@AGA3 wrote:
He has a W-2, if he can be claimed on somebody else’s tax return as a dependent then he will not get any of his tax return back and still owe taxes for federal and state. Do I still have to claim his as a dependent? Can he claim himself, and not claim that he can be claimed as a dependent?
Sorry, my first answer was wrong.
Yes, he must file, he must say he is a dependent, and he must pay the tax.
This situation arises from his large interest income. Congress has put in place laws that tax investment income of children, so that parents can't put investments in a child's name and have the interest be tax-free when it would have been taxable if the interest was in the parent's name. As a result, your son's standard deduction is equal to his income earned from work plus $400, which means that $800 of the interest income is taxable. The tax on that should be about $80 (10%). It should not be higher.
See publication 501 under "filing requirements for dependents" (table 2) and "standard deduction for dependents" (table 8).
https://www.irs.gov/pub/irs-pdf/p501.pdf
Your son must answer "yes, I can be claimed as a dependent" if he can be claimed, even if he doesn't want to be claimed. Failing to answer correctly to avoid paying tax could be considered fraud. Also, if you don't claim your child, you will lose a $500 credit, against the $80 of tax he should owe.
