What Happens if You Claim a Dependent That’s Not Yours?

Claiming a dependent on your tax return can provide valuable credits and deductions, but doing so incorrectly can lead to serious consequences. The IRS takes dependent claims seriously and has systems in place to verify them.

Understanding what happens if you claim someone who doesn’t qualify is essential to avoid penalties, audits, and potential repayment of any benefits received.

The IRS’s Review of Dependent Claims

When a tax return includes a dependent, the IRS cross-references the claim against its database, which contains prior tax filings, Social Security records, and other government data. This automated system flags discrepancies, such as multiple taxpayers claiming the same individual or dependents who do not meet eligibility requirements. If an issue is detected, the IRS may delay processing the return or request additional documentation.

To verify a dependent claim, the IRS follows criteria outlined in the Internal Revenue Code, which defines who qualifies as a dependent. Eligibility depends on factors such as relationship to the taxpayer, residency duration, financial support, and income thresholds. For example, a qualifying child must generally live with the taxpayer for more than half the year and not provide more than half of their own financial support. If these conditions are not met, the IRS will disallow the claim.

When multiple taxpayers claim the same dependent, such as divorced parents listing the same child, the IRS applies tiebreaker rules. The parent with whom the child lived the longest during the tax year has priority. If time is split equally, the parent with the higher adjusted gross income (AGI) is granted the claim. If neither parent qualifies, another relative may claim the dependent only if they meet additional support and residency requirements.

Potential Penalties for Incorrect Dependent Claims

Filing a tax return with an ineligible dependent can result in financial penalties, loss of tax credits, and increased scrutiny from the IRS. If an improper claim is identified, the IRS will disallow deductions and credits associated with the dependent, such as the Child Tax Credit (CTC) or Earned Income Tax Credit (EITC), requiring repayment of any refunds that were improperly granted. Interest and late payment penalties may also apply.

Beyond financial consequences, taxpayers who incorrectly claim a dependent may face restrictions on claiming certain credits in future years. The IRS can impose a two-year ban on claiming the EITC if the mistake is deemed reckless or intentional. If fraud is determined, this restriction extends to ten years. Similar penalties apply to the American Opportunity Tax Credit (AOTC) and the Child Tax Credit, reducing future tax benefits.

Errors in dependent claims can also increase the likelihood of an audit. If the IRS suspects deliberate misrepresentation, it can assess civil fraud penalties of 75% of the underpaid tax due to fraud. In extreme cases, criminal charges for tax fraud or perjury can be pursued, leading to fines or imprisonment.

Correcting an Erroneous Dependent on Your Return

If a taxpayer realizes they mistakenly claimed a dependent, taking prompt action can help minimize complications. The first step is to determine whether the return has already been processed. If it is still pending, there may be an opportunity to withdraw or correct the filing before IRS review. If the return has been accepted, an amendment is necessary.

To amend a return, taxpayers must file Form 1040-X, which corrects the original submission. This form requires an explanation of the error and adjustments to income, deductions, and credits. If the improper dependent claim resulted in an inflated refund, setting aside the excess amount is advisable, as the IRS will likely request repayment. Electronically filed corrections are typically processed faster than paper submissions.

If the IRS has already flagged the issue, they may send a CP87A notice, informing the taxpayer that the dependent was also claimed on another return. In such cases, supporting documentation may be required to prove eligibility. Failure to respond could lead to an audit or further penalties, making it important to address the notice promptly.

Updates to Tax Liability or Refund

Removing an ineligible dependent from a tax return can significantly alter the taxpayer’s financial position, often leading to a higher tax liability or a reduced refund. This adjustment primarily affects tax credits and deductions, particularly those tied to dependents, such as the Child Tax Credit (CTC), the Credit for Other Dependents (ODC), and the Earned Income Tax Credit (EITC). Without these benefits, the taxpayer’s total tax due increases, potentially resulting in a balance owed to the IRS.

The impact on liability is further compounded when the taxpayer moves into a different tax bracket due to the removal of deductions or credits. Losing the $2,000 CTC per child or the EITC, which can be worth up to $7,430 for tax year 2023 depending on income and number of qualifying children, can substantially reduce a refund or create an unexpected tax bill. If this results in an underpayment, interest accrues from the original due date of the return, and failure-to-pay penalties may apply at a rate of 0.5% per month, up to 25% of the unpaid amount.