Elderly dependent and tax audit

What? What? You "included her income on _your_ filing? How did you do that? If you added it to your total income, you've been overpaying _your_ taxes for all those years. When someone doesn't have sufficient income to require filing, they should simply _not_ file. If they are a dependent, your filing takes credit for them, and their independent income (which shouldn't exceed $3200 in 2005), is ignored.

Sounds like a routine automated inquiry. She should simply reply that she had insufficient total income to require filing, and that ought to close the matter (unless AZ has a particularly low threshhold for filing state returns). Bill

Why did you include her income in your tax return? It is her income, not yours. If she did not need to file, just tell the state DOR that fact. You would not file amended returns for her if she did not file in the first place. I think that it might be wise to consult a tax professional in your town. You might want to amend your returns and get any refunds that you might have coming from including her income on your returns. You have until Monday 17th to file 1040X for 2002. Any year before that the refund is lost. Missy Doyle

If she were not required to file a return, whether federal or state, a simple explanation on the notice and return it should suffice. HOWEVER!.... You say you included her income on your return? It doesn't belong on your return, only on her's IF she had a filing requirement. Perhaps you have a case for filing some amended returns for refunds. ChEAr$$$$, Harlan Lunsford, EA n LA

You don't tell us how much was reported on the 1099 AZ is asking about. Without that informaton, there is no way to tell what should be done. However, you do tell us enough to indicate a couple of possible problems. If your MIL's income, not including social security is greater than the personal exemption, she does not qualify as your dependent, even if you do provide more than half of her support. Secondly, even if she is your dependent, her income goes on her return. It is not your income and does not belong on your return. Lanny K. Williams, CPA Nawarat, Williams & Co., Ltd. Income Tax Services for Expatriate Americans