I've asked for further information from my parents tax consultant. But all I was told is that "I'm not suppose to file my own taxes a college student. And that they're going to get our taxes amended and I'll will end up owing money." Which makes no sense to me.
Are there rules to claiming yourself?
Table 5 at the following link is a good summary of the requirements for dependents. The rules are described in detail below the table. Note that there are two types of dependents, a qualifying child or a qualifying relative. You could conceivably be either type. Also note that being away at college is considered a temporary absence. You are still considered to be living at your permanent home, which I assume is your parents' home.
<a rel="nofollow" target="_blank" href="https://www.irs.gov/publications/p501/ar02.html#en_US_2016_publink1000220868">https://www.irs.gov/pu...>
"I'm not suppose to file my own taxes a college student."
That is absolutely not true. Maybe you misunderstood what the tax consultant said, or maybe you got a distorted version second-hand through your parents. If you are working, you are almost certainly required to file your own tax return, whether or not your parents can claim you as a dependent. If you are their dependent, you can file your own tax return and not claim an exemption for yourself. If you did claim an exemption for yourself when you should not have (because you meet the requirements for your parents to claim you as a dependent), amending your return to not claim yourself will indeed mean that you owe money.
"I did my taxes using turbo tax and had no errors; so everything was accepted."
TurboTax has no way of knowing whether your parents can claim you as a dependent. It asked you whether someone could claim you, and you answered No. TurboTax has to take your word for it.
Test 4 for a qualifying child says "The child must not have provided more than half of his or her own support for the year." It's not clear whether you meet that test or not, and it could take a little work to figure it out. But from what you said, if you did not get any money from your parents in 2016, you probably don't meet that test, which means that you are not their qualifying child. Note that the support test covers the entire calendar year. If you only started college in September 2016, you may not have provided more than half of your own support for the year.
If your parents' tax consultant says that they can claim you as a dependent, and you don't think you meet all the tests, ask the consultant to go through the tests with you one by one and explain how you meet them. Keep in mind that the tax consultant works for your parents, not for you, though he or she should be trying to follow the law as accurately as possible.
"they're going to get our taxes amended"
An amended return cannot be e-filed. It has to be filed on paper, and you have to sign your own amended return. So your parents or their tax consultant cannot file the amended return for you (unless you give them a signed power of attorney). If you disagree with the amended return that the tax consultant prepares for you, you don't have to sign it.
How to amend a 2016 Online return <a rel="nofollow" target="_blank" href="https://ttlc.intuit.com/questions/3402261-how-do-i-amend-my-2016-turbotax-online-return">https://ttl...>
That's true. If you are in the 25% tax bracket, the difference between claiming or not claiming an exemption for yourself would be around $1,000. That's just the difference in the amount of tax, not a penalty or "fine." Being a college student, you might not be in that high a bracket. But if your parents claim you as a dependent you might lose an education credit or some other credit or deduction that would cause you to owe more tax.
The fact that you're overseas is irrelevant. The below still applies. Read it carefully. Also, you'll have to read it through several times to "get it". Nobody gets it on the first read, and I was no exception to that either.
College Education Expenses
Colleges work in academic years, while the IRS works in calendar years. So the reality is, it takes you 5 calendar years to get that 4 year degree. With that said:
- Scholarships and grants are claimed/reported as taxable income (initially) in the year they are received. It does not matter what year that scholarship or grant is *for*
- Tuition and other qualified education expenses are reported/claimed in the tax year they are paid. It does not matter what year they pay *for*.
Understand that figuring out who claims the student as a dependent, and determining who claims the education expenses & credits, is two different determinations. It depends on the specific situation as outlined below. After you read it, I have also attached a chart at the bottom. You can click on the chart to enlarge it so you can read it. If it’s still to hard to read on your screen then right-click on the enlarged image and elect to save it to your computer. Then you can double-click the saved image file on your computer to open it, and it will be even easier to read.
Here’s the general rules gisted from IRS Publication 970 at http://www.irs.gov/pub/irs-pdf/p970.pdf Some words are in bold, italicized, or capitalized just for emphasis. This is because correct interpretation by the reader is everything. Take the below contents LITERALLY, and do not try to “read between the lines”. If you do, you’ll interpret it incorrectly and risk reporting things wrong on your taxes. For example, there is a vast difference between “can be claimed” and “must be claimed”. The first one indicates a choice. The second one provides no choice.
If the student:
Is under the age of 24 on Dec 31 of the tax year and:
Is enrolled in an undergraduate program at an accredited institution and:
Is enrolled as a full time student for one academic semester that begins during the tax year, (each institution has their own definition of a half time student) and:
the STUDENT did NOT provide more that 50% of the STUDENT’S support (schollarships/grants received by the student ***do not count*** as the student providing their own support)
The parents will claim the student as a dependent on the parent's tax return and:
The parents will claim all schollarships, grants, tuition payments, and the student's 1098-T on the parent's tax return and:
The parents will claim all educational tax credits that qualify.
If the student will be filing a tax return and:
The parents qualify to claim the student as a dependent, then:
The student must select the option for "I can be claimed on someone else's return", on the student's tax return. The student must select this option ieven f the parent's qualify to claim the student as a dependent, and the parents do not claim them.
Now here’s some additional information that may or may not affect who files the 1098-T. If the amount of scholarships/grants exceeds the amount of qualified education expenses, the parent will know this when reporting the education on their tax return, because the parent will not qualify for any of the tax credits. (They only qualify for tax credits based on out-of-pocket qualified expenses not covered by scholarships/grants.) Also, the parent’s will not qualify for the credits depending on their MAGI which is different for each credit, and depends on the marital status of the parent or parents.
In the case where scholarships/grants covers “all” qualified education expenses, the parent’s don’t need to report educational information on their dependent student at all – but they still claim the student as a dependent if they “qualify” to claim the student.
If the scholarships/grants exceed the qualified education expenses, then the student will report the 1098-T and all other educational expenses and scholarships/grants on the student’s tax return. The student will pay taxes on the amount of scholarships/grants that are not used for qualified education expenses. However, if the student’s earned income reported on a W-2, when added to the excess scholarships/grants does NOT exceed $6200, then the student doesn’t even need to file a tax return, and nothing has to be reported.
If the student has any other taxable income not reported on a W-2, and it exceeds $400, (not including taxable portion of scholarships/grants) then most likely it’s considered self-employment income. That will require a tax return to be filed and the student will have to pay the Self-Employment tax on that income.
Finally, regardless of the student’s W-2 earnings, if any taxes were withheld on those earnings and it was less than $6200, then the student should file a tax return so as to get those withheld taxes refunded.
First, scholarships & grants are applied to qualified education expenses. The only qualified expenses for scholarships and grants are tuition, books, and lab fees. that's it. If there is any excess, then it's taxable income. It automatically gets transferred as follows depending on what type of 1040 you’re riling.
1040-EZ excess scholarship
income is included on line 1.
1040-A excess scholarship is included on line 7.
1040 Excess scholarhip is included on line 7.
Next, 529/Coverdell funds reported on 1099-Q are applied to qualified education expenses. The qualified expenses for 1099-Q funds are tuition, books, lab fees, AND room & board. That's it. If there are any excess 1099-Q funds they are taxable. The amount is transferred as indicated above with one exception. For the 1040 excess ESA/QTP funds get transferred to line 21 with the annotation “SCH” next to it.
Finally, out of pocket money is applied to qualified education expenses. The only qualified expenses for out of pocket money is tuition, books, and lab fees. Room & board is NOT a qualified expense for out of pocket money.
When you have a 1099-Q it is extremely important that you work through the education section of the program in the order it is designed and intended to be used. If you do not, then there is a high probability that you will not be asked for room & board expenses, and you could therefore be TAXED on your 1099-Q funds.
Finally, if "all" qualified expenses are covered by scholarships, grants, 1099-Q funds and there is ANY of those funds left over, the left over excess is taxable. While the parent can still claim the student as a dependent, it is the student who will report all the education stuff on the student's tax return. That's because the STUDENT pays the taxes on any excess scholarships, grants and 1099-Q funds.