What happens when you receive IRS reject code IND 517-01 or IND 516-01?
Claiming qualifying dependents on your taxes can reduce your overall tax liability. Claiming dependents can also put extra money in your pocket in the form of a fully refundable tax credit if you claim the Child Tax Credit (CTC). That means you can claim the cash even if you don’t owe any taxes to offset. But the rules for qualifying dependents can be complicated, especially in the case of adult children or other adults living in your household who rely on you for most of their financial support.
Claiming Dependents on Your Tax Return
Most people understand they can claim their own children under the age of 19, who live with them for more than half the year, as long as the child receives more than half their financial support from that parent. In most cases, you won’t need to supply additional evidence beyond the dependent SSN.
But even claiming a child gets complicated in the case of a married couple, filing separately, or in the case of a divorce where parents share custody. In the case of joint custody after a divorce, the courts determine who can claim the child as a dependent based on the child’s residency. If custody is shared almost equally, the IRS will consider who had the child for the most overnight stays. If this is also split evenly, the parent with the higher Adjusted Gross Income (AGI) reserves the right to claim the child as a dependent and also claim the Child Tax Credit (CTC) if they qualify based on income limits.
Many people don’t know you can also claim a child under 24 if that child is a full-time student, or is any age and permanently and totally disabled, according to the IRS. To claim older children, the dependent must also live with you for more than half the year and receive more than half their financial support from you. They can’t file jointly on a tax return with their spouse, unless they are claiming a refund of taxes paid or withheld. No one else, including their spouse, can claim that person as a dependent.
Similarly, you can claim another adult as a dependent as long as they aren’t the qualifying child of any other taxpayer and they don’t earn more than $4,700 in gross income annually. That person must live with you all year and rely on you for more than half their financial support.
Claiming Dependents and the Earned Income Tax Credit
You’ll want to claim any valid dependents to maximize your tax refund. Claiming dependents may also help you qualify for the Earned Income Tax Credit (EITC), a credit that helps low to moderate income individuals and families pay bills or build an emergency savings account. The more dependents you can legally claim (up to three), the higher the income you can show and still qualify for the credit.
However, you can’t claim the EITC if someone else claims you as a dependent on their tax return. Mistakenly claiming dependents for the CTC or EITC are two common reasons for IRS reject codes.
IRS Rejection Codes
The IRS uses rejection codes to let you know that you may have made a mistake on your tax return. If you file electronically, you will not be allowed to file the returns until the error is corrected. Two common reject codes pop up when people claim dependents on their taxes.
Understand IRS Reject Code IND 517-01
IRS reject code IND 517-01 shows up when you claimed someone as a dependent on your return who is already listed as the primary taxpayer or a spouse, filing jointly, on another return. This may happen if a filer meets the requirements as a dependent child on a parent’s return but also files jointly on their spouse’s return.
For instance, if a partner in a young married couple (under 24 years old) is attending school full-time, living with one of the parents, not paying rent, and relies on the parents for at least half of their living expenses, the parent can claim that adult child as a dependent on their taxes. The parent may receive an error message when filing if the married couple filed jointly or if the dependent claimed any children of their own as dependents on their return. If the married couple tries to claim the EITC, the married couple will receive an error message and may be denied their Earned Income Tax Credit.
Understand IRS Reject Code IND 516-01
Similarly, IRS reject code IND 516-01 may pop up when you file your tax return if a working child that you claimed as a dependent also claimed a dependent. If this happens, you can remove the dependent from the return, or claim the dependent and have the child amend their own return. This may reduce their tax refund or even lead to the dependent owing tax debt.
Avoid IRS Rejection Codes When You File
IRS reject codes can delay your tax return and create hassles you don’t need when you file taxes. To avoid these common IRS rejection codes, make sure you agree who is claiming dependents. Also, make sure to enter all dependent SSNs accurately to avoid having your tax return flagged.
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What are the rules for claiming dependents?
In general, dependents must be a U.S. citizen, resident alien, or a resident of Canada or Mexico. They can’t be a dependent on someone else’s tax return, and they can’t claim any dependents on their own tax returns. Dependents must be under the age of 19 (or 24 as a full-time student), live with you more than half the year, and rely on you for more than half of their financial support. Other family members and some adults may qualify as a dependent if they have less than $4,700 in gross income for the year and rely on you for more than half their financial support.
Is it worth claiming a dependent on taxes?
Claiming dependents on your taxes can reduce your tax liability and help you qualify for certain credits, including the dependent care credit, Child Tax Credit (CTC), and Earned Income Tax Credit (EITC).
How do I fix the reject code 517-01?
If you receive reject code 517-01 on your taxes when you file, you will want to verify the Social Security Numbers of any dependents you claimed and also ensure that they qualify as a dependent.
