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arivera0187
Returning Member

If a taxpayer didn't claim their student dependent for 2020, but is claiming them for 2021, will the dependent have to pay their EIP3 back to the IRS?

 
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13 Replies

If a taxpayer didn't claim their student dependent for 2020, but is claiming them for 2021, will the dependent have to pay their EIP3 back to the IRS?

No they will not ... a quirk in the tax law lets them keep it and you to also get it on the 2021 return if you qualify.

If a taxpayer didn't claim their student dependent for 2020, but is claiming them for 2021, will the dependent have to pay their EIP3 back to the IRS?

what I read into your question is that the student / dependent was not claimed by the parents in 2020. Could he have been claimed?  (the IRS doesn't really care if you claim your student/ dependent; it is your option)

 

However, the student is asked a question on HIS tax return CAN he be claimed by anyone else. it doesn't ask WAS he claimed by anyone else.   If he CAN be claimed but wasn't, he still needs to check the box that he CAN be claimed. 

 

if the student CAN be claimed on past tax returns, but didn't check the box indicating so, the tax return needs to be amended.  He wasn't eligible for the stimulus payment.  THe right thing to do is return it.

If a taxpayer didn't claim their student dependent for 2020, but is claiming them for 2021, will the dependent have to pay their EIP3 back to the IRS?

@Critter-3 

what makes @arivera0187 question confusing is he appears to be comingling a question about two sets of tax payers in the same question.

 

The parents as taxpayers -  the parents should receive EIP for their student / dependent on the 2021 tax return.  That probabty ended up as RRC on Line 30 

 

the student as a taxpayer - assuming he CAN be claimed by someone else on the 2020 tax return and that box was NOT checked on the 2020 tax return, he should NOT have receiver the stimulus payment in March, 2021.  The right thing to do is amend the 2020 tax return and return the $1400.

 

All that stated, if the dependent / student was NOT able to be claimed by anyone, meaning he correctly did NOT check the "I can be claimed by others' box, then the dependent does NOT need to return EIP3; he was legally eligible for the payment

If a taxpayer didn't claim their student dependent for 2020, but is claiming them for 2021, will the dependent have to pay their EIP3 back to the IRS?

Agreed ... if the student could have been claimed by their parents then they must indicate that in the program and then they would not have been eligible for the stimulus payment or credit.   However this is a situation that is rarely caught by the IRS and is an error that is made all too often.  So unless the return is audited the error will most likely never be found.  

 

I am sure millions figured out this loophole last year ... by not claiming the dependent the dependent could file a return to get the RRC for the first 2 stimulus payments (1800) on the 2020 return and then get the third $1400 payment in advance.  So the parents lost the $500 credit on their return but the dependent got $3200 in total.  If the parents made too much to get any of the education credit this illegal action netted a nice reward that again the IRS will probably never catch.   Think of all the adult dependents that are normally claimed on someone else's return ... doing this is a $2700 win overall ($3200 - $500 ) ... I am sure millions of returns for folks who were claimed as dependents in the past were filed in 2020 to take advantage of this "loophole" they left in the tax law (since they did not tie the advance to a specific dependent  SS#).  

arivera0187
Returning Member

If a taxpayer didn't claim their student dependent for 2020, but is claiming them for 2021, will the dependent have to pay their EIP3 back to the IRS?

Thank you. TY2020, the parents typically claim their dependent(s), but when the stimulus payments started to roll out, a lot of our clients did not want to claim their student dependents because they wanted them to receive the EIP3. So, the box was checked that the student dep could NOT be claimed as a dependent. 

 

TY2021, parents want to go back to claiming their student dependents. I originally heard that if this happens, the student dependent may have to pay back the EIP3, but I'm seeing conflicting information. 

If a taxpayer didn't claim their student dependent for 2020, but is claiming them for 2021, will the dependent have to pay their EIP3 back to the IRS?

as I stated in my earlier post, "doing the right thing" would be to check the box that the student CAN be claimed

 

Failure to check the box when the student CAN be claimed is FRAUD.

 

Note what each taxpayer signs at the bottom of the Form 1040: 

 

"Under penalties of perjury, I declare that I have examined this return and accompanying schedules and statements, and to the best of my knowledge and belief, they are true, correct, and complete

 

if you knew to check that you CAN be claimed and didn't then the return is not true, correct or complete. 

 

@arivera0187  - since you appear to be a paid tax preparer. ("My clients") note that the statement also includes the preparer:

"Declaration of preparer (other than taxpayer) is based on all information of which preparer has any knowledge."

 

And if you had knowledge what your clients were doing, you are part of the FRAUD.

 

Sorry to be so harsh, but cheating the government means cheating the rest of us

 

Help me understand how defrauding the tax return was "doing the right thing"

arivera0187
Returning Member

If a taxpayer didn't claim their student dependent for 2020, but is claiming them for 2021, will the dependent have to pay their EIP3 back to the IRS?

Thanks for your input. 

If a taxpayer didn't claim their student dependent for 2020, but is claiming them for 2021, will the dependent have to pay their EIP3 back to the IRS?


@NCperson wrote:

as I stated in my earlier post, "doing the right thing" would be to check the box that the student CAN be claimed

 

Failure to check the box when the student CAN be claimed is FRAUD.

 

Note what each taxpayer signs at the bottom of the Form 1040: 

 

"Under penalties of perjury, I declare that I have examined this return and accompanying schedules and statements, and to the best of my knowledge and belief, they are true, correct, and complete

 

if you knew to check that you CAN be claimed and didn't then the return is not true, correct or complete. 

 

@arivera0187  - since you appear to be a paid tax preparer. ("My clients") note that the statement also includes the preparer:

"Declaration of preparer (other than taxpayer) is based on all information of which preparer has any knowledge."

 

And if you had knowledge what your clients were doing, you are part of the FRAUD.

 

Sorry to be so harsh, but cheating the government means cheating the rest of us

 

Help me understand how defrauding the tax return was "doing the right thing"


I agree.   And the student should file an amended return and check the box and repay anything that was received that they were not eligible for.

 

A paid preparer should know better than to file  such a return and risk losing their PTIN.

 

**Disclaimer: This post is for discussion purposes only and is NOT tax advice. The author takes no responsibility for the accuracy of any information in this post.**

If a taxpayer didn't claim their student dependent for 2020, but is claiming them for 2021, will the dependent have to pay their EIP3 back to the IRS?

there is something else. the taxpayer that omitted to mark they could be claimed as a dependent may have gotten a standard deduction or other tax credits that would otherwise not have been allowed.  they may owe the kiddie tax depending on their age.   as others have pointed out, it's unlikely  the IRS will catch this

If a taxpayer didn't claim their student dependent for 2020, but is claiming them for 2021, will the dependent have to pay their EIP3 back to the IRS?

@Mike9241 - agreed that it is unlikely the IRS will catch this, but that isn't my issue.

 

The whole system is predicated upon trust and 'doing the right thing'.

 

if the return was intentionally completed incorrectly (even under the belief that the IRS  is unlikely to catch the error) to acheive a better refund - that is FRAUD. 

If a taxpayer didn't claim their student dependent for 2020, but is claiming them for 2021, will the dependent have to pay their EIP3 back to the IRS?

@arivera0187 

 

"thank you for your input"

 

that's it? WOW 

If a taxpayer didn't claim their student dependent for 2020, but is claiming them for 2021, will the dependent have to pay their EIP3 back to the IRS?

To address the original question.  Nobody posted the link yet.

 

If you are claiming a dependent and they already got it or someone else got the 3rd 1,400 Stimulus payment based on their 2020 return, you can get it now on your 2021 return and they don't have to pay it back. The IRS just used 2020 returns to send the checks out fast.


See IRS question 15 here
https://www.irs.gov/newsroom/2021-recovery-rebate-credit-topic-e-calculating-the-2021-recovery-rebat...

 

If a taxpayer didn't claim their student dependent for 2020, but is claiming them for 2021, will the dependent have to pay their EIP3 back to the IRS?

@VolvoGirl - yes,  but that FAQ presumes that the return was correctly completed resulting in the stimulus / EIP3/ RRC payment.  In those instances, I totally agree there is no need to return the stimulus payment. 

 

the issue here is the return was NOT accurately completed.  Doing the right thing is writing a check to the IRS to return the ill gotten gain

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