If someone else claims you, as a dependent, inappropriately, and if they file first, your return will be rejected if e-filed. You would then need to file a return on paper, claiming yourself, if appropriate. The IRS will process your return and send you your refund, in the normal time. Shortly (up to a year) thereafter, you’ll receive a letter from the IRS, stating that your exemption was claimed on another return. It will tell you that if you made a mistake to file an amended return and if you didn't make a mistake to do nothing. The other party will get the same letter you did. If one of you doesn't file an amended return, unclaiming the exemption, the next letter, from the IRS, will require you to provide proof. Be sure to reply in a timely manner.
Winner gets the tax benefits; loser gets to pay the IRS back with penalties and interest.
That said, you parents doesn't need your permission to claim you, if you qualify as their dependent, under the rules. There is a rule that says IF somebody else CAN claim you as a dependent, you are not allowed to claim yourself. If you have sufficient income (usually more than $12,950), you can & should still file taxes. In TurboTax, you indicate that somebody else can claim you as a dependent, at the personal information section. TT will check that box on form 1040.
With the tax law change, effective 2018, most dependents will get the same refund whether they claim themselves or not. The personal exemption has been eliminated and the standard deduction increased. However, you only qualify for an education credit, if you are not a dependent*.
There are two types of dependents, "Qualifying Children"(QC) and Other ("Qualifying Relative" in IRS parlance even though they don't have to actually be related). There is no income limit for a QC but there is an age limit, student status, a relationship test and residence test.
A child of a taxpayer can still be a “Qualifying Child” (QC) dependent, regardless of his/her income, if:
- He is under age 19, or under 24 if a full time student for at least 5 months of the year, or is totally & permanently disabled
- He did not provide more than 1/2 his own support. Scholarships are excluded from the support calculation
- He lived with the parent (including temporary absences such as away at school) for more than half the year
So, it doesn't matter how much he earned. What matters is how much he spent on support. Money he put into savings does not count as support he spent on himself.
The support value of the home, provided by the parent, is the fair market rental value of the home plus utilities & other expenses divided by the number of occupants.
The IRS has a worksheet that can be used to help with the support calculation. See: http://apps.irs.gov/app/vita/content/globalmedia/teacher/worksheet_for_determining_support_4012.pdf
If you do not qualify under the QC rules, they can only claim you under the Qualifying Relative rules, if your income was less than $4400.
See full dependent rules at: https://turbotax.intuit.com/tax-tools/tax-tips/Family/Rules-for-Claiming-a-Dependent-on-Your-Tax-Ret...
*There's a new urban myth among college students that says they can get a $1000 from the government just for filing a tax form. For most of them, they simply aren't eligible. A full time unmarried student, under age 24, even if you don't qualify as a dependent, is only eligible for the refundable portion of the American Opportunity Credit if he supports himself by working. You cannot be supporting yourself on parental support, 529 plans or student loans & grants. It is usually best if the parent claims that credit.
You cannot claim a credit if you are, or can be, claimed as a dependent by someone else.
Reference: Line 7 instructions for form 8863. https://www.irs.gov/instructions/i8863
