1. YOU may claim exemptions for yourself, your spouse and your dependents.
2. Dependents must have a Social Security number (TIN is not good enough).
3. Exemption amount is $3,800 for 2012 for each exemption.
4. Exemptions reduce your taxable income and your income tax.
5. It could also produce credits such as child care credit, earned income credit, child tax credit, additional child tax credit and other credits.
6. Some of these credits are refundable (meaning that you can get a refund even if your tax is zeroed out).
7. Do not claim your spouse as your dependent even if he/she does not have not any income. The rationale: you file a joint return with him/her as your spouse, not as dependent.
8. If you are claimed as a dependent by another such as your parents, do not claim your exemption again as this will result in a duplication if deduction. It invites a notice from the IRS. Yes, they will catch it. IRS computers are programmed to identify duplication of exemptions for the same Social Security Number. Guaranteed.
9. You may not claim a married person as your dependent if he/she files a joint return with spouse.
10. Your dependent must be a US citizen, US resident alien, or US national or resident of Canada or Mexico for some part of the year. There is an exception to this rule for certain adopted children.
* * *
Victor Santos Sy, CPA, MBA, provides professional services in accounting and tax controversy including IRS audit defense and offers in compromise. He also advises clients on choices of entity including corporations for small businesses and LLCs for rentals. Vic worked with SyCip, Gorres, Velayo (SGV – Andersen Consulting) and Ernst & Young before establishing Sy Accountancy Corporation at 704 Mira Monte Place, Pasadena, CA 91101. The firm celebrates its 35th anniversary this year. You may email tax questions to Vic at [email protected]. You are welcome to visit our website for more than 300 tax tips at www.victorsycpa.com.