As tax law is very complicated, this article is intended only for educational or illustrative purposes and should not be construed to communicate legal or professional advise.  You should contact us with any specific questions so we can properly interpret how the tax laws applies to your situation.   Killingbeck Tax Preparation, Kokomo, Indiana.  765-452-8000.

General Rules About Dependents

 1.  Only 1 taxpayer* can claim the qualifying child for all 5 benefits:  Head of Household (HOH), dependent, child tax credit., dependent care, Earned income credit (EIC).  Example:  A mother provided a household for her daughter  and granddaughter.  If the daughter claims her child(or EIC), mother can’t claim HOH.  *Exception:  If one of the parents qualifies as a noncustodial parent under rules on p. 7, noncustodial parent can claim dependency and child tax credit.  Other parent if qualifies  can claim Head of household, EIC, and Dependent Care Cr.

2. Be sure to enter the actual number of months the dependent lived with taxpayer.   Enter "12" months for a dependent who was born or died during the year.

3. Watch that children not in household  have attached to return either form 8332 or appropriate pages of pre- 2009 divorce agreement.  Must attach forms each year!

4. A child born on Jan. 1^st uses that age on the previous year return.  For example if he was 18 on Jan 1^st   of current year,  he is  considered 18 for the prior year.

5.  All dependents are required to have a Social Security #
To claim child, must wait on SS#  from Social Security administration or file without child and then amend with SS#. 

•  Deceased Child Exception:  If a dependent child was born and died in current year you do not have a SSN for the child, you can attach a copy of the birth certificate and enter died in column 2.
• IRS says it takes 2 weeks to get a SS number. It usually takes  4 to 6 weeks to get a ITIN.
• Year of birth is also verified on EIC credits.
• Adoption ID:  An ATIN ID# is a temporary # issued to adopting U.S. citizens or residents. 
•  Can’t use ITIN issued to aliens for dependency.
  

Rules for Claiming a Dependent

 A.  Rules to Claim a Child as a Qualifying Child

__ 1. Can’t claim a dependent if taxpayer is claimed or could be claimed by another. 

__ 2. Must be Taxpayer’s son, daughter, stepchild, foster child, brother, sister, 
        step-sibling, half-sibling or a descendant of any of these.  A relationship 
        established by marriage isn’t changed by divorce/death. 
__ 3. Child is younger than taxpayer or spouse (unless disabled) &Under 19 or under 24 & a 
        full time student  for 5 months or any age and disabled.
__ 4. Child didn’t provide over ½ of own support

__ 5. Lived with taxpayer over ½ year except for death, birth or temporary absence. 
        See How to File section  for temporary absence rules.
        Exception. Taxpayer has signed form 8332 or qualified pre-2009 divorce 
        decree and all of the following apply: (see rules later on this page)
        A.  Parents lived apart at all times during last 6 mo.
        B.  Parents provided ½ of support.
        C.  Child is under 18 1/2 at year end.
        D.  Child lived with a parent +6mo except for death, birth or temporary absence.         
            See How to File section  for temporary absence rules.Taxpayer has signed 
            form 8332 or qualified pre-2009 divorce decree and : (see rules later on this page)  

__ 6. Didn’t file a joint except if both only get back taxes withheld.

__ 7. Is a U.S. citizen, U.S. national or U.S. national alien.

__ 8.If child qualifies for more than 1 taxpayer you must follow below rules.   

A. If one of the qualifying parties (meets tests 1-7) is child’s parent,

    1.  That parent can claim or
2.  If parent(s) qualifies but doesn’t claim child, a relative who meets tests 1 to 7 can claim if their AGI is > parent(s)* or

        *If child lived with both parents & other qualifying relative,   the relatives AGI must be > ½ of both parents AGI

3.  If more than 1 relative qualifies and both of their AGIs are > parent(s)* goes with relative with highest AGI.

            

B.  If parents don’t qualify to claim child (don’t meet tests 1-7)

    or qualifying parent(s) doesn’t file a return

    or parent files solely for a full refund of income taxes (no EIC …)

     then  goes to qualifying relative with highest AGI. 

 

C.  If 2 parents qualify to claim child (meets tests 1 to 7)

1. Non-custodial parent  can claim with 8332 or pre-2009 divorce decree if meets rules in 5 above.

2. Or parents can decide who will claim the child.

3. Otherwise parent who child lived with the most nights during year (or  would have except for temporary absence) is the custodial parent. Don’t count days after child turns 18. 

                     If lived with parents equally, goes to parent with highest AGI

__ 9. Taxpayer Can’t Claim if Someone* Claims EIC, Dependent Care,
         Child Tax Credit, or HOH on the qualifying individual.  *Exception 
        is a qualifying noncustodial parent can claim depedent & child tax credit.

 

B.  Qualifying Relative and 12 Month Resident Rules.

__ 1. Can’t claim a dependent if taxpayer is claimed or could be claimed by another

__ 2. Dependent can’t be a qualifying child of another.
        A.   A person who doesn’t file a return or files solely for a full refund 
             of income taxes (no EIC) is not considered a qualifying person. 
        B.  These rules would allow a non-related household member 
            (boyfriend) to claiming another resident’s child (girlfriend) if other 
            resident doesn’t file a tax return (or solely for refund of income taxes.)

__ 3. Taxpayer provided > ½ support of dependent or pay over 10% and 
            with others pay over 50% and have a multiple support agreement?  
            (support rules are at bottom of this page.)

         A.  In determining support, you look at you include all money  
               the dependent used for support, even nontaxable income.

             1. Must look at all money benefiting dependent: social security, 
                wages, savings, gifts, & welfare. 

           Usually can’t claim a parent receiving social security.

 __ 4. Dependents Gross Income < $3700 except if from tax shelters 
        workshop (like Bona Vista)

        Gross income includes only taxable income.  
        a.100% of gross capital gains, gross business income & gross rental.

        b. Do no include nontaxable social security, welfare, gifts or any 
            income exempt from tax.

 __ 5. Live with taxpayer entire year or is one of the below relatives

_  lived with taxpayer the entire year or

_  child, step child, or descendents

_  siblings, half-siblings & their children

_  parents, their ancestors or siblings

_  stepparents and step siblings

_  son/daughter-in-law, mother or father-in-law or brother/sister-in-law

_  Any other person other than taxpayer’s spouse (or was a spouse anytime during the year) who  lived in the  

            same abode as taxpayer for the entire year  except birth, death &  
            temporary absence-school, illness…

__ 6. Didn’t file a joint except if both only get back taxes withheld.

__ 7. Is a U.S. citizen, U.S. national or U.S. national alien.

__ 8. Taxpayer Can’t Claim if Someone* Claims EIC, Dependent Care, 
        Child Tax Credit, dependency, or HOH on the qualifying individual.  

 

 

Rules for Divorce, Separated, or Unmarried Parents 

These rules only apply if  non-custodial parent meets all 5 requirements in Requirements for Noncustodial Parents below.  If don’t meet all 4 rules, then use dependents rules above.

 

Custodial Parent:  The IRS has it own definition of custodial parent and does not go by the divorce decrees definition of custodial parent. 
IRS definition of custodial parent is the parent who the child lived with for the most nights during the year. 

A.  Do count temporary absence of up to 6 months.

B.  Don’t count  time after child becomes age 18 (legal adult.)

C. If days are equal, goes to parent with highest AGI.

Requirements for Noncustodial Parent to Claim Child

A Child will be treated as being the qualifying child or qualifying
relative of the parent with whom the child lived for the lesser part of
the year (non-custodial parent)  if all the following apply.  If they
don’t meet all 4 requirements then use dependents rules above.

1.  Parents are divorced, legally separate or lived apart at all times 
    during the last six months. 

2.   The child received over half of his or her support from the parents.

3.   The child lived with one or both of the parents for more than half of

    the year. (Count temporary absence up to 6 mo.)

 

4.  The child is under 18 1/2 a year end.

5.   And either of the following applies:  
    A. The parent whom the child lives with for the longer part of the year 
        signs form 8332 or similar statement saying they will not claim child 
        AND it is attached to return of non-custodial parent. 

          1. 8332 does not apply if noncustodial parent doesn’t  
              file a tax return. 

     B.   A pre-2009 divorce decree or written separation agreement provides 
            the parent who the child lived with for the lesser part of the year that 
            they can claim the child without regard to any condition such as 
            payment of child support.  It must list what years they can claim.

 5. If don’t meet all 4 rules, then the parent the child lived with for 
    the  greater number of nights during the year (or possibly 
    another  individual who can claim child as a qualifying child) 
    claims the child (see previous page for dependents rules).

 6. If these rules apply and this child would otherwise be the 
    qualifying child of more than one person:  
    a. Only the parent whom the child lived with for the shorter time of 
        the year can claim the child as a dependent and take the child tax credit.

    b. For HOH, dependent care, and EIC the custodial parent  or other 
        qualifying party can claim these 3 benefits if they qualify. 
        (see head of household rules and dependent rules).               

Form must be attached to return      
    1.  Must attach Form 8332 or similar statement  to return or

    2.  Attach  pages of pre-2009 divorce decree that show.
        (can no longer use a divorce decree issued after 2008).
        a. Cover page, 
        b. Page which gives right. No conditions are allowed 
        c. What years taxpayer can claim amd 
        d. Signature page.

    3. Can sign form 8332 for future years.

    4. Must attach form each year.

Custodial Parent Can Revoke form 8332   
The custodial parent can revoke a written declaration by submitting
notice of revocation to non-custodial parent. Proof of mailing
recommended.  Custodial parent can claim year after revocation.

Must include copy of revocation with tax return.

Taxpayer might do this when non-custodial spouse is behind in child
support or other situations have changed.

Other party may take taxpayer back to court to dispute.  May be legal
consequences for taxpayer revoking.  But if non-custodial parent is
behind in support, the court is less likely to penalize taxpayer.

Remember:  We can’t tell taxpayers how  a spouse filed or which  
dependent spouse claimed.  The IRS says this is confidential
information.         

Support Rules

1. To figure total support  you include all money the dependent 
    used for support, even nontaxable income.

    A. Must look at all money benefiting dependent: social security, 
        wages, savings, gifts, & welfare.   

    A. dependent: social security, wages, savings, gifts, & welfare.   

    B. Amounts received aren't counted as  support unless actually 
        spent for support. 

         1. An exception is support paid by a parent is counted as fully  
            spent  for  dependent!  (delinquent support is not counted for 
            any year)

    C.  If home is jointly owned each spouse is considered as 
            providing 1/2  the rental value. 

    D.  If support goes to more than one person it may be better to 
            earmark it to one person.

    E.  Multiple Support Agreement: (Form 2120)                            
            Can be used when no party contributes over 50% but  each 
            contributes over 10%  & together contribute +50%

 2. Items that aren't support include : 
     Life insurance, funeral, scholarships, value of rooms in a state 
    agency, medical benefits from insurance...

3.  Support Worksheet

 

Spent  by   Spent by
Taxpayer  Dependent

$____        $____    A. Rent & utilities: divide by # of people $____           

$____        $____    A. Rent & utilities: $____           

$____        $____         OR fair rental value of lodging,                                    

$____        $____         Utilities, furnishings, & telephone.                          

    1.   Fair rental value is the amount you could           
          reasonably expect to receive from a stranger.            
    2.  Military must figure the fair value of housing.

$____        $____    B. Food. Divide total by the # eating.                        

$____        $____    C. Amounts spent on clothing                                  
$____        $____        education: tuition, books, housing                        
$____        $____        baby-sitting or daycare                                            
$____        $____        medical, dental care, nursing home                     
$____        $____        medical insurance,                                                   
$____        $____        entertainment & recreation                                      
$____        $____        toys, pets, bicycles, presents                                   
$____        $____        barber shop, cosmetics, other items                        
$____        $____        transportation, gas, travel  

                                   
$____        $____     D. *A major expenditure such as an auto 
                                        purchase or  student loan for the exclusive 
                                        use of the dependent are included at full 
                                        value even if paid by a  loan.

$____        $____         Total by taxpayer over 50%?                    

E.   Does not include life insurance, tuition paid by scholarship, student 
        loan payments.

 

Give us a call if you have questions or we can be of help, 765-452-8000.  Killingbeck Insurance & Tax Preparation, Kokomo, Indiana.