claiming siblings as dependants

[julie-clark]

What is the name of your state? Texas.
I do not file taxes anymore as i am on ssi disability and have no earned income. two of my 4 daughters began working this year at age 19 while going to college, we lost our food stamps as their income was household income so more than 50 % of their paychecks have gone to support our household expenses. can they each claim one of their sisters since they pay for their food, buy them school clothes etc. neither of the fathers pays court ordered child support or has any right to claim them. their income is higher than mine but still minimum wage type jobs so their income is not very high, but it does support us all. can they claim them for EIC purposes? also do their pell grants need to be listed somewhere on the 1040A? thanks for any help.....

 

[LdiJ]

What is the name of your state? Texas.
I do not file taxes anymore as i am on ssi disability and have no earned income. two of my 4 daughters began working this year at age 19 while going to college, we lost our food stamps as their income was household income so more than 50 % of their paychecks have gone to support our household expenses. can they each claim one of their sisters since they pay for their food, buy them school clothes etc. neither of the fathers pays court ordered child support or has any right to claim them. their income is higher than mine but still minimum wage type jobs so their income is not very high, but it does support us all. can they claim them for EIC purposes? also do their pell grants need to be listed somewhere on the 1040A? thanks for any help.....

Yes, they can claim their sisters as exemptions if they are supporting them.
No, they do not put their Pell Grants on their returns.

 

[abezon]

Actually, it's very tricky this year. Since they are full time students, they are probably 'qualifying children' for you, unless they can show that they provided more than 50% fo their own support. You need to document all money coming into the house & how much is spent on each member. Be sure to include any public assistance payments. Do not include the Pell grants as money they contributed to their own support. If the girls pay over 1/2 their support, they can claim EIC for their sisters.

If they are qualifying children, they cannot have a qualifying child of their own & can't claim EIC or dependents.

 

[LdiJ]

Its only tricky if both mom and her elder daughters were attempting to claim the children. Mom obviously isn't providing more than 50% of their support, when its they that are contributing to mom's support. I doubt that mom's disability pay is really enough to support mom, let alone provide for more than 50% of the support of 4 children.

 

[abezon]

I agree that the IRS probably won't catch these returns if mom doesn't try to claim the younger kids for anything, but many incorrect returns don't get caught. Someone who is a qualifying child cannot legally claim EIC. They may get away with it, but that doesn't make it legal.

If the IRS examines these returns, it will assume that 19-year-old students living at home are qualifying children of their mother & deny EIC. If the girls can't show that they provided over 1/2 their own support, the IRS will demand repayment of the EIC & flag the girls as fraudulent taxpayers in its computer system. Also, if they use a professional tax preparer, the pro has a duty to inquire about support & satisfy him/herself that there is at least a 1 in 3 chance the girls can legally claim EIC for their sisters.

Given the higher risk of examination for EIC returns, I'd recommend the girls have their returns prepared somewhere that offers a 'we pay the tax + interest + penalties if we screw up' warranty. I know H&R Block offers this.

I agree with LdiJ that the girls probably provided over 1/2 their own support. But without seeing the numbers for SSI, TANIF, AFDC, employment income, food stamps, etc., we can't know for sure whether that's true.



PS: Pell grants are not income to the girls, except for amounts that paid for something other than tuition & fees & books/supplies.

 

[julie-clark]

Heavens the last thing i would want to do is have them file EIC if it wasnt the correct thing to do. I don't want it to just "slip" through or make them appear as fraudulent taxpayers. I was hoping the fact that Dept. of Human Services, since they count 100% of their income as household income might be all the proof that was needed. I dont make them hand their entire check to me, but losing the $500.00 for food, well, they give me that, pay gas and all kinds of other expenses that keep us afloat, and seem like an unfair burden for them to pay, providing food for me and their sisters, they do support us. my SSI is 600.00 a month and both of their monthly incomes is higher. But proving it is another thing because all i can show is the reduction in our benefits and their pay stubs. I have to drive them to school and work as they cant afford liability insurance and can't even have their license or I couldnt afford to pay mine. I have subsidized rent and they are no longer deductions as dependants, rather my rent is higher but fortunately they only count 600 a year for each of their incomes since they attend full time college. So really i am wanting to know if they honestly deserve to file it and not just to slide one past if they are not. I want them to do the right thing, that was the reason for my post as i wasnt sure. thanks for your responses, i can see this is as sticky as i thought it might be.

 

[abezon]

Don't abandon the idea -- just figure out the amount everyone contributes to support themselves & family. The feds contribute the SSI to the family & the Pell grants to the girls; the state contributes rent discount & other benefits to the family; the girls contribute their entire paychecks. Some of the girls' money goes towards family support; the amount they keep is contributed to their support only.

Once you've figured the total support spent on the family in general (rent, food, utilities, car, etc. divided by 5 people) & the support each girl needs (her share of general expenses, clothes, tuition, books, entertainment, etc.), you look at how much each girl made. If what she made exceeds 50% of her total required support, she can claim EIC. There is no requirement that the girls support their sisters as well as themselves.

If the girls made $5,000, they probably supported themselves. Without actual numbers for their income & Pell grants, I can't be more specific than that.

 

[LdiJ]

Heavens the last thing i would want to do is have them file EIC if it wasnt the correct thing to do. I don't want it to just "slip" through or make them appear as fraudulent taxpayers. I was hoping the fact that Dept. of Human Services, since they count 100% of their income as household income might be all the proof that was needed. I dont make them hand their entire check to me, but losing the $500.00 for food, well, they give me that, pay gas and all kinds of other expenses that keep us afloat, and seem like an unfair burden for them to pay, providing food for me and their sisters, they do support us. my SSI is 600.00 a month and both of their monthly incomes is higher. But proving it is another thing because all i can show is the reduction in our benefits and their pay stubs. I have to drive them to school and work as they cant afford liability insurance and can't even have their license or I couldnt afford to pay mine. I have subsidized rent and they are no longer deductions as dependants, rather my rent is higher but fortunately they only count 600 a year for each of their incomes since they attend full time college. So really i am wanting to know if they honestly deserve to file it and not just to slide one past if they are not. I want them to do the right thing, that was the reason for my post as i wasnt sure. thanks for your responses, i can see this is as sticky as i thought it might be.

I am going to disagree with abezon. Government benefits do not count. (other than SSI) I know that for certain. Your subsidized rent doesn't count, the Pell grants don't count etc. The only that counts is your SSI and the girl's income. You already stated that your SSI is 600.00 a month and both of the girls make more than that. Therefore the girls are providing more than 2/3rds of the income for a family of 5. Hon, you are FINE. You do not have to worry about this. You are not providing any support to the girls....at all basically. The numbers are clear.

Abezon...I appreciate your attention to detail on this one. However you are scaring this poster unnecessarily. They can clearly claim their sisters for EIC purposes, and should not be discouraged from doing so. The numbers are clear. Mom clearly is not providing ANY of their support. They are not mom's qualifying children, period.

 

[Snipes5]

Just a tiny clarification based on the new rules...

You should have said that the girls are clearly providing more than half of their OWN support, and so they are not qualifying children for mom.

There is no requirement that mom support them, the only requirement is that they provide more than half of their OWN support in order to not be QC's for mom.

These rules truly suck.

Snipes

 

[LdiJ]

Just a tiny clarification based on the new rules...

You should have said that the girls are clearly providing more than half of their OWN support, and so they are not qualifying children for mom.

There is no requirement that mom support them, the only requirement is that they provide more than half of their OWN support in order to not be QC's for mom.

These rules truly suck.

Snipes

I guess what I really should have said is that they are clearly providing basically 100% of their own support, since no one else (ie mom) is providing any support. I didn't mean that mom was required to support them.

I agree that the rules suck. Allegedly these new rules were supposed to simplify things.....all they did was make it more complicated.

 

[julie-clark]

I have been reading over pub 596 and i am not finding anything about the ammount they paid towards their own support, only that they are my qualifying children whether or not i can claim them based mereley on age, relationship and residency as far as EIC goes. I hope i am missing something somewhere. if the fact that they are under 24 and a full time college student could cause them to be ineligible as opposed to age 19-24 and not in school and they could claim it, well i can't imagine why that would be unless it was meant to be a benefit to the parent who does support their child but why penalize the ones that are supporting themselves. it makes sense for the support to be considered but i am only finding it in regards to claiming exemptions.

 

[abezon]

Good point. For EIC, support is not part of the QC test, & a parent can get EIC even if they have a QC who makes more than the parent! Since the girls are QC for you, they can't claim EIC for their sisters. They can claim their sisters as dependents, if that helps.

 

[Snipes5]

However, since benefits cannot be separated this year, except by divorced/never-married parents, and the college kids pay more than half their own support they are NOT QC for Mom, and may therefore claim EIC for their siblings.

If they are not QC for dependency, they cannot be QC for EIC. At least not until the IRS clarifies this sometime before the next millenium.

Snipes

 

[abezon]

From the IRS web site Pub 596:

Rule 10. You Cannot Be a Qualifying Child of Another Person

Qualifying child of another person
You are a qualifying child of another person (your parent, guardian, foster parent, etc.) if all of the following statements are true.

You are that person's son, daughter, stepchild, grandchild, or eligible foster child. Or, you are that person's brother, sister, half brother, half sister, stepbrother, or stepsister (or the child or grandchild of that person's brother, sister, half brother, half sister, stepbrother, or stepsister).

At the end of the year you were under age 19, or under age 24 and a full-time student, or any age if you were permanently and totally disabled at any time during the year.

You lived with that person in the United States for more than half of the year.

For more details about the tests to be a qualifying child, see Rule 8.

If you (or your spouse, if filing a joint return) are a qualifying child of another person, you cannot claim the EIC. This is true even if the person for whom you are a qualifying child does not claim the EIC or meet all of the rules to claim the EIC. Put “No” beside line 66a (Form 1040) or line 41a (Form 1040A).

A qualifying child for the earned income credit does not need to qualify as a dependent unless he or she is married.

===========================================

The girls are QC for EIC purposes. Since someone could claim them for EIC purposes, they may not claim EIC themselves, even though they are not QC for any other purpose. At least that's how I interpret the pub.

 

[julie-clark]

H and R Block has posted this concerning the new UDC so it is back to the confusion
More on the New Uniform Definition of a Child (UDC)

Until the 2005 tax year, a child was defined in many different ways, depending on whether the taxpayer was looking to qualify for head of household filing status or claiming a dependent exemption, a child tax credit, an earned income tax credit or a child care credit. The predictable result was lots of confusion for many taxpayers.

The IRS now has developed a new, uniform way of defining who is a “qualifying child” for all of these tax benefits. For most taxpayers, this will mean good news – less tax owed. The congressional Joint Committee on Taxation estimates American families will reap an extra $200 million in tax savings annually. However, the new uniform rules mean a loss of benefits for some taxpayers, mainly those with complex family situations involving children who live with different adult relatives during the year.

Under the new definition, a “qualifying child” must meet the following requirements:

Relationship – Must be the taxpayer’s child, stepchild, foster child, sibling or step-sibling, or a descendant of one of these.
Residence – Must have the same main residence as the taxpayer for more than half of the year. Some exceptions apply, including for children of divorced or separated parents, so read the UDC instructions carefully.
Age – Must be under the age of 19 at the end of the tax year, or under age 24 if a full-time student, or be permanently and totally disabled. Exceptions: For a child tax credit, the child must be under age 17; and for a child care tax credit, under age 13 or disabled.
Support – Must not have provided more than one-half of his or her support for the year. Overall – Must be a U.S. citizen, U.S. resident, or resident of Canada or Mexico. However, for a child tax credit or earned income tax credit, the child must be a U.S. resident. In addition, if the child is married, he or she cannot file a joint return unless the filing is to claim a refund of all tax withheld, and he or she owes no taxes.