRS.
2) The student was the "primary borrower" on a *qualified* student loan, and sufficient funds were distributed to the student in the tax year to justify a claim to providing more than half of their support. The funds distributed to the student in the tax year must also exceed the total of all third party support received by the student in the same tax year. Additionally, all costs must be reasonable and within the guidelines set forth by the IRS.
So if my assumption is correct your dependent does not qualify for a stimulus check. However, I could very well be wrong and it wouldn't be the first time. 🙂 The main thing is that if they get a check and the IRS later determines they did not qualify based on invalid information on the 2020 tax return, the audit will not be only for the payback of the $1200.
Also understand the stimulus payment is not a simple thing of the IRS just giving money away. It's an advance on your 2020 (or 2021???) tax refund. The thing is, if your refund turns out to be less than the stimulus amount received, you won't have to pay back the difference.
However, if you received a stimulus payment when you should not have, I would fully expect any difference to be due and payable back to the IRS upon demand. But even that's not clarified in any IRS pub I can find on this.
