I keep getting reject code 507 for my dependents, but none of them have been claimed yet. Why does this keep happening?
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See this TurboTax support FAQ for error 507 - https://ttlc.intuit.com/community/rejections/help/e-file-reject-r0000-507-01-a-dependent-on-your-ret...
First, understand that once an SSN is "claimed" for the tax year, that's it. Period. End of Story. If the return was e-filed, then the SSN was marked as "claimed" for the year in the IRS computers. There is no way to go back and undo this. it's done. Generally in this case you have no choice but to either print, sign and mail the return to the IRS this year, or remove the dependent from your tax return.
There are a number of ways this can happen.
1. Someone did "in fact" claim your dependent on their tax return. This can happen if someone else has an SSN close to your dependents and they made a typo on their tax return that "just happens" to be your dependent's SSN.
2. The dependent filed their own tax return and did not select the checkbox to indicate "I can be claimed on someone else's tax return". If this is the case, then the dependent needs to amend their tax return to select that checkbox. Generally speaking, it's highly probable this will reduce the dependent's expected refund. But even if they amend, you will 'STILL" have to print, sign and mail your tax return that claims the dependent. Once the dependent's SSN is marked as "claimed" by the IRS computers, an amended return will not change that.
3. Your filing status was married on Dec 31 of the tax year and you selected to file as Married Filing Separate. The spouse has already claimed the dependent. If the spouse was not entitled to claim the dependent, then the spouse will need to amend their tax return to remove the dependent. But as stated earlier, this does not change things in the IRS computers and you will still have to print, sign and mail your tax return to the IRS.
In cases where a dependent is claimed on more than one tax return, the IRS will follow up later with a letter to all tax filers that claimed that dependent, requesting proof they are entitled to claim them. If you get such a letter, make sure to respond in a timely manner following the instructions in that letter to the absolute pentacle of perfection.
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