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Thread: dependent status

  1. #1
    Veteran Member rain's Avatar
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    Default dependent status

    After paying off my over 10K student loans from my previous undergrad work I have decided to go back to school May 3 to finish my degree.

    Background info:
    - My parents do not know I am stripping. Shit would hit the fan if they did so I'm not going to tell them.
    - My dad has a good job that offers me health insurance if I am a dependent of my dad. In order to be a dependent I have to be under 24 and in school full time at least five months out of the year. One of the reasons I want to finish school now is so I can keep this health insurance.

    Here is my concern. I'm not sure if there is an upper limit to how much money you can make and still be declared as a dependent. On the IRS site all I could find was the rule about being under 24 and in school full time if you make more than approx. 3000 dollars (the amount my dad can deduct).

    I'm about to do my Jan. 15 estimated tax payment through Turbo Tax. I don't want to mess up my dependent status or have the IRS asking my dad questions. This would ruin my entire family relationship so I am obviously really worried about it.

    I know I need an accountant lol...but are therethoughts on what I should be thinking about so I can 100% legally stay as a dependent on my dad's taxes?

    A family relative has offered to pay my tuition at my new college, so I want to keep my dependent status solely for this health insurance.
    There is no salvation in becoming adapted to a world which is crazy.
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    Banned Melonie's Avatar
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    Default Re: dependent status

    I'll leave it to the professionals to answer you in detail. However, at the very least, the college IRS forms showing the amount of tuition paid in your name have already created a linkage between your parents' tax return and your own tax return in IRS computers. Therefore any potential audit is going to involve both you and your parents. The IRS has also been automatically informed that somehow $10k in student loans in your name have been paid off, which has undoubtedly set the IRS computers on a search of your own and your parents' tax returns to see where the declared income needed to pay the $10 grand originated. If you don't report sufficient 2005 income to cover the $10k loan payment, and if your parents' tax returns don't show enough declared income vs. expenditures/cost of living to allow for the $10k loan payment being made by them, then the IRS alarm bells are likely to start ringing. Of course reporting sufficient 2005 income to cover the $10k loan payment may make you ineligible for dependent status.

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    Veteran Member rain's Avatar
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    Default Re: dependent status

    I am planning on paying 100% legit taxes for the 10K plus some. My parents also have enough money where it would be probable that they could have paid off the loan, too. I'm not too worried about an audit.

    My concern now is if I can file legit taxes for the coming years until I'm 24, no matter how much those taxes will be, and still be a dependent because I'm in school.
    There is no salvation in becoming adapted to a world which is crazy.
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    Banned Melonie's Avatar
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    Default Re: dependent status

    My concern now is if I can file legit taxes for the coming years until I'm 24, no matter how much those taxes will be, and still be a dependent because I'm in school.
    Not only are there 'special rules' regarding the dependent status of students, but there are also general requirements regarding dependents i.e. that someone else must provide more than half of the dependent's support. On a very basic level, as a student the costs of your 'support' include tuition plus housing plus living expenses. If you earn more than 1/2 the amount spent on your tuition plus housing plus living expenses, then certainly your dependent status is open to question ... as is your eligibility for grants etc. which are based on 'family' income criteria. As I said earlier I'm not very experienced in this area so I'll leave specifics to the experts.

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    God/dess Gynger's Avatar
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    Default Re: dependent status

    Have you considered looking into your own health insurance? If you are overall fairly healthy, you could get a plan through a broker that would have a higher deductible with a co pay option for office visits etc.. I know where I am, I did this while I was dancing for me and my daughter and spent only $300 a month for insurance with a $2500 deductible for major medical and a $20 co pay for routine office visits. I was with Blue Cross. It might be well worth checking it out if you are only concerned about remaining a dependent for the sole purpose of health insurance.


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    Featured Member Lizette's Avatar
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    Default Re: dependent status

    When I was an undergrad, I earned enough money to support myself, file my own taxes, *and* be on my parents' health insurance plan. Just make sure they do not claim you as a dependent to the IRS. The health insurance companies do not care how much you earn so long as you are under a certain age and in school. (I think.)

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    God/dess montythegeek's Avatar
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    Default Re: dependent status

    The issue is really simple if you cut to the bottom lines--the insurance companies bottom line and the company your dad works for's bottom line.

    The insurance company does not care about your status IF they get paid enough to insure you and other's like you (kids on dad's policy). If the employer is footing part of the bill as a benefit, however, they do not want to keep paying forever and having their costs go up, so they need ome kind of reasonable cut off time. When the dad-comapny and insurance company work out their deal, they structure it so the insur. co and employing company are happy , AND employees at dad's company do not start looking for new jobs.

    The solution is to go straight to the source--the employment benefits coordinator at Dad's company and find out what the rules are including messy details on how "dependent is defined". Then go straight to the source at the IRS (if applicable) and find out what matches that definition.

    If it is the IRS dependent definition go to page 27 of this http://www.irs.gov/pub/irs-pdf/p17.pdf
    It goes through the messy, complicated rules involving people between 19 and 24

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    Default Re: dependent status

    Also isn't there a "gift tax" where the giver owes tax on of an amount over 10K$ or 11K$ given, not loaned, to another?


    This is what the IRS says about that....

    Gift Tax

    The gift tax applies to the transfer by gift of any property. You make a gift if you give property (including money), or the use of or income from property, without expecting to receive something of at least equal value in return. If you sell something at less than its full value or if you make an interest-free or reduced interest loan, you may be making a gift.

    The general rule is that any gift is a taxable gift. However, there are many exceptions to this rule. Generally, the following gifts are not taxable gifts.

    • Gifts that are not more than the annual exclusion for the calendar year.
    • Tuition or medical expenses you pay for someone (the educational and medical exclusions).
    • Gifts to your spouse.
    • Gifts to a political organization for its use.
    • Gifts to qualified charities (a deduction is available for these amounts).
    Annual Exclusion

    A separate annual exclusion applies to each person to whom you make a gift. For 2002, 2003, 2004 and 2005, the annual exclusion is $11,000. Therefore, you generally can give up to $11,000 each to any number of people in 2002, 2003, 2004 and 2005 and none of the gifts will be taxable.

    If you are married, both you and your spouse can separately give up to $11,000 to the same person in 2002, 2003, 2004 or 2005 without making a taxable gift. If one of you gives more than $11,000 to a person in any one of these years, refer to gift splitting in Publication 950, Introduction to Estate and Gift Taxes.

    Gifts to individuals are not deductible on the donor's income tax returns.
    Last edited by threlayer; 12-12-2005 at 10:32 AM. Reason: add IRS quote
    I loved going to strip clubs; I actually made some friends there. Now things are different for the clubs and for me. As a result I am not as happy.

    Customers are not entitled to grope, disrespect, or rob strippers. This is their job, not their hobby, and they all need income. Clubs are not just some erotic show for guys to view while drinking.

    NOTE: anything I post here, outside of a direct quote, is my opinion only, which I am entitled to. Take it for what you estimate it is worth.

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    God/dess LuckiCharm's Avatar
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    Default Re: dependent status

    i got a question that relates to this subject too...if you are a dependent and you file taxes, do your parents find out what you do? like, do they get your tax return forms and get to see all of your income and stuff?

  10. #10
    God/dess LuckiCharm's Avatar
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    Default Re: dependent status

    rain- im in the same boat youre in!!! i would DIE if my parents found out i was a dancer! im also 20 years old.

  11. #11
    Banned Melonie's Avatar
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    Default Re: dependent status

    i got a question that relates to this subject too...if you are a dependent and you file taxes, do your parents find out what you do? like, do they get your tax return forms and get to see all of your income and stuff?
    As long as neither your parents nor yourself are audited by the IRS, the probable answer is no. However, if either your parents or yourself are audited, because of the issues of dependency, odds are that the other party will also be audited to clear up dependent eligibility questions ... which will very probably lead to your parents finding out what 'occupation' you filed on your tax return and how much money you earned.

    It's actually more likely that questions raised on student grant/loan applications will wind up opening this Pandora's Box, because grant/loan eligibility is based on total household income i.e. your parents income plus your own income. Student grant/loan agencies also share info with the IRS. Therefore if you earned $10k last year, if you don't include that $10k of income on the student grant/loan forms which your parents must fill out and sign, the IRS may inform the student grant/loan agency about your tax return's declared income and both you and your parents may be hit with a fraud charge by the student grant/loan agencies.

    If on the other hand you tell your parents about the $10k of income so they can correctly fill out the student grant/loan forms, you'll undoubtedly be asked how in the world you managed to earn $10k last year while going to school at the same time ! If you choose not to report your income to the IRS, then there won't be a cross-check problem with the student loan/grant agencies, you won't have to tell your parents about the $10k of income to be included on the student grant/loan forms, and they won't start asking you questions. However, if your club is ever audited and the IRS discovers that you did indeed have income that you did not declare, not only will you be vulnerable to tax evasion charges by the IRS, but both you and your parents are at risk of being charged with fraud by the student grant/loan agencies once the IRS tips them off to your undeclared income.

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    Featured Member MadisonM's Avatar
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    Default Re: dependent status

    I'm 20 years old and also a college student. My parents do know that I strip, and this will be the first year I'm filing taxes on my stripping job (been dancing a little over a year). My parents will not be claiming me as a dependant this year, because I made too much money and because I want to be able to claim all my deductions. I will still be able to be covered by my dad's insurance as long as I stay in school full time and am under 24, even though he isn't claiming me as a dependent. You should check into the insurance thing, because you should still be able to be covered by your parents' insurance even if you aren't claimed on their taxes (though that may depend on the insurance company you go through- I'm not sure).

  13. #13
    God/dess LuckiCharm's Avatar
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    Default Re: dependent status

    one more quickie... i actually strip for an on site service, meaning i dont work at a club, i do bachelor parties and things like that. so this is my question. since no business liscence is needed to do my type of work, do i REALLY even need to worry about reporting my income? i mean, i do have other income to report in order to prove something, like i am an avon rep and little stuff like that. so as long as i report some type of income to show some way of paying my car note and rent and everything, do i necessarily need to worry about reporting my stripping income? the company i work for has a business liscence that covers me but i had to sign an independent contractor form. my boss said she wouldnt report my name or anything to the IRS. Melonie- youre a great help! thanx so much. ive been looking for a site like this because i have so many questions that i havent had anyone to ask!!!

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    Banned Melonie's Avatar
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    Default Re: dependent status

    Well, lucki, you certainly know the 'correct' answer to your own question already. This company has your job application on file with all of the pertinent info necessary to file a 1099 on you next february. Even if the company doesn't file a 1099, your name and financial records exist at this company, and will be uncovered if the IRS ever audits the company. There is also undoubtedly some sort of bank paper trail leading right to you unless this company pays you in cash. Declare the income and pay the taxes already !!!!

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    God/dess VenusGoddess's Avatar
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    Default Re: dependent status

    Lucki, Of course, check with an accountant, but if you average how much you make at your dancing job and don't want to claim those taxes outright (so your parents will find out), you may be able to have more taxes withheld from your "9-5'er" to cover the amount you would otherwise owe in your dancer taxes.

    I am not too sure how this would work, but I've heard of people doing this. Make sure you talk with a qualified accountant and get the low-down on it.

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    God/dess LuckiCharm's Avatar
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    Default Re: dependent status

    do they always tell you if you are being audited or do they do it secretly? what causes someone to be audited?

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    God/dess Bunny's Avatar
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    Default Re: dependent status

    I remember when I was in college my parents had to provide at least half of my support to claim me as a dependant. I graduated in 1993 so the rules might be different now. It would definitely be worth a consult with a CPA to see what to do. Perhaps you could tell your parents you work but not tell them doing what. You could say you're a waitress making tips or a performance artist or something.

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    Banned Melonie's Avatar
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    Default Re: dependent status

    If you are over 18 years of age, to legally be considered as a dependent on your parents tax return, two situations seem to apply ...

    you qualify if you are a full time student, your 'legal' residence is at your parent's home, you are 23 years of age or younger, and you provide less than 50% of your own total 'support' (which includes out of pocket tuition costs but not tuition paid with borrowed money)

    you also qualify if you are not a full time student, your 'legal' residence is at your parent's home, you are any age, and you earn less than $3000 per year.

    An audit by definition means the IRS contacting the taxpayer, and exchanging information with the taxpayer by mail, by phone or in person. However, an audit and an investigation are not the same thing.

    It is indeed possible for the IRS to begin an investigation of a particular taxpayer's finances if the IRS determines that there is 'probable cause' to suspect a crime has been committed i.e. tax evasion. An investigation can indeed proceed without the taxpayer's knowledge. In the early stages an IRS investigation could typically include an IRS request to banks, credit card companies, stockbrokers, mortgage companies, state real estate and motor vehicle title agencies etc. for financial details of that taxpayer's accounts. During an investigation, the IRS can also contact/visit the taxpayer's place of work without the taxpayer's knowledge, to inquire or make its own estimates of that taxpayer's typical earnings potential.

    A recent example was last years' (maybe it's two years ago now) IRS onslaught of Vegas casinos, where the IRS investigated both the casinos themselves and tipped casino 'employees'. It was discovered that underreporting of tip income was epidemic, and the IRS entered into a settlement agreement with the casinos to run all casino 'employee' tip income through the casino's payroll system in the future - with taxes withheld and with W2's/1099's generated for every tip dollar.

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    God/dess Bunny's Avatar
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    Default Re: dependent status

    My friend was actually able to claim her parents as dependants because she basically supports them. I guess the less than $3000 per year thing is what made that possible.

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    Default Re: dependent status

    Quote Originally Posted by LuckiCharm
    do they always tell you if you are being audited or do they do it secretly? what causes someone to be audited?
    You will always know when they audit you. You get this envelope that makes that freaking "Jaws" music. J/k (obviously). But, seriously, you'll get a notice.

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