Tax Preparer Courses Needed to Learn Coordination of Returns for Parents and Their Children

February 18, 2012 by  Filed under: Taxes 

Tax preparers encounter problems every year with people who failed to communicate with their children about income tax. The kids grab their W-2s, file online for free and then get their withholding back from the government. Meanwhile, finances of the entire household are completely disarranged due to lack of tax filing coordination.

Children who qualify as dependents of their parents can usually obtain a refund of all their withholding. They typically do not have to claim themselves for a personal tax exemption. In fact, the advice of a professional who has become a tax preparer could prevent children without any tax liability from even having taxes withheld.

When a child files a tax return using a status as single, no one can then claim that child as a dependent. The parents lose a tax benefit that the child unnecessarily captured. A professional with tax preparer certification can only sort out the mess by amending the child’s return and then correctly filing the parents’ return with the child as a dependent. Children cannot claim themselves for the standard tax exemption when their parents can claim them as dependency exemptions.

Not every child is eligible for a parent to claim as a dependent. The rules are a critical component of tax preparer training. Any child under age 19 living with a parent almost always qualifies as a dependent. Such children cannot provide more than half their own support. In most cases, they also cannot be married.

Children over age 19 living at home are a little trickier. Several factors from tax preparer courses are applicable. Full-time students still qualify as dependent children up to age 24. The existence of many multi-generational homes causes quite a few tax considerations.

Some kids are still living with their parents while working and not attending school. When they are at least 19-years-old, they probably should claim themselves when filing tax returns. But not necessarily. Another set of tax rules applies to claiming children as dependent relatives. The most important test under that situation is how much the child living with parents earned.

When three generations live in the same residence, the advice of a tax preparer is particularly valuable. Sometimes, a grandparent can claim a qualifying child exemption for a grandchild. This means the adult child of the grandparent may file a tax return but doesn’t claim her own child.

Various scenarios are possible. One is that a single grandmother can often claim Head of Household status. The daughter of the grandmother – who is the parent of the grandchild – must file as single. This can occur when the grandmother pays more than half the costs of maintaining the home. Head of Household status is not available to the daughter because – although she is also a parent – she doesn’t pay half the costs of maintaining the home.

The main focus to retain after completion of the tax preparer examination is to assure that only one exemption is claimed for each person and that only one individual per residence claims Head of Household status.

IRS Circular 230 Disclosure

Pursuant to the requirements of the Internal Revenue Service Circular 230, we inform you that, to the extent any advice relating to a Federal tax issue is contained in this communication, including in any attachments, it was not written or intended to be used, and cannot be used, for the purpose of (a) avoiding any tax related penalties that may be imposed on you or any other person under the Internal Revenue Code, or (b) promoting, marketing or recommending to another person any transaction or matter addressed in this communication.

Fast Forward Academy is a leading publisher of education for become a tax preparer and tax professionals. Access to free questions for the tax preparer certification is available on their website.

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