My 81 year old aunt hasn't filed taxes in several years. She makes $15,700 social security and $2,350 from her 401(k). Does she have to file a tax return this year?

[sue4]

My mom (her sister) has been claiming her for the past 8 years - they live together in my house.  Turbo Tax now says she makes too much money for my mom to claim her.

[BrittanyS]

Yes, your aunt may need to file a tax return due to her 401k distributions.  Once she starts withdrawing from her 401k, her withdrawals are taxed as ordinary income.  

Listed below is a link from the IRS website detailing filing requirements for individuals that may be claimed by someone else:

Filing Requirements for Dependents

The IRS considers unearned income as taxable interest, ordinary dividends, capital gain distributions, unemployment compensation, taxable social security, pensions, annuities, and distributions.  The 401k distributions are reported on Form 1099-R and are written as gross distributions on line 1 and taxable distributions on line 2a.

To go to the section of TurboTax to enter information from your Forms 1099-R, use these steps:

1. On the top row of the TurboTax online screen, click on Search 
2. This opens a box where you can type in “1099-R” 
3. click the magnifying glass 
4. The search results will allow you to “Jump to 1099-R.”
5. Click on the blue “Jump to 1099-R” link

For your mother to claim your aunt as a dependent, your aunt would have to meet all the requirements for a qualifying relative.  The criteria for qualifying relatives are:

• Your aunt must be a US citizen, US resident alien, US national, or resident of Canada or Mexico
• Your aunt can't be claimed as anyone else's dependent
• Your mother must provide more than half of her support
• Your aunt must have lived with her the entire year
• Your aunt did not have a gross income greater than the annual threshold ($4,400 in 2022)
• Your aunt can not have filed a joint return for 2022

If your mother and aunt live with you, your mother may need help proving she pays over half the support.  

See a few links below on qualifying relatives:

A case of two households

What are dependents?

[Edited 01/26/23| 1:25 pm PST]

@sue4

[fanfare]

$2,350 is below the threshold for having to file a tax return.

After the Standard Deduction, even as a dependent, the tax due is -0-.

[fanfare]

BUT if any tax was withheld, she has to file to get it back.

@sue4 

[leeloo]

Your aunt falls under the filing requirement for 2022.  She would be allowed to make $4,400 and still be claimed. Review your answers to the questions in the program to make sure you didn't answer incorrectly.

Although filing reuirements differ depending whather you have earned income or unearned income, your aunt is not required to file.

Single dependents—Were you either age 65 or older or blind?

Yes. You must file a return if any of the following apply.

1. 1. Your unearned income was more than $2,900 ($4,650 if 65 or older and blind).
2. Your earned income was more than $14,700 ($16,450 if 65 or older and blind).
3. Your gross income was more than the larger of:
4. $2,900 ($4,650 if 65 or older and blind), or
5. Your earned income (up to $12,550) plus $2,150 ($3,900 if 65 or older and blind)