What does this mean? If your parent files a joint tax return solely to get a refund

[galt]

I'm trying to see if I can claim my parents as dependents as I am single and paying their expenses.  Their main source of income is SS benefits and some interest/dividends (under $1000).  Their gross income is under $4400 but this question in TT is a bit confusing "If your parent files a joint tax return solely to get a refund?"  and when I click the "What does this mean?" it references refundable tax credit which my parents will not get.  So my parents do not have any Fed taxes withheld via SS or bank/brokerage so would this mean I have to click "no" thus disqualifying?  They typically file Jointly even though they know they don't even need to file since gross income is only less than $1000 (no including SS benefits)

If they were to file Married Filing Separately, their taxable income would be $0 still unless they flag "someone can claim me as a dependent" which is me.  If they did flag yes they would have taxable income since they lose the benefit of standard deduction and SS is partially taxable income now.

[ThomasM125]

It means that they are not required to file a tax return but file one because they are due a refund. This may happen if they paid in withholding taxes or are due a refundable tax credit. You can use this IRS tool to see if they are required to file a federal tax return:  Do I need to file?  

[galt]

Thanks just did the exercise and they are not required to file a return unless due to the 1099-b my mother gets to file if cost basis is $0 and proceeds is over $28k~ . 

I usually file for my parents since they don't want to stop filing even though they don't get any refund or owe.  They never withhold taxes on their SS or banks so I would think I need to click no to them filing on the purpose getting a return on withholds.  This would disqualify me claiming them as dependent.  Seems only option is for them to file Married filing Seperately so I can claim them as dependents and HoH but they'll need to pay a bit of taxes.

[GeorgeM777]

Yes, the option you describe is correct.  For you to claim your parents as dependents, they must not file a joint return. Because your parents are married, he or she must file separately.   As @ThomasM125 explained in the prior post, there is an exception if your parent is filing jointly but has no tax liability.   If your parent should file a joint tax return solely to get a refund, you can still claim him or her as a dependent.

@galt 

[galt]

I filed them as dependents and HoH.  I did for my parents file MFS but got rejected since for each parent couldn't check mark spouse can be claimed as a dependent.  Seeing my parents make under $28k suggestions by TT experts was not to file for them. 

[ShirlynW]

"If you parents file a joint tax return solely to get a refund," means your parents were not required to file a tax return, but filed to get money withheld or a refund. A good example would be filing to receive the Stimulus in 2020.

You are not able to claim your parents because, you parent receive over $28K. While it is not taxable, the IRS considers that as income. A person's gross income for a year must be less than $4,400. With both parents, their combined income could not be more than $8,800 for a year.

For more Information: IRS Pub. 501

[galt]

@ShirlynW Thanks for the additional information.   Sorry I mentioned my parents combine income with SS is under the $28,700 so this would mean they wouldn't even need to file but should make my parents eligible as my dependents as I support them more than 51% and their gross income is less than  $8,800

I already got my filing in and I put the portion "If you parents files a joint tax return solely to get a refund," as No although your point for the stimulus in 2020 makes sense to mark them as Yes.  If I were to resubmit my parent's taxes as MFJ now would this cause an issue with my taxes since I already filed and marked "no" for my parents not filing a joint tax return solely to get a refund?  Would I need to do a 1040x just to update that one checkbox on my taxes?  I just filed over the weekend if that matter and already accepted by IRS and my state.

Although my parents didn't have to file since they always fell under the standard deduction last few years, they have a preference to do so even with no tax liabilities the last few years.

[AmyC]

No. To claim them as dependents, their gross (total) income must be less than $4,400 each and they have a much higher gross income due to social security. You can go through the IRS Worksheet for Determining Support. Line 1 shows taxable and nontaxable income as the starting point.

The meaning behind filing a joint return is that the other person is also low income such that there is no real tax liability or requirement to file. The IRS does not want you claiming a dependent married to a billionaire.

The stimulus is not officially a refund. It could be claimed as part of your refund if you did not receive it. If your parents are not required to file a return then they would only file a return for any money wrongfully withheld during the year or not paid, such as stimulus. They can file a joint return without issue.

You don't need to do a 1040x for them to file jointly. You will need to amend if you wrongfully claimed them as dependents on your return. 

[galt]

@AmyC HI Amy, isn't Gross Income for IRS is only taxable income?  If my parents are MFJ then their SS benefits wouldn't be taxable.    I'm going off this from IRS for their definition of Gross and Taxable Income.  My parents is total taxable income is under $32,000 with SS and other income.  This would make their SS benefits not part of gross income as what IRS would care for.    https://www.irs.gov/faqs/social-security-income

https://www.irs.gov/publications/p17#en_US_2016_publink1000170388 

For my parents their Gross Income not including SS is under $8,800.  I would be able to claim them both as I support all their expenses and their Gross Income is under the limit.  I think the issue for my end is I should had marked them as filing for MFJ and refile them again as MFJ.

[DMarkM1]

There is no option to claim a stimulus payment on the 2022 tax return.  So I don't see an option for your parents to file a joint return as your dependents in the scenario you describe since there is no withholding.  They each need to file a separate married return and indicate they can be claimed as a dependent on someone's return (Yours). 

You are correct the nontaxable social security does not count toward the gross income test ($4400).  However it does count as part of the 1/2 support test and the head of household test for providing more than 1/2 the cost of keeping up their home. 

You are correct filing as dependent with no earned income is going to limit their standard deduction and likely produce a tax owed for each.  I assume you have done the math and claiming them results in a positive net for the family.  

Of course the net would be greater if they did not file tax returns since there is not a filing requirement or refund reason to file.

[galt]

@DMarkM1 Thank you.  Yes because I'm single and factoring in 2/3 of the household expenses (they live me so I took out 1/3 for), I still support 60%+.   Their total expenses of the 2/3 of household plus other expenses they pay on their own is roughly double their incoming income (SS and other sources included) and of that amount I mentioned 60%.  I think another issue is they do have savings which according to the worksheet for Determining Support it's factored in but not mention anywhere else in the Publication 501.  I feel like their savings will disqualify them as dependents for me.

Yes my parents total income with SS is under $26,000 which makes so they don't need to file but I did file them as MFS and they did owe a bit but net with my refund is higher.  It also got rejected since on both their taxes I have it marked as themself and spouse can be claimed as dependent on someone else's taxes.  Not sure why this would reject their taxes.

I want to be safe to avoid audits in the future but the part about the savings in the worksheet makes it seems nobody with elderly parents that collect SS can be claimed by a child of theirs.

[DMarkM1]

@galt In the support worksheet "Savings" is a source for support but is not part of the support calculation until/unless it is used in the lines further down the worksheet.

You may need to print/mail the returns with those married/dependent selections in combination with your already filed return claiming them. 

[edited 3/13/2023 1:34pm PDT]

[mf206]

Hi, sorry to poke my head into the conversation, but I am in a similar situation, though slightly different.

I just filed for my parents, MFJ, they have <$18k SS benefits combined and they have no other taxable income other than $130 in taxable interest from banks. I filed theirs as 'someone is able to claim them as dependent', and my filing is rejected. According to the test, since they are MFJ, I technically cannot claim them, however, everything else holds true. What is the best course of action in this case I support their day-to-day. (Food, utilities, etc.) Should I leave their submission alone and mail mine in since it has already been rejected once and hope they are seeing what I am trying to accomplish since we only filed since my dad has a lot of losses from stocks and I'm told I have to file due to this fact?

Or should I amend their 2022 submission, and submit new separate filings as MFS so I can claim both my parents on my filing, or do they not qualify at all and file mine without them as dependents, and amend their current filing as no one will be claiming them?

[MayaD]

You can claim your parents even if they are filing as MFJ as long as they are filing their return to get a refund for taxes withheld (Filing just to get a refund of tax withheld means you are not receiving what's called a refundable credit. A refundable credit is a credit that allows you to get back more tax than you paid in during the year. Some example of the most common refundable credits is the Earned Income Credit). 

Also to be able to claim them you need to answer NO to the question If your parents filed MFS return, would either of them have any taxable Income?

You need to amend their return and make sure your are answering the questions correctly and you need to file your return by mail. IRS takes weeks to process amended return.