Most people don’t realize this, but occasionally, an electronically filed tax return is rejected by the IRS.  This usually happens if a social security number has already been claimed on someone else’s return and it can be a little scary if it happens to you. Fortunately, there are some easy things you can do to resolve this problem.

First of all, don’t panic. The beauty of e-filing is that you receive notification of these types of problems quickly. This allows you to make any corrections and resubmit your return.

Next, check the social security number.  Sometimes, it is just a typing error or a number transposition. If this is the case, correct the number and resubmit the return. Chances are, it will be accepted.

If the social security number is correct, someone else has already claimed the person on their tax return. One instance where this may happen is your teenage child had income from a job and filed his/her own tax return to receive a refund of the income taxes that were withheld from his/her paychecks. Your child may have mistakenly claimed himself as a dependent, not understanding how that would affect your tax return. If that is the case, you have two options:

  • Change your return to not claim your child as a dependent.
  • File a paper return and have your child file an amended return.  
    • Your child can change their filing status showing they are a dependent of another.  Unless their income was quite high, this action probably will not affect their refund.
    • You will need to file your return on paper by mail.  
      • Sign the Form 1040
      • Sign your state return.  Most states request a copy of the federal return to be sent along with the state return.
      • We suggest you send the federal and state returns by certified mail so you can track when they are delivered.

In other cases, another person has already claimed the child as a dependent. This could happen with divorced parents or a foster child. Under IRS regulations, the custodial parent has the right to claim the child. The custodial parent is the one whom the child stays with the greatest number of days. In order for the non-custodial parent to claim the child as a dependent, the custodial parent has to complete and sign Form 8332, Release/Revocation of Release of Claim to Exemption for Child by Custodial Parent. The non-custodial parent has to include a copy of this form with his/her tax return in order to claim the child as a dependent.  

For foster parents, the foster child has to live with them for more than six months of the tax year to be claimed. They also need documentation from the placement agency. This documentation does not need to be sent with the tax return. It should be kept with the taxpayer’s records, though, in case the IRS questions the dependent claim.  

A rejected tax return is nothing to get concerned about. It does not mean you will be audited and it does not come with a fine. Usually, it’s a simple error that can be easily corrected. If you’ve had your tax return rejected and you don’t know why, please reach out. I’d love to help you resolve the situation.

Judith Ackland has more than 26 years of experience in accountancy and financial planning, including seventeen years as a CFO of a diverse business. She started Crystal Financial in 2010 to help a wide array of individuals, families, and business owners better understand their finances and how good financial management could help them achieve their goals. Judith has an MA in Professional Accountancy from the University of Nebraska at Lincoln as well as a Certified Public Accountant Certificate and a Certified Financial Planner designation.

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