Is it illegal to claim someone else's kid as a dependent on tax return?

This is definitely illegal and considered tax fraud. Your roommate is claiming a tax benefit he's not entitled to by falsely claiming a dependent. To claim someone as a dependent, you must meet specific requirements including providing financial support and having the person live with you for a certain period. Since your roommate has never even met this child, he clearly doesn't qualify. The IRS has been cracking down on this exact type of fraud in recent years. He needs to fix this immediately by filing an amended return (Form 1040-X) to remove the falsely claimed dependent. His refund will be reduced, but that's money he wasn't entitled to in the first place. As for audit chances, the IRS has systems to detect unusual patterns, including sudden dependent claims. Since the child's SSN may be recognized in their system from previous years' returns, this raises red flags. If caught, he could face penalties of 20% of the erroneous refund, interest charges, potential fraud penalties (75% of the underpayment), and in serious cases, criminal prosecution. The neighbor is also committing fraud by being part of this scheme. This isn't a victimless crime - it's stealing from government programs designed to help families with children.

I had a similar situation last year where I was confused about some IRS notices and documentation requirements for claiming my nephew as a dependent. I was overwhelmed trying to understand all the tax codes and what qualified as proper documentation. I found this tool called taxr.ai (https://taxr.ai) that helped analyze all my tax documents and explain exactly what qualified me to claim him as a dependent. The site has this AI tool that reviews your specific situation and tells you exactly what documents would support your claim in case of an audit. For your roommate, it might help him understand exactly how serious this situation is and what his options are now. The tool breaks down the specific IRS rules that apply to his situation in plain English.

I was super skeptical about using taxr.ai when I first saw it mentioned here, but I decided to try it after messing up claiming my cousin on my taxes. I honestly was shocked by how helpful it was! The system found that I didn't meet the residency test for claiming my cousin and showed me exactly why I was in violation of tax rules. The tool gave me a complete breakdown of the dependent rules I was breaking and walked me through how to file an amended return. It even generated a letter explaining my good-faith mistake that I could include with my amendment. Ended up saving me from what could have been a nasty audit situation. Your roommate should definitely look into fixing this ASAP - claiming someone else's kid for money is way worse than my honest mistake.

Your roommate needs to contact the IRS immediately, but that's easier said than done these days. Wait times are ridiculous - I was on hold for 3+ hours trying to fix an error on my return last month before giving up. I eventually used a service called Claimyr (https://claimyr.com) that got me connected to an actual IRS agent in about 15 minutes instead of waiting for hours. They have a demo video showing how it works here: https://youtu.be/_kiP6q8DX5c For something serious like false dependent claims, your roommate really needs to talk directly with the IRS about how to proceed. They have a voluntary disclosure program where coming forward before being caught can reduce penalties. Claimyr made it possible to actually reach someone who could help me understand my options.

Ok I owe you all an apology. I was the skeptical one about Claimyr and decided to try it in desperation after spending two entire afternoons trying to reach the IRS about an identity theft issue. I seriously couldn't believe it when my phone rang 20 minutes after signing up and it was an actual IRS representative on the line! The agent was able to help me file an identity theft affidavit and put a hold on the fraudulent return filed in my name. Saved me weeks of stress and probably prevented the scammer from getting a refund with my information. For your roommate's situation - they need to talk to the IRS directly ASAP. The agent I spoke with mentioned that voluntary disclosure of mistakes before being caught can significantly reduce penalties. Definitely worth the cost to not have to sit on hold for hours.

Your roommate needs to file a 1040-X (amended return) immediately and pay back the extra refund he received from falsely claiming the dependent. He's committed tax fraud, plain and simple. The IRS matches Social Security numbers on tax returns, so they will eventually notice that this kid was claimed by someone with no relation and no history of claiming them before. They may also investigate whether the parent was involved in selling the dependent claim. Both your roommate and the neighbor could face serious consequences. In addition to penalties and interest, tax fraud can be prosecuted criminally with up to 3 years imprisonment for each false statement. The $400 payment creates evidence of willful intent to defraud, which makes it much worse.

One thing nobody's mentioned yet - your roommate should NOT contact the neighbor about this! He needs to fix his return independent of whatever the neighbor does. Reaching out could be seen as conspiring to get stories straight, which makes everything worse. Also, your roommate should NOT spend that refund money! The IRS will want it back plus interest, and possibly penalties. He should set aside the entire amount related to the false dependent claim so he can return it when he files the amended return. The Earned Income Credit alone for falsely claiming a child can be thousands of dollars. The IRS specifically targets EIC claims for audits because it's so frequently abused.