Claiming Non-relative Dependent

[gobonas99]

What is the name of your state? New York

I think I know the answers to my questions, I just would like confirmation from the tax gurus here (I'm a CPA, but do not practice tax).

My fiance and I lived together for all of 2007. He only had $660 in income for 2007 (on a 1099-Misc). He also received $501 per month during 2007 in Veterans Disability Compensation (non-taxable). He gave me $350 of his government check each month to pay bills (he kept $150 each month to pay for his car insurance, gas, and some entertainment....so he gave me about $4800 for the year).

Our joint monthly bills for rent, utilities, phone, food, and entertainment averaged $2000 per month (so roughly $24,000 for the year). Half of our joint living expenses is $12,000, plus the $1800 he kept for his car insurance/gas is $13,800...50% of that is 6,900...he provided 6012 + 660 = $6672, which is less than the 50% amount of $6900).

Since he only had $660 in income for 2007, he would not normally have to file taxes for 2007. But, because of the economic stimulus package, he would be eligible for the $300 rebate, due to his receiving $6k in VA benefits...and so he would need to submit his "dummy" tax return to get the stimulus check.

So my questions:
1. I believe that I can claim my fiance as a dependent on my 2007 tax return, since we lived together for all of 2007, he did not have more than $3400 of earned income in 2007, and I paid more than 50% of his expenses throughout the year. Correct?

2. I would still file as single and not head of household, because he is not related to me...correct?

3. Also...if I claim him, he would not have to file the "dummy" return to get the stimulus check, because he would longer be eligible for it...correct?

Thanks in advance for your help!!

[tranquility]

1. Your statement on the law is correct. But, even though I'm sure you can manipulate the numbers to come out to be more than 50%, if you were ever audited you would have to dance a bit. You fall under the law by $228 by your calculation but use the terms "averaged" and "roughly" in your process. If you're cutting it that close, you have to be able to prove it up. How significant would that amount be statistically? What is it, 3 or 4%?

2. Agreed.

3. Agreed, but he may be able to claim it in 2009 if not your dependent in 2008.

[gobonas99]

Originally Posted by tranquility

1. Your statement on the law is correct. But, even though I'm sure you can manipulate the numbers to come out to be more than 50%, if you were ever audited you would have to dance a bit. You fall under the law by $228 by your calculation but use the terms "averaged" and "roughly" in your process. If you're cutting it that close, you have to be able to prove it up. How significant would that amount be statistically? What is it, 3 or 4%?

I'm sure that I would be able to back it up. We have copies of all our bills, and can get "history" for things like groceries and entertainment expenses from bank and credit card statements. Would claiming him raise an audit flag?

3. Agreed, but he may be able to claim it in 2009 if not your dependent in 2008.

What do you mean? How would be "claim it" in 2009?

[TinkerBelleLuvr]

If his 1099-misc has the $660 in box 7, he's going to need to file a tax return.

[tranquility]

I'm sure that I would be able to back it up. We have copies of all our bills, and can get "history" for things like groceries and entertainment expenses from bank and credit card statements. Would claiming him raise an audit flag?

I'm just saying it's so close that you should be sure. Anyone who knows the "audit flags" has knowledge which will not be given for free on the internet. However, it is not a focus area on anything I've seen. (Unless used for EIC or HOH.)

What do you mean? How would be "claim it" in 2009?

The regs are not out yet. But remember, the check is an early refund for 2008 taxes. If a person deserves a check, but does not get one, there will probably be a way to claim it on the 2008 return.

[LdiJ]

Originally Posted by tranquility

I'm just saying it's so close that you should be sure. Anyone who knows the "audit flags" has knowledge which will not be given for free on the internet. However, it is not a focus area on anything I've seen. (Unless used for EIC or HOH.)

The regs are not out yet. But remember, the check is an early refund for 2008 taxes. If a person deserves a check, but does not get one, there will probably be a way to claim it on the 2008 return.

I think its premature to say that its an early refund for 2008. Everything our office has read has indicated that while it will have to be reported on the 2008 return, that a corresponding credit will be given to offset it. Therefore, the signals so far is that it will not impact a normal 2008 refund. That it will, in fact, be different than past situations.

Of course, however, Congress has LOTS of time to tinker with things, so nothing is cast in concrete.

[tranquility]

I think its premature to say that its an early refund for 2008.

Read the law. That is what it is. It will not reduce your refund for 2008 or increase the payment made so the practical effect of you office position is correct.