Question regarding dependents, independents, tax credits and stimulus checks

[HokieHill]

I could use some advice on this.

In 2019 and 2020 I made too much $ to qualify for stimulus checks / tax credit. Same for upcoming $1400 stimulus. But I have 3 daughters in college that I plan to claim as dependents on 2020 tax return as they meet the criteria for dependents. No real benefit to me on my 2020 tax return. 2 had jobs so they can show some earned income. None made enough to have to file.

My questions are:

1. Do I have to claim them as a dependent if they qualify as one? I easily provide more than 50% of their financial support.
2. If I don't have to claim them as a dependent should they file 2020 taxes as independents to get the tax credit from last year and the upcoming $1400 stimulus?
3. The 3rd daughter is at school on athletic scholarship which covers tuition, I pay room and board. She earned a few $ interest on some money she has in savings but she has no earned income. Is this enough to file and allow her to receive the tax credit and upcoming $1400 stimulus?

I understand that I should get a CPA to address this. Used to have one do my taxes when I was partial owner of a business. Since I sold it I've done my taxes via TT. I can pay for some of his time but don't want to if this is a non-starter. Plus he's busy and I'm less of a priority now, especially this time of year.

Thanks in advance.

 

[SecondCor521]

Answers:

1. No, you are not required to claim them even if you are able to. Although I'm not sure why you wouldn't, as most of the time there is a $500 per dependent tax credit. I guess it is a non-refundable credit, but if your income is too high to qualify for the EIP payments then the $500 tax credit is probably useable for you - see line 19 of your 2020 Form 1040. As an aside, note that there are multiple criteria to be claimed as a dependent (age, support, relationship, etc.) See the flowchart in the Form 1040 instructions.

2. No, they can't do this. If they qualify to be claimed as your dependent, they are disqualified from the first and second stimulus whether or not you actually chose to claim them.

3. There is no requirement to have any earned income in order to qualify for the first two stimulus payments; your earned income can be zero. It just had to be less than the threshold amounts to get the full amount; it was possible to get a partial payment even above those levels as there was a 5% phase-out rate above the thresholds.

The rules for the third stimulus payment have not yet been established, but I have not seen any requirement to have any earned income to qualify. From what I have seen, the third stimulus payment will include college age dependents (which is new) but will still exclude people who can be claimed as dependents (which is the same rule as the first two). But again, we'll have to wait and see what the final law says if/when it becomes law.

 

[Philliefan33]

Answers:

....
2. No, they can't do this. If they qualify to be claimed as your dependent, they are disqualified from the first and second stimulus whether or not you actually chose to claim them.

...

I want to emphasize this part. It holds for tax-related things also. One of the questions on the Federal income tax forms is “CAN this taxpayer be claimed as a dependent by someone else?”

 

[HokieHill]

OK- that's what I figured. Thank you for your answer.