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Thread: Independent taxes and health insurance ( 'unemancipated' college student )

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    God/dess sammii's Avatar
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    Default .......

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    Last edited by sammii; 03-11-2014 at 01:39 PM.

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    Default Re: Independent taxes and health insurance

    you've got a problem.

    Absent some extraordinary legal action on your part, all college students are NOT considered to be financially 'emancipated' until they reach age 23. In the simplest form, this means that you cannot claim yourself as a dependent on your own tax return, but that your parents can still claim you. Also, this means that you can still be carried on your parents' health insurance plan.

    However, if you aren't 'emancipated', this also means that when you and your parents file for student grant / loan money for college tuition assistance, the gov't forms require that TOTAL HOUSEHOLD INCOME be included on the form to determine eligibility. This filing will inexorably link your own social security number with your parents' social security numbers at the IRS, since gov't grant / loan agencies and college bursar's offices are required to share information with the IRS.

    If you do webcam work, it is an absolute certainty that your webcam host is going to issue a 1099 form to the IRS next spring for whatever camming money you earned during 2011. This camming income MUST be reported along with your parents' income on your student grant / loan application ... which means that there is no way that your parents can remain unaware of your camming work / earnings since they must fill out and sign this form.

    There are also other potential ramifications for both your own and your parents' income tax filing. For example, if you are not 'emancipated' from your parents, and thus can't claim yourself as a dependent on your own tax return, odds are that you'll wind up paying 15% Social Security tax plus 25% federal income tax plus 5% state income tax on your webcam earnings ... or 45 cents out of every dollar earned. The IRS allows a tax credit for tuition payments that would reduce this potential tax liability, but your parents will undoubtedly expect to take this tuition tax credit to reduce their own tax liability and you both can't claim it.


    There are some options where 'emancipation' is concerned to get around this problem. The easy way would be to marry your BF ( even if a future divorce is part of the plan ) !!! The hard way involves hiring an attorney and filing a court action seeking legal 'emancipation'. This is more complicated since it involves issues like what percentage of your total 'support' stems from your parents versus what percentage stems from your own earnings ( meaning that your webcam earnings would play a major part in any such court filing ... a fact which would obviously be shared with your parents via court paperwork ). However, both of these options would 'cost' you the loss of parent provided health insurance coverage. On the plus side, both of these options would probably lower your overall tax rate on webcam earnings from 45% down to 20%, and may also provide much greater amounts of gov't tuition assistance grant money eligibility.

    What you do NOT want to do is simply keep working as a webcam girl without telling your parents and without becoming 'emancipated' ... thus allowing your parents to file your student grant money application with a stated total household income that does NOT include your webcam earnings. If this were to happen, when the 1099 form from your webcam host shows up next spring, IRS and/or student grant agency computers are going to instantly track your SS# on that 1099 form back to your parent's tax return ( which claims you as a dependent ) as well as your own tax return. This will probably result in both you and your parents being audited, will definitely result in a request to your parents to repay any student grant money you received based on their 'fraudulent' student grant application filing ( which understated total household income by not including your webcam income ), as well as possible additional penalties !!!

    ~
    Last edited by Melonie; 07-03-2011 at 01:52 AM.

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    Default Re: Independent taxes and health insurance ( 'unemancipated' college student )

    I didn't cam in 2010 and I already sent the information for taxes for last year to my school, but what if I don't apply for student loans/grants next year? It's only a community college so I can afford the whole tuition. Is there any way I can claim independence so my parents' don't find out? Of course I would talk to them first and tell them to not list me as a dependent. I started camming in March of 2011, so would I have to marry my bf by the end of the year to get out of filing with my parents? We'd prefer not to get married if there is any other option, but we will if we have to.

    Emancipation is totally out of the question since I'm really close with my mom and I haven't been abused.
    Last edited by sammii; 07-03-2011 at 02:02 PM.

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    Default Re: Independent taxes and health insurance ( 'unemancipated' college student )

    I started camming in March of 2011, so would I have to marry my bf by the end of the year to get out of filing with my parents?
    yup you got it. Actually you would still file your own tax return even if you didn't get married. It's just that your parents would still claim you as their dependent on their tax return, you could not claim yourself on your own tax return, and any student grant / loan applications would have to include both your own and your parents' income = 'total household income'.

    Is there any way I can claim independence so my parents' don't find out?
    yes ... get married ! No financial questions need to be asked this way. You simply cease being your parents' dependent.

    Of course I would talk to them first and tell them to not list me as a dependent
    Unfortunately, it's not that easy. Even if you and your parents agree that you should be 'emancipated', due to federal law you cannot actually become 'emancipated' without a legal change in your status. This means getting married, joining the US military, a judge's order, or waiting until you reach age 24.

    We'd prefer not to get married if there is any other option
    well, the other option is retaining an attorney and filing for an 'emancipation' ruling. If your parents were willing to go along with this without contest, and if you did this real quickly ... on the basis that you're living in a different state and providing more than 1/2 of your own support, and need 'emancipation' status to properly file for student grant money for the upcoming fall semester ... it might fly without a ton of details about your webcam work needing to be included in the court documents. But if your parents contest 'emancipation', or your parents are providing any significant amount of 'contribution' money to you ( or your college ), then all of the details will be requested by the court.

    I would suggest that you arrange a meeting with your college bursar's office to discuss the subject of 'emancipation'. At the very least, the bursar can tell you how successful or unsuccessful other students have been at gaining 'emancipated' status ... as well as giving you some general idea of the necessary legal procedure in your state. From there you can arrange a consult with a local attorney to see what sort of hoops need to be jumped through, and what the legal fees are likely to cost.

    However, against those legal fees, you're also going to come away with a far lower effective tax rate applying to your webcam income, plus far more college tuition grant money. The only major kicker will be losing parental health insurance ... but most colleges offer some sort of low cost health insurance coverage for otherwise uninsured students ( which you can also ask the bursar about ).

    ~
    Last edited by Melonie; 07-03-2011 at 02:43 PM.

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    Default Re: Independent taxes and health insurance ( 'unemancipated' college student )

    This might be stupid: Do your parents have to know the $$$ is actually from camming? Like, the company that pays you and shows up on your bank stuff and all that jaz; does it blatantly mention your camsite or is it done under something sounding more vague? For instance I work for Camwithher but 'Camwithher' isn't what shows up in my bank info and employee info and stuff like that. If you do get paid under something that shows up vague and it isn't a shit ton of money could you lie to your parents and say it's from something else/some other type of employment?

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    Default Re: Independent taxes and health insurance ( 'unemancipated' college student )

    ^^^ if she makes a move before next February's 1099 arrives, the only thing she'll have to explain is the company name that appears on her webcam 'paychecks'. If that name is more or less innocuous ( as opposed to 'XXX Web Whores Inc.' ) then the door is open to offer any explanation details she chooses to her parents and the court.

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    Default Re: Independent taxes and health insurance ( 'unemancipated' college student )

    Thanks Melonie! It looks like I have two choices: tell them the truth or get married to my bf. My bf agreed to get married. We're just going to get it done legally, but we won't consider ourselves married yet and we'll still have a real wedding in the future. Hopefully I can get away with this without my parents finding out. It wouldn't be the end of the world if my parents found out about me camming, but I'd rather avoid it if I can.

    And Zinaida, this wouldn't work because I know my dad would research the name. I wish I had parents' that know nothing about a computer, but unfortunately they do, lol.

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    Default Re: Independent taxes and health insurance ( 'unemancipated' college student )

    i was in a similar situation with school, I lived with my bf, and barely made any money. My parents provided no monetary support to me, not even health insurance. I got barely any grant money because they made too much, even though they wouldn't help me pay for school. Oh and with the FAFSA that is the financial aid form for school in the US, your parents don't actually sign anything, just you do.

    You just need their social, and their adjusted gross income from the prior year, but if your parents make a lot of money, it makes much more sense to marry your bf or have a baby.


    It's so stupid that we have to resort to things like this when we want to go to school, with parents that can't afford to or aren't willing to help pay for school.

    I now have a crap load of loans, and a degree that doesn't seem to get me anymore, but I digress, good luck! :-)
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    Default Re: Independent taxes and health insurance ( 'unemancipated' college student )

    I want to clarify the original question with regards to whether you can file independently. First of all because you have income, you will file your own tax return. The real question is whether or not you qualify as a dependent for your parents and they get a deduction for you or you are your own dependent and get that deduction on your personal tax return.

    From Publication 17:

    1) The child must be your son, daughter, stepchild, foster child, brother, sister, half brother, half sister, stepbrother, etc.

    2) 2. The child must be (a) under age 19 at the end of the year and younger than you (or your spouse, if filing jointly), (b) under age 24 at the end of the year, a full-time student, and younger than you (or your spouse, if filing jointly), or (c) any age if permanently and totally disabled.

    3) The child must have lived with you for more than half of the year.

    4) The child must not have provided more than half of his or her own support for the year.

    5) The child is not filing a joint return for the year (unless that return is filed only as a claim for refund).
    To me the question would be whether you provided more than half of your own support or whether your parents did so. If you are providing more than half of your own support they cannot take you as a dependent and you get the exemption. Regardless you need to file your own personal tax return.

    If you do not want them to know about your camming or your side income, just don't take yourself as an exemption. You'll pay more in taxes but they don't have to know about your income. What you do not want to do is claim yourself as an exemption and then they claim you as an exemption because then it will red flag and the IRS will inquire and open the can of worms.

    With regards to the health insurance that is going to depend on your carrier. My experience with health insurance is that they do not ask for tax records when you apply. They would simply want to see whether or not you are a full time student and probably would need some proof that you are full time.

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    Default Re: Independent taxes and health insurance ( 'unemancipated' college student )

    ^^^ again the primary consideration is Sallie Mae closing the loop on parents' reported income plus 'child's' reported income ( i.e. 'total household income' as required by student grant paperwork ) versus IRS tax return reported incomes for parents and 'child' versus College bursar's office tuition payment reports. If being a college student weren't part of the equation there really wouldn't be much of an issue as long as either the parents or the 'child' ( but not both ) claimed the 'child's' exemption. But since being a college student IS part of the equation, the 50% support criteria now gets complicated by relative levels of reported incomes, by tuition grant money received, etc. As such, it is virtually impossible to satisfy the 50% support requirement unless the student 'child' has an officially reported income level that equals a significant fraction of the combined reported income of the parents - like $100k combined parents' income versus $50k student 'child' income ). $100k combined parents' income versus $20k student 'child' income isn't a credible option to argue 51% of total support being paid for by the student 'child'.

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    Default Re: Independent taxes and health insurance ( 'unemancipated' college student )

    I'm just looking at the original posters question and followup. She doesn't seem to be overly concerned about student loans, just how to report to the IRS and whether she can stay on the health insurance.

    Like I said I'd file a return without claiming myself as my own dependent. And like the OP said, just don't go after student loans next year. That way your parents won't know about your camming work AND you can stay on their health insurance.

    And wow, somehow she got convinced to get married for a reason that is not even a concern of hers (Student loans). I'd sit down with a CPA or some professional who knows what they are doing before running off to get married. You don't want to do that based on advice from this website.
    Last edited by Robertjordan; 07-06-2011 at 11:05 AM. Reason: Last paragraph added when I saw she decided to get married.

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    Default Re: Independent taxes and health insurance ( 'unemancipated' college student )

    OP, while I think Melonie has great suggestions, I don't think I'd suggest marrying your boyfriend. Keep in mind that once you marry a person your financial life is basically tied to them... including all of their debt collectors. Plus, just because you get along now doesn't mean you will get along in the future.

    After 18 I always filed as independent, but I was living away from my parents. As far as the FAFSA though I was not independent. Basically you will need both your own tax forms & your parent's tax forms to complete the FAFSA. Basically you'll total both of your numbers & attach taxes from yourself & your parents.

    The health insurance issue is totally separate & you will need to check with their insurance provider on that. Some insurance companies are now allowing parents to cover children up to age 26, including living outside the home... but that may not be all insurance providers.

    All of this FAFSA independency status is the main reason why I think more people need to consider waiting on college. Save your money so you will pay less for your education rather than taking out high interest loans. If you wait you'll likely be able to get more government assistance that doesn't have to be paid back AND loans with cheaper interest rates.
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    Default Re: Independent taxes and health insurance ( 'unemancipated' college student )

    You can marry me Sammii

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    Default Re: Independent taxes and health insurance ( 'unemancipated' college student )

    Thanks for the help you guys!! I decided not to marry the boyfriend. When I was drunk it sounded like a good idea, but it just seems kind of silly now. Anyway, I talked to a couple of tax people outside of this website and they said I couldn't be my parents dependent because 1. I'm too old 2. I haven't been enrolled in school full-time in 2011 (you have to be enrolled for 5 months) 3. My parents haven't been financially supporting me 4. I haven't lived with my parents at all in 2011.
    I don't plan on camming after this year, so I'm not concerned about 2012 taxes, but it sounds like I can claim myself for this year. They said the FAFSA has nothing to do with taxes. Also, they said even if my parents did claim me, I would still be filling out my own tax return, so they wouldn't see it, but I doubt they'll even try to claim me based on the information I've read.
    Quote Originally Posted by Zinaida View Post
    You can marry me Sammii
    Problem solved. You're hot!

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    Default Re: Independent taxes and health insurance ( 'unemancipated' college student )

    They said the FAFSA has nothing to do with taxes.
    For the benefit of other DD readers, this point is technically true. However, be aware that FAFSA has a 'direct line' to the IRS, and DOES utilize IRS tax return info to compare FAFSA 'total household income' amounts listed on student loan/grant applications against reported parental and student incomes. Obviously if no FAFSA application is filed ( and thus no gov't student loan / grant money is requested ) then no potential FAFSA inquiry to the IRS is going to occur. Also, independent of FAFSA, colleges may also inquire about parental and student IRS tax return info to officially establish / confirm 'in-state' residency eligibility as well as 'emancipation' status of the student.

    ~
    Last edited by Melonie; 07-07-2011 at 01:03 AM.

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    Default Re: Independent taxes and health insurance ( 'unemancipated' college student )

    I double checked my FAFSA and it only asked for my parents financial information, not mine, so I can't see there being a problem with it. Also, my parents' don't live in the same state as me so it would be useless to use their tax information for in-state residency. I'm just going to use my tax forms from my old job, as well as my bank information to confirm residency.

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    Default Re: Independent taxes and health insurance ( 'unemancipated' college student )

    I know this is the law in NY, and most other state colleges now have similar requirements since most state gov't budgets are in such deep trouble ...


    (snip)" A student whose parents or legal guardian reside out-of-state may claim to be emancipated in order to qualify for in-state tuition. A student claiming emancipation must present evidence of both emancipation and a New York State domicile in order to be designated a New York State resident for tuition purposes. Proof of emancipation must include documentation demonstrating the student’s financial independence. Emancipation does not occur automatically when a student reaches 18 years of age. Students under the age of 23 must provide evidence of one year of independent living in order to be considered emancipated.

    Factors relevant to the determination of financial independence include, but are not limited to, the following:

    1. employment on a full- or part-time basis within New York State;

    2. sources and extent of financial support from parents or guardians;

    3. sources and extent of other income;

    4. parents’ federal and state income tax forms which do not claim the student as a dependent (if the student continues to receive financial support, the student shall not be considered emancipated);

    5. student’s place of residence during the summer or other academic term recess;

    6. student’s status as financially independent for purposes of federal and/or state financial assistance;

    7. independent filing by the student of federal or state income tax return; and

    8. student’s assets and liabilities.

    Emancipated students are totally responsible for paying all of their educational costs. The amount of income claimed by the student must equal or exceed educational expenses, including those expenses associated with living in non-University housing. The term income includes any financial aid received as an independent student. The students should not have any joint or custodial accounts with their parents or legal guardians and any income claimed must be accompanied by source documentation (tax returns, Form 1099, Form W-2, bank statements, trust documents, etc.)."(snip)


    ... if you don't mind paying 'out-of-state' tuition prices at a college in a state different from the one that your PARENTS live in ...


    Sammii, you may be fine following the advice of your tax people. All I'm trying to do is make you aware that you may be opening a 'Pandora's Box' when you attempt to register as a full time student !

    ~
    Last edited by Melonie; 07-07-2011 at 02:34 AM.

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    Default Re: Independent taxes and health insurance ( 'unemancipated' college student )

    I live in Illinois as of now, and the college I was going to go to accepted my bank statements as proof of residency and they had no problem with it. I'm moving to Arizona where I used to work and where I originally opened my bank account last year. I'm going to say that I was living with my boyfriends' parents the whole time and show my old work and bank information as proof of residency. It's not that hard to gain in-state residency at community colleges if you have proof that you live there for a reason other than school. If the school doesn't accept my proof of residency, I'll just have to pay the out-of-state tuition, but I don't think I should have a problem.

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    Default Re: Independent taxes and health insurance ( 'unemancipated' college student )

    ^^^ I'm sorry to hear of your 'brush' with FAFSA and the IRS teaming up ... but you're not the first and ultimately you won't be the last. From a pure 3rd party official viewpoint, when your parents filled out FAFSA applications requiring them to report 'total family income' and you did not tell them to include your 1099 Webcam income, they were technically 'defrauding' a gov't agency. I have never heard of the IRS or FAFSA attempting to prosecute anyone for fraud on this basis. However, if the true amount of 'total family income' entered by your parents on past FAFSA applications which lacked the addition of your 1099 Webcam income resulted in the approval of student grant money that you would NOT have been eligible for had your 1099 Webcam income also been included, FAFSA will indeed seek immediate repayment of past grant money with interest.

    And if your 2010 1099 Webcam income was NOT included in either your parents' 2010 tax return or your own 2010 tax return ( if you filed one ), the IRS will undoubtedly start a detailed audit of all tax returns with your Social Security number on them. The IRS will be looking to collect the social security taxes and income taxes due on that 1099 Webcam income with interest. The IRS will most likely also comb through every other major aspect of those tax returns going back at least the past 3 years. This of course will also turn up the fact that you also had 1099 Webcam income in 2009 - where the IRS will again be looking to collect the social security taxes and income taxes due on that Webcam income as well with even more interest. And if the amount of 1099 Webcam income actually constituted more than 10% of your parents' total reported income, a 10% under-withholding IRS penalty may also be in the cards. And if you and/or your parents live in a state that levees an income tax of its own, the IRS will undoubtedly tip off state tax auditors as well. And of course the IRS will again exchange information with FAFSA if they hadn't yet connected the dots that 'unreported' 1099 Webcam income was involved in 2009 as well as 2010.

    I don't know how much you earned from Webcam over the past 2 years, but the IRS will probably be looking for payment of 25-30% of that amount for Social Security taxes and federal income taxes ( and your state may be looking for 5% additional state income taxes ). I also don't know how much student grant money you received to help defray tuition costs over the past 2 years, but FAFSA will definitely be looking for immediate repayment of any grant monies that recalculated FAFSA applications for the past 2 years ( adding your Webcam income to your parents' income = 'total household income' ) will make you ineligible to have received in the first place. At any rate, somebody is going to wind up 'on the hook' to produce many thousands of dollars for the IRS and FAFSA in short order ! If you have been listed as a dependent of your parents, and have not become emancipated, I believe it will be your parents who will wind up being responsible for these payments.

    FAFSA and the IRS may be 'slow' to take notice of such irregularities, but once they do notice they are like bulldogs !!!

    ~
    Last edited by Melonie; 07-14-2011 at 01:51 PM.

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    Default Re: Independent taxes and health insurance ( 'unemancipated' college student )

    ^^^ well at least that will cut down any 'surprise' tax bills and FAFSA grant repayment bills ... but it may not prevent the IRS from auditing both you and your parents.

    Actually, one 'good' side effect of this situation is that if your parents are going to 'cut you off', they can also co-operate with a filing for 'emancipation'. That way A. you'll save a lot of money on future taxes due on your Webcam income, B. you'll qualify for a LOT more FAFSA grant money filing on your own ( i.e. 'total household income' = just your Webcam income ), and C. you may get a 'break' on certain future college costs like a lower interest rate on a 'low income' student loan.

    Of course, your parents may not be all that co-operative re an 'emancipation' filing once they figure out that their own income taxes may be going up by $10,000 a year due to their loss of your dependent claim plus their loss of your college tuition tax deduction ( which YOU get to take instead ). But if they're going to 'cut you off', 'emancipation' and the resulting tax consequences is an inevitable consequence of their decision. And even if they don't choose to co-operate, you can still make the 'emancipation' filing yourself with almost guaranteed success of being granted 'emancipation' by a local judge under the circumstances i.e. your parents wouldn't allow you to move back home, your parents stopped paying your college tuition etc.

    ~
    Last edited by Melonie; 07-14-2011 at 02:08 PM.

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    Default Re: Independent taxes and health insurance ( 'unemancipated' college student )

    if you're a college student, not married, not a member of the military, do not have a child of your own etc. it doesn't happen automatically until you reach age 24. Not being 'emancipated' means that you can still be covered by your parents' health insurance, and means that your parents can claim you as a dependent on their tax return while you can't claim yourself on your own tax return ( because by IRS assumption your parents are still providing more than 50% of your total financial support ).

    However, if your parents are no longer paying your college tuition in cash, and are no longer providing you additional money for college expenses / room and board / food etc. then the legal argument can be made that YOU are now providing more than 50% of your own support ( perhaps much more ) and are thus deserving of 'emancipated' status. But because this doesn't happen automatically if you are younger than age 24, in order to actually get 'emancipated' status you'll need to file via an 'emancipation' petition with a local court ... see . I also found this specific blurbage re PA ...

    (snip)"VIII. JUDICIAL DETERMINATION OF EMANCIPATION

    As stated earlier, a minor may ask a court to declare him or her emancipated but, as shown above, court action is often unnecessary for the minor to get what he or she wants. A minor may petition a court to confirm his or her emancipated status by either submitting a "Petition for Emancipation" or by filing a "Complaint For Declaratory Judgment On Plaintiff's Emancipation Status." A minor should get legal assistance when asking a court for a judicial decree of emancipation. A hearing will be held on any request for emancipation, so the court can get the information necessary to decide if the minor should be declared emancipated. Information given to the court at the hearing should include facts showing: whether the minor is living with his or her parents or guardians; whether the minor is dependent on his or her parents for financial support; whether the parents and the minor intend for the minor to be independent; whether the parents are actually exercising control and authority over the minor; and whether the minor can financially support him or herself. For example, a 13-year-old who wants to leave home is not likely to be declared emancipated because he or she cannot support him/herself. In effect, the minor child must already be living independently for a court to determine that the child is emancipated.

    Parents or guardians of a minor emancipated by court order, are no longer required to give the minor any financial support. This means they do not have to provide food, housing, clothing or any other assistance to the minor."(snip)


    I assume from your siggy that you live in a 'college' town. As such, the local family court and local legal aid office should be extremely familiar with 'petitions for emancipation'.

    ~
    Last edited by Melonie; 07-14-2011 at 04:53 PM.

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    Default Re: Independent taxes and health insurance ( 'unemancipated' college student )

    ^^^ fair enough.

    However, keep it in the back of your mind that as long as you continue doing Webcam, not being 'emancipated' will continue to cost you somewhere around an extra 15-20% of every dollar you are earning in the form of higher taxes ( because you can't claim yourself as a dependent, nor can you claim your college tuition payments as a deduction - your parents can but you can't ). Also keep in mind that, even if you relocate to a different state, if you are not 'emancipated' your official legal residence won't change ( meaning for example that you'll have to pay higher 'out of state' tuition rates at any Virginia college even though you have physically moved to Virginia because your PARENTS don't live in Virginia ). Also keep in mind that any student loans you wind up taking out will be YOUR sole legal responsibility to repay in the future ... and you can't avoid repayment via bankruptcy.

    Please understand that I'm not trying to foment additional problems between you and your parents. However, there are a lot of very real financial issues at stake. If your parents are no longer going to be paying your tuition out of pocket, I want to make sure you understand that allowing them to still get $5,000+ a year in tax benefits ( while you pay $5,000+ a year in extra taxes ) because you aren't 'emancipated', and allowing them to sign you up for student loans at higher interest rates versus becoming eligible for subsidized 'low income' student loans via 'emancipation' ( which will cost you more every month once you graduate and must start making payments ), etc. are going to have a very real impact on your life both immediately and well into the future !!! If you choose to 'pay' this extra money to keep peace with your parents, then so be it. I only wish to make you aware that there IS a very real additional cost involved.

    ~
    Last edited by Melonie; 07-15-2011 at 02:31 AM.

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