Published: April 15, 2020 at 2:32 p.m. ET
‘In 2019, tax-law changes made it advantageous for me to claim my oldest as a dependent. I now regret doing that’
The Moneyist answers dilemmas in an age of coronavirus.
I have three children in college, aged 20, 23 and 25. I support them as best I can. In 2018, claiming my oldest as a dependent made no difference in what either of us paid in taxes, so I did not claim her as a dependent. She filed as an independent. In 2019, tax-law changes once again made it advantageous for me to claim my oldest as a dependent.
I now regret doing that and, unfortunately, I have already filed. It appears that I do not get the $500 child-dependent stimulus for any of my three dependent children, but had I waited until after the stimulus checks had been issued to file my 2019 taxes and my daughter’s taxes, my oldest would have received the $1,200 stimulus check because she filed as an independent in 2018.
Is there anything I can do to remedy this situation?
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I understand your frustration. The stimulus checks can’t come soon enough for the nearly 17 million people who are out of work, and others worried about bills and rent due to the coronavirus pandemic. The good news for those who are receiving them: The government has already processed 80 million stimulus checks and they should arrive this week.
The Internal Revenue Service is sending $1,200 to individuals with annual adjusted gross income below $75,000 and $2,400 to married couples filing taxes jointly who earn under $150,000, plus $500 per qualifying child. It’s also frustrating for people who are just above those thresholds and will receive less or no money from the $2 trillion CARES Act.
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There’s also growing concern among many Americans — especially those who are most in need of the checks and already have bills piling up — that debt collectors will garnish or swipe their checks before they can put the money toward rent, or utility and food bills. Millions of Americans have court judgements against them. But there are ways to avoid the checks being garnished.
But back to your dilemma. “This legislation moved incredibly fast and the Treasury wanted to get money to the American public as quickly as possible,” says Larry Pon, a CPA in Redwood City, Calif. “This means we had no opportunity for tax planning or to figure out strategies to maximize the stimulus checks. The Treasury will look to the 2018 tax data if there was no 2019 tax data.”
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First of all, consider all of your tax options. Pon recommends that you and/or your children consider IRS education credits. The American Opportunity Tax Credit or AOTC can be as high as $2,500 for each child in college — up to $1,500 for the nonrefundable credit and up to $1,000 for the refundable credit — and could actually be worth more than the stimulus payments, he says.
Failing that, there may begood news: “If it turns out you actually qualify for a larger stimulus check then you received, you will get a credit on your 2020 tax return,” Pon says. “If you got too much, the Treasury will not ask for it back. In my 34 years as a tax profession, I’ve never seen this.” It’s worth a shot. If you or your daughter are above the threshold, you’re likely out of luck.
You can email The Moneyist with any financial and ethical questions related to coronavirus at [email protected]
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