guys, I was in this EXACT situation last year and the IRS actually audited me!!! I said "no" nobody could claim me (even tho my parents could have) because they didn't actually claim me on their return. BIG MISTAKE. I got a letter 6 months later and had to pay back all the credits I shouldn't have gotten plus interest. They don't mess around with this stuff.

This is such a common confusion and I totally get why it's frustrating! I went through this same thing with my son a few years ago. The key thing to remember is that the IRS dependency rules are based on eligibility, not actual claiming. Think of it this way: if you meet the tests to BE a dependent (which you clearly do as a full-time student with your parents providing majority support), then certain tax benefits are "reserved" for the person who COULD claim you - even if they choose not to use those benefits. Your parents were trying to be nice, but unfortunately the tax code doesn't work that way. You absolutely need to check "yes" that you can be claimed as a dependent. Filing incorrectly could lead to problems down the road if the IRS notices the discrepancy between your filing status and your actual situation. I know it sucks to lose out on those credits, but it's better to file correctly than risk having to deal with an audit or paying back money later with interest.

Has anyone successfully resolved this error by creating an IRS online account? I've heard sometimes you can pull your exact AGI from their transcript system.

I had this exact same reject code last week and it was driving me crazy! After reading through all these suggestions, I ended up trying the IRS transcript approach that Carmen mentioned. Created my online account at IRS.gov and pulled up my 2023 tax transcript - turns out the AGI I had been using was off by exactly $1! Must have been a rounding error somewhere. Used the exact number from the transcript and my return was accepted within minutes. Definitely recommend checking your transcript first before trying the other methods - it's free and might save you a lot of time and stress. Thanks everyone for all the helpful advice in this thread!

I've been dealing with a similar severance situation and wanted to share what I learned from my tax preparer. One thing that wasn't mentioned yet - if you're making that large December estimated payment, make sure you submit it by January 15th rather than December 31st to get credit for the fourth quarter. Also, when you're calculating whether your withholding from the February severance will cover your first three quarters, remember that the required payment for each quarter is based on 25% of your TOTAL annual tax liability (including the tax on that severance), not just 25% of your regular income tax. Since severance often pushes you into a higher tax bracket, this calculation can be tricky. Your strategy sounds solid overall though. The combination of checking Box D to allocate that February withholding to when it actually occurred, plus making a substantial fourth quarter payment, should definitely help you avoid penalties. Just double-check your math on those quarterly requirements to make sure that February withholding amount is actually large enough to cover the first three quarters!

I've been following this thread closely since I'm dealing with a similar situation - received a large severance payment in March with substantial withholding. One thing I want to add that might help others: when you're using Form 2210 Part III to allocate your withholding to specific quarters, make sure you're also accounting for any regular payroll withholding you had before your layoff. That regular withholding should be spread evenly across the quarters you were employed, while the severance withholding goes in the quarter it actually occurred. Also, for anyone using tax software that's being stubborn about letting you check Box D - sometimes you need to first indicate that you want to complete Form 2210 manually rather than letting the software auto-calculate everything. Look for options like "Override software calculations" or "Manual Form 2210 entry" in your tax program's advanced settings. The severance/withholding timing issue is more common than people realize, especially with all the layoffs that happened recently. It's definitely worth taking the time to get Form 2210 right rather than just accepting whatever penalty the software initially calculates!

Letter 86C is definitely a relief! I remember getting one last year and being so confused by the official language, but it really is just their way of saying "all good, no issues found." One thing I'd recommend is setting up text alerts with your bank if you haven't already - that way you'll know the moment your refund hits. The IRS website also has a "Where's My Refund" tool that updates pretty regularly once they issue the letter. Hang in there, you're almost at the finish line!

Letter 86C is definitely a good sign! I went through this exact same situation last year and was panicking for no reason. The letter basically confirms they've completed their review and found no issues with your return. From my experience, once you receive the physical letter, your refund should be direct deposited within 10-21 days (mine took about 14 days). Pro tip: make sure your banking info is correct on file because any delays there could slow things down. You're almost done with this whole process - the hardest part (the waiting and worrying) is basically over!

4 Does anyone know if stimulus payments or pandemic relief count as unearned income for kiddie tax purposes? My daughter received some unemployment plus the extra federal pandemic amount, and I'm not sure how to treat it on Form 8615.

Just went through this exact situation with my 16-year-old nephew last year! The key thing to remember is that you'll definitely need your parents' tax information to complete Form 8615 since your sister's unemployment benefits ($3100) exceed the $2,300 threshold. Here's what you'll need from your parents' tax return: their adjusted gross income, taxable income, tax before credits, and filing status. The IRS has a specific worksheet in the Form 8615 instructions that walks you through the calculation step by step. One tip that saved us a lot of headache: make sure to keep the earned income ($2600 from her mall job) completely separate from the unearned income (unemployment) when doing the calculations. The earned income gets taxed normally at her rate, while only the portion of unearned income above $2,300 gets the kiddie tax treatment. Since you're in Oklahoma, you'll also want to check if the state has any similar rules that follow the federal kiddie tax - some states do, others don't. Good luck with the filing!