Dear Tax Talk,
My son has been unemployed for several years and I have provided full support since he decided to further his education. As such, I claimed head of household and claimed him as a dependent because he had no income. He is now working part time and I am concerned that I will not be able to claim him this year as he will be filing his own taxes. That will move me from head of household tax-filing status. I don't want to owe the IRS and need to know what to do to resolve this.
If you don't want to owe the IRS when you file your 2014 tax return, you will need to estimate the amount of your 2014 tax liability and then determine whether you need to adjust your tax withholding on your salary or send in estimated tax payments to the IRS.
If everything else is more or less the same from 2013 to 2014, you could just recalculate your 2013 tax return without claiming your son and using the filing status of "single" to see what the difference in your tax liability would have been for 2013. However, if you have major changes in 2014 regarding income and deductions, then I think you should recalculate your 2013 return incorporating those changes, and then see what the difference is and go from there.
By claiming your son as a dependent in 2013, you most likely received a tax deduction of $3,900. I say most likely because exemptions are "phased out" for head of household filers if their adjusted gross income exceeded $275,000 in 2013. Additionally, by using the filing status of "head of household," your standard deduction was $8,950 versus $6,100 for the filing status of "single." If you itemized your deductions on Schedule A instead of taking the standard deduction, then the standard deduction difference does not apply. Finally, the tax rates at different income levels are lower for the "head of household" filing status than they are for "single" filers. This is why you need to go through this whole process.
If you received a large refund in 2013, you may end up figuring out that your refund is lower in 2014 and you do not need to make any adjustments to your withholding on your salary. If you figure out that you may owe taxes, you can adjust the taxes withheld on your salary by submitting a new Form W-4 to your employer. Alternatively, you can send in Form 1040-ES, estimated tax payments, each quarter. The forms and instructions are available at IRS.gov.
Thanks for the great question and all the best to you.