IRS Intensifies Reviews: Common Mistakes That Can Delay Your Refund

Mistakes When Claiming Dependents

Claiming dependents correctly is an important part of filing a tax return. Children and other relatives who meet certain requirements may allow taxpayers to qualify for different tax credits and benefits.

However, mistakes in a dependent’s information can cause a tax return to be rejected, reviewed by the IRS, or delay the processing of a refund.

For this reason, before listing someone as a dependent, it is important to confirm that the person actually meets the applicable IRS requirements.

Not Every Relative Automatically Qualifies

One of the most common mistakes is assuming that someone can be claimed simply because they are a child, parent, sibling, or other relative.

For tax purposes, a dependent generally must meet the requirements to be considered a Qualifying Child or a Qualifying Relative.

For a Qualifying Child, factors such as relationship, age, residency, and support must generally be reviewed.

For example, a child usually must have lived with the taxpayer for more than half of the year, although certain exceptions may apply.

When Two People Claim the Same Dependent

Another common problem occurs when two taxpayers claim the same child on separate tax returns.

This can happen between separated or divorced parents, relatives living in the same household, or situations where both a parent and grandparent believe they are entitled to claim the same child.

If the dependent’s Social Security number has already been used on another tax return, the second electronically filed return may be rejected.

However, filing first does not necessarily mean that person has the legal right to claim the dependent. IRS rules must be reviewed to determine who is actually entitled to claim the child.

Separated or Divorced Parents

In situations involving separation or divorce, the custodial parent is generally the parent with whom the child lived for the greater number of nights during the year.

In certain circumstances, the custodial parent may allow the noncustodial parent to claim certain tax benefits by using Form 8332, Release/Revocation of Release of Claim to Exemption for Child by Custodial Parent.

However, this does not mean that all tax benefits related to the child can be transferred.

For example, benefits such as Head of Household filing status, the Earned Income Tax Credit, or certain child care credits may have additional residency requirements.

Mistakes in the Name or Social Security Number

Even when a taxpayer has the right to claim a dependent, a simple information error can create problems.

The dependent’s name and Social Security number should match official records.

An incorrect number, misspelled last name, or outdated information may cause an electronically filed tax return to be rejected or require additional correction.

For this reason, taxpayers should verify the information directly from the dependent’s documents before filing.

Confusing a Qualifying Child With a Qualifying Relative

Not all dependents have to be minor children.

Under certain circumstances, parents, grandparents, siblings, adult children, or other relatives may also qualify as dependents.

However, specific requirements related to the person’s income, relationship to the taxpayer, and the amount of support provided must be met.

Providing financial assistance to a relative does not automatically mean that the person can be claimed as a dependent.

Support Also Matters

Another common mistake involves incorrectly determining who provided the person’s financial support.

Support may include expenses such as housing, food, medical care, education, and other basic needs.

This can be especially important when several family members contribute financially to support a parent, grandparent, or another relative.

For this reason, keeping records of the amounts actually paid by each person can be important.

One Mistake Can Affect Several Tax Credits

A dependent can be connected to several different tax benefits.

These may include the Child Tax Credit, Additional Child Tax Credit, Earned Income Tax Credit, Credit for Other Dependents, Head of Household filing status, and certain dependent care credits.

For this reason, if the IRS determines that a dependent does not meet the requirements, the change could affect several parts of the tax return and reduce the expected refund.

What Happens if Someone Else Already Claimed Your Child?

If an electronically filed return is rejected because the dependent’s Social Security number was already used, the taxpayer should first determine who actually has the right to claim the child.

It is not recommended to immediately remove the dependent simply to allow the return to be filed electronically.

If the taxpayer believes they meet the applicable requirements, other filing procedures may need to be followed so the duplicate dependent claim can later be resolved with the IRS.

Documents You Should Consider Keeping

If the IRS asks the taxpayer to prove the right to claim a dependent, certain documents may be helpful, including:

• School or medical records.

• Birth certificates.

• Documents showing the dependent’s residence.

• Proof of financial support.

• Custody or divorce documents.

• Form 8332, when applicable.

• The dependent’s Social Security card.

  
  

The documentation required will depend on each taxpayer’s individual situation.

Mistakes That Can Delay Your Refund

Some of the most common mistakes include:

• Claiming a dependent who does not meet the requirements.

• Claiming a child who was already claimed by someone else.

• Entering an incorrect name or Social Security number.

• Failing to verify the residency requirement.

• Calculating support incorrectly.

• Misapplying the rules for separated parents.

• Claiming tax credits without first confirming the dependent’s eligibility.

  
  

Conclusion

Claiming dependents correctly can have a significant impact on the outcome of a tax return.

Before filing, taxpayers should verify where the dependent lived during the year, who provided financial support, whether another person may also have the right to claim the dependent, and whether all personal information is accurate.

A careful review before filing can help prevent rejected returns, additional IRS correspondence, and unnecessary refund delays.