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Thread: Help!!!

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    Member CaliDancer's Avatar
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    Default Help!!!

    I turned 18 last march and i "officially" started dancing June 2004.....now i have to file my taxes etc but i have never done that before.....now i live with my parents and they don\'t know i dance .... im scared that theyre gonna get the forms in the mail and find out. .... when do u guys get all the papers in the mail and how do i deal with the taxes? i mean what do i do ??? sorry to sound stupid i just never filed taxes before ...pleaseee help!

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    Default Re: Help!!!

    Get an accountant and a Post Office Box.

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    Banned Melonie's Avatar
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    Default Re: Help!!!

    Unfortunately, it's not that easy ! If you've been earning really good money since June of 2004, you may in fact have been providing more than half of the money for your own support (versus your parents providing it). If your parents have been claiming you as a dependent and wish to claim you again on their 2004 tax return, you cannot also claim an exemption on your own behalf. Also if your parents wish to keep claiming you as a dependent, if you were under 18 last year, there is also an IRS provision which requires that your earnings be taxed at your parent's tax rate.

    However you and your parents decide to work this out, only one of the tax returns can claim you as a dependent. This will either translate into you getting totally raked over the coals in regard to the federal and state income taxes you will owe, or your parents income taxes will increase as a result of them not being able to claim you as an exemption. If you file a tax return as a single person (claiming yourself) and your parents also claim you as a dependent, both of the tax returns have an extremely probable chance of being audited.

    So to do this right, you need to co-ordinate with your parents when you both prepare and file your tax returns, or use the same accountant that your parents use to prepare their tax return !

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    Default Re: Help!!!

    Just a question...where do your parents think you work and how do you get away with working all night while you are living at home?

    Most clubs do not put "DeeDee's Gentleman's Club" on their W-2's/paychecks. At least my club has a completely different "name" on my paychecks, etc. If that is the case, you may not have too much to worry about...in terms of them finding out.

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    Member Jon_CPA's Avatar
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    Default Re: Help!!!

    [
    Quote Originally Posted by Melonie
    Unfortunately, it's not that easy ! If you've been earning really good money since June of 2004, you may in fact have been providing more than half of the money for your own support (versus your parents providing it). If your parents have been claiming you as a dependent and wish to claim you again on their 2004 tax return, you cannot also claim an exemption on your own behalf.




    In the year that you turn 18 your parents may only claim you as a dependent if:

    1) You earned less than $7,950, you lived at home, and they provided over half of your support.



    or

    2) You are under the age of 24, are a full time student at an accredited institute of education, and the parents provide more than half of your support



    Quote Originally Posted by Melonie
    Also if your parents wish to keep claiming you as a dependent, if you were under 18 last year, there is also an IRS provision which requires that your earnings be taxed at your parent's tax rate.




    The only Federal provision requiring an minor dependent's income to be reported on the guardians income is the "Kiddie Tax". For a dependent who is 13 years old or younger, who has investment earnings in excess of their regular earned income, the excess investment income must be reported and taxed at the parents rate.



    Technically the income of a dependent is to be reported on the dependent's return. For a minor dependent the income is still reported on the minor's own return and the liability is calculated on the minor's tax rate for that income, the dependent minor's tax liability is to be reported on and added to the parent's tax liability. Some parents have adopted the practice of reporting the dependents income as their own. The IRS chooses not to contest this because the parent's marginal tax rate is often considerably higher than the marginal tax rate of the minor dependent. The IRS position is that if the parent wants to shoot themselves in the foot by paying more taxes, then the IRS is more than willing to help them load the gun.



    Check with a tax advisor in your area for the reporting requirements of state and local authorities.





    Quote Originally Posted by Melonie
    If you file a tax return as a single person (claiming yourself) and your parents also claim you as a dependent, both of the tax returns have an extremely probable chance of being audited.




    IRS standard practice is to send to both parties where the same SSN is used a letter of notification that someone else is already claiming that person as a dependent. The letter will request that recipient amend the return and not claim the dependent. As long as one party files an amended return that no longer claims the dependent, the IRS will take no further action. If neither party amends their returns then the IRS will inquire as to whom is allowed to claim the dependant and disallow it to the non-eligible party. If both parties' amend their returns and neither party claims the dependent then the IRS will simply keep their mouth’s shut and collect the tax.

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    Banned Melonie's Avatar
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    Default Re: Help!!!

    In the year that you turn 18 your parents may only claim you as a dependent if:

    1) You earned less than $7,950, you lived at home, and they provided over half of your support.

    or

    2) You are under the age of 24, are a full time student at an accredited institute of education, and the parents provide more than half of your support
    Thanks Jon for filling in the official details. I knew that a potential problem existed here, but did not know all of the details since I haven't been personally involved in such a situation.

    Anyway, assuming that CaliDancer earned more than $8,000 during her 6 months of dancing last year, and assuming that student or not her parents did not actually provide more than 50% of her support on a dollar basis, is there ANY way that she can avoid presenting her parents with a nasty tax surprise when the parents go to file their 2004 tax return ?

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    Member Jon_CPA's Avatar
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    Default Re: Help!!!

    Quote Originally Posted by Melonie
    Anyway, assuming that CaliDancer earned more than $8,000 during her 6 months of dancing last year, and assuming that student or not her parents did not actually provide more than 50% of her support on a dollar basis, is there ANY way that she can avoid presenting her parents with a nasty tax surprise when the parents go to file their 2004 tax return ?
    The only question is who gets to claim her on their tax return. If her parents are not legally entitled to claim her then she need only tell them that she will be claiming herself on her own return. If they can claim her then she has to still file her own return but she's just not allowed to claim her self.



    Irregardless of whoever claims her, she has to report her income on her return not theirs.


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    Banned Melonie's Avatar
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    Default Re: Help!!!

    The only question is who gets to claim her on their tax return. If her parents are not legally entitled to claim her then she need only tell them that she will be claiming herself on her own return. If they can claim her then she has to still file her own return but she's just not allowed to claim her self.
    Agreed, but the central issue of the original post was that this girl was trying to avoid having to tell her parents that she has been dancing. Because the parent's continued eligibility to legally claim her as a dependent is deeply in question due to her significant amount of dancing income, I simply don't see how this 'secrecy' would be possible.

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