Tax/Insurance problem - Too much $ to be a dependent

[JrJordan]

I come to the Zoo seeking advice.

I am currently 20 years olds and full time college student. My father works for a non-profit health care organization. My health insurance is covered by this organization because until now I have been claimed as a dependent.

Enter stage left, tax issue regarding poker. I am expecting to make approximately $20k this year playing poker, and told my parents I wanted to be responsible and pay taxes for this amount. Here is the problem. In order for my parents to declare me as a dependent, my personal income must be less than the amount my parents pay for my annual living expenses. An outside source is helping aid my college tuition as well. This money unfortunately counts as a personal income of mine, and means my parents would need to spend even more money on me in order to claim me as a dependent.

What possible options do I have? These are what I've arrived at so far, but would really like to hear some other ideas.

1.) Stop play poker for the next 2 years until I get a job in the real world that covers my health insurance and still be claimed as a dependent for insurance until then.

2.) Keep playing poker, lose my dependent status, and be required to pay my own way for various independent policies such as health insurance, auto insurance, and all other aspects of discounts I lose by no longer being a dependent.

3.) Pay taxes on the poker winnings that my parents can match for my living expenses, and pray I don't get audited for the rest.

4.) Not pay taxes on poker winnings period.

None of these options are favorable for obvious reasons (either ethical or financial). Is there any other course of action I can take in order to maintain my growth as a poker player, while still being buddy-buddy with the IRS and still maintain my dependent status?

[boose_bagina]

if you don't need the money...keep it in your poker or neteller account...maybe even an ign account where it can collect interest (*note: i don't know how ign works, and if it can be tracked by gov'nt)

[Nigel]

Option 2. Welcome to the real world, it sucks. [img]/images/graemlins/smile.gif[/img]

[Rasputin]

I think you should double or triplecheck with the insurance company regarding their rules for dependent eligibility.

I work for a major health insurance carrier and we couldn't care less about your tax filing status. Dependent eligibility is based on other things entirely, primarily status as a full time student.

[mdeck]

[censored]. I'm in a similar situation (expect to make around 30k). I'm 18 and a full time student also. I've been discussing my desire to file taxes and do things right as well, and this is something we didn't realize was possible. Time to make a meeting with the CPA!

[JrJordan]

I will have to double check this. I do remember specifically the condition of being a full time student (which I meet), but my dad seemed to think this other requirement was also necessary to fulfill. I will get back to you, and anyone else interested, on this.

[Sniper]

http://www.irs.gov/publications/p501/index.html

[Chadt74]

"In order for my parents to declare me as a dependent, my personal income must be less than the amount my parents pay for my annual living expenses. An outside source is helping aid my college tuition as well. This money unfortunately counts as a personal income of mine, and means my parents would need to spend even more money on me in order to claim me as a dependent."

I believe the test you are talking about is the support test and the gross income test for dependency. Since you are under 24 and a full time student the gross income test does not apply. For support your parents need to supply 1/2 (plus 1 cent) of the total support for you to claim you as a dependent.

Under those guidelines you might be able to swing it. I'd say give a CPA that focuses on taxes a call and for $125-$250 you should be able to get a better answer. I don't know the definition of "support" in this respect so some other CPA (I don't specialize in taxes) would probably be able to define that and might be able keep you as a dependent which your parents would LOVE.

Good luck, there is some hope.

[XChamp]

For 2004 I filed as a dependant and paid taxes on about 16k of winnings. My family and I had no problems. My dad is a scrupulous CPA and never mentioned anything about this. I still will be covered by my dad's health insurance plan until I am 23 (another 6 months). My father is fully aware that my winnings for 2005 will probably be significantly more than 2004 and yet he never said anyhting about losing dependant status for 2005.

Hope that helps.

[JrJordan]

[ QUOTE ]
I believe the test you are talking about is the support test and the gross income test for dependency. Since you are under 24 and a full time student the gross income test does not apply. For support your parents need to supply 1/2 (plus 1 cent) of the total support for you to claim you as a dependent.

[/ QUOTE ]

Thanks for the help. The "support test" is the big one here that's screwing over my dependent status. We've basically done our own caluclations in estimating what my annual living expenses are re: college and other costs. Using the number we have, I'm probably out of luck since I myself make more than half of that. I will most likely end up seeing a CPA to see if he can find some reasonable methods to adjust the total number for my living expenses.

I'm also going to contact my health insurance provider to ensure the support rule is also used to define their coverage of dependents. My hope is that being a full time student is the only qualification on this front instead of my dad's previous claims.