(Editor’s Note: Somehow, in the chaos of my Sunday morning, I didn’t paste in the second part of the question and first part of my answer. So, edited to reflect those changes… sorry about that!)
Taxpayer asks:
I’m 23, full time student, lived at home for free, worked…$6500 with withholding of $500. Can I file to get my withholding back and can my parents claim me as a dependent on their 2010 taxes?
Related question: If my parents claim me, can I get the Making Work Pay Credit?
taxgirl says:
Whether or not you file is not related to whether you can be claimed as a dependent (your parents will be able to determine your eligibility as a dependent better than you will but I’m guessing if you live for free, they can claim you as a dependent). However, the amount of your income does matter: if you’ve earned at least $5,700 in earned income or report at least $950 in unearned income, you’re going to want to file a federal income tax return. I don’t know if you’ll get a refund or not based on your question but if you are entitled to a refund (and you may well be, depending on what you are calling your withholding), you won’t get it unless you file.
As to the second question? So, this is an easy one. The answer is no. You don’t qualify for the Making Work Pay Credit if you can be claimed by someone else as a dependent. For more information about eligibility, check out this prior post.
Before you go: be sure to read my disclaimer. Remember, I’m a lawyer and we love disclaimers.
If you have a question, here’s how to Ask The Taxgirl.
The situation your correspondent describes is very common, and the misunderstandings of our tax system by college students are also very common.
It’s also important to note that
1) Not only “can” your correspondent file, she is legally required to file if she is a dependent and had $6,500 in earnings last year. In general, a dependent with more than $5,700 in earned income is required to file a return. (Dependents with unearned income are more complicated, but in general, their required filing thresholds are even lower, and they can be subject to the “kiddie tax”.)
2) Even though dependents do not qualify for the Making Work Pay credit, she might still get a refund–or she might owe money. It depends on what she means by “$500 in withholding.”
If the “$500 in withholding” to which she refers is the Box 2 amount for federal income tax withheld on her W-2, and if she had no other income besides the $6,500, I would expect that she would get most, though not all, of it back. If the “$500 in withholding” comes from Box 4 and Box 6, amounts withheld for Social Security and Medicare, I would expect that she would get none of it back, and would probably owe some income tax.
Your correspondent might want to take a look at the VITA volunteer’s workbook case study for Rose Hudson here:
http://bedbuffalos.blogspot.com/2011/01/workbook-case-study-1-rose-hudson.html
Gosh, Mary, I’m glad I read your answer or I wouldn’t have realized my big mistake… There were two related questions, both from college students, about Making Work Pay and I didn’t paste in the second part! Editing now.
Hmmm… was someone fishing for answers? This is a scenario from the VITA/TCE training test.