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Provoking the IRS seems counterintuitive to most people. Nevertheless, thousands of individuals each year attempt to swindle the government for varying sums of money. And while not every one of these unscrupulous citizens incurs the wrath of the IRS, the ones who do get caught comprise a diverse and uncompromising breed of fraudsters. Arguably the lowest of the bunch are parents (and non-parents) who falsify tax deductions for kids.
There are a series of common improprieties that the IRS is on the lookout for each year; specifically, those perpetrated with the intention of exploiting child tax credits and deductions. While knowingly providing false information on a return is an obviously risky endeavor, some folks just can't help themselves. Understandably, the IRS provides stiff penalties to counterfeit claimants. Here are some typical examples of what not to do when taking deductions for children:
Claiming Someone Else's Child
Preparing a return accurately includes claiming only children who are, by definition, dependents. This means that anyone attempting to take deductions for kids belonging to friends or relatives is inviting trouble. Parents or legal guardians are permitted to claim qualified dependents. In the case of divorced parents, only one is allowed to take the associated tax break.
Age Counts
Children aged nineteen or older cannot typically be claimed as dependents (no older than 24 if they're full-time students). A decidedly common error arises when parents attempt to take deductions for older children. There are exceptions to the age limitations, but generally post-teen, non-enrolled young people cannot be claimed.
Claiming Phantom Kids
A conspicuously prohibited practice when it comes to dependents is claiming fictitious offspring. Bolder individuals will attempt to take ownership of non-existent children, going so far as to provide a phony Social Security number for each one. Few endeavors could be so accurately described as fraud, pure and simple.
Location Limitations
Children who live outside the United States don't count as dependents, even if they're related. Similarly, children who are not citizens of the US, resident aliens or nationals can't be claimed. Many times, eligibility in these situations comes down to having the correct paperwork to validate the tax break.
When in Doubt
There are plenty of exceptions to the rules, which is why it's advisable to research qualifications for each intended dependent. Also, a good rule of thumb is to err on the side of caution. Not everyone who incorrectly takes a deduction does so with the intention of defrauding the government. Unfortunately, a handful of underhanded individuals spoil it for the rest, forcing the IRS to remain razor sharp when examining each claim. Anyone who finds themselves receiving notices following a denied deduction should seek the assistance of a licensed tax professional. In most cases, a tax expert can make short work of such an IRS issue and provide insight on how to avoid future missteps.