Dependant Question

[Marshac]

I'm doing my taxes via turbotax, and on a whim, I checked to see if my fiance could be considered as my dependant. To my surprise, the answer (according to turbotax) was "yes." We both thought this was kinda funny, and she's cool with being my 'dependant' if it means more money for us I have some 1099 income I would love to offset too...

So anyways, are they on crack, or is this legit?

1. We lived together for all of '05
2. She made <$1k for the entire year (she's a student)
3. I paid for food/shelter for the both of us (ie: >50% of her support).

After reading IRS publication 501, i'm inclined to believe that turbotax is correct, but just thought I would pose this question here as well.

 

[kaneohe]

Can your fiancee be claimed as a dependent by anyone else?
e.g. her parents. If she can, whether or not she is, you cannot
claim her as dependent.

 

[maddythebeagle]

http://taxes.about.com/od/dependents/a/Dependents.htm

I think the person has to be your child or relative (parent, etc.).

I have known a couple of people that put down thier parent or brother if they made little money for the year.

 

[Martha]

http://taxes.about.com/od/dependents/a/Dependents.htm

I think the person has to be your child or relative (parent, etc.).

I have known a couple of people that put down thier parent or brother if they made little money for the year.

They only have to be your relative if they don't live with you.

Marshac, a factor might be how she is paying for school--that might be considered support.

 

[maddythebeagle]

http://www.irs.gov/taxtopics/tc354.html

you are right. this gives a better explanation.

 

[kaneohe]

The second sentence in the IRS link in the post above states that a person cannot be your qualifying relative is she is someone elses qualifying child. That is saying she cannot be your dependent if she is could be claimed by her parents. You can also check in the link to Pub 501 (in the IRS link above) about what a qualifying child is (includes children away from home attending school within certain age limits, attendance qualifications, etc.)

 

[Marshac]

Nobody else has or will be claiming her, and her tuition is covered entirely by the state.

For some reason, the department of ed has their own weird dependency calculation, so her financial aid is still determined by her mother's income.

I'm starting to believe turbotax.... this is awesome. +$1k for me Maybe i'll buy the "audit defence" thing they always try and sell this year... just in case the IRS comes knocking

 

[Martha]

Nobody else has or will be claiming her, and her tuition is covered entirely by the state.

Pub 501 gives this example: Your brother's daughter takes out a student loan of $2,500 and uses it to pay her college tuition. She is personally responsible for the loan. You provide $2,000 toward her total support. You cannot claim an exemption for her because you provide less than half of her support.

Does she get financial aid from the state? If so, I would think this would be counted when determining if you provide half the support.

 

[Marshac]

She does, although unlike a loan, she is not "personally responsible" for financial aid repayment.

501 also says this-

"Scholarships. A scholarship received by a person files a return claiming the same child, the
child who is a full-time student is not taken into account in determining whether the child provided more than half of his or her own support."

So from that statement, it would appear that grant/scholarship money is not a factor.

 

[retire@40]

You can claim her. Just make sure nobody else claims her too (like her parents).

Don't waste your money on the "audit defense" or whatever they call it.

 

[Martha]

She does, although unlike a loan, she is not "personally responsible" for financial aid repayment.

501 also says this-

"Scholarships. A scholarship received by a person files a return claiming the same child, the
child who is a full-time student is not taken into account in determining whether the child provided more than half of his or her own support."

So from that statement, it would appear that grant/scholarship money is not a factor.

Looks that way to me.

 

[kaneohe]

Marshac, the test is not whether she will be claimed as a dependent by her parents but whether she could be----therefore if she is less than age 19 at end of tax year (or age 24 if a full time student), she cannot be claimed by anyone else.

 

[Martha]

kaneohe, I am not sure about that. Anyway, I bet she does not meet the qualifying child test for her parents because she is not temporarily absent from her parents' home. Therefore she would not be their dependent.

 

[retire@40]

...the test is not whether she will be claimed as a dependent by her parents but whether she could be----therefore if she is less than age 19 at end of tax year (or age 24 if a full time student), she cannot be claimed by anyone else.

What are you doing? Making up your own rules and then believing them?

 

[kaneohe]

From the irs link above cited by maddythebeagle:
Topic 354: Dependents---a child who is a qualifying child of any taxpayer for the tax year is not your qualifying relative

From Pub 501 referenced by the above link:
Qualifying child age test
<age19 at end of year or
<full time student < age 24 at end of year

I could be wrong but in my experience the correct answers are most likely to come from both ends of the spectrum:
1) Very experienced persons who have dealt with such matters forever
2) Inexperienced persons who know they are not sure and so look up the regs to confirm and can cite references.

I am certainly not in the first class but am an AARP tax aide doing volunteer work. We have 20 lbs of IRS reference material with flow charts , etc. on many topics. We also had speakers from H&R Block who handed out similar material. Marshac should also contact the IRS help number (800)829-1040 for assistance. I did call them and got the same answer.

 

[Martha]

Kaneohe (BTW, welcome to the board), publication 501 says:

There are five tests that must be met for a child to be your qualifying child. The five tests are:

1.Relationship,
2.Age,
3.Residency,
4.Support, and
5.Special test for qualifying child of more than one person.



To meet the residency part of the test, publication 501 saysyour child must have lived with you for more than half of the year. There are exceptions for temporary absences, children who were born or died during the year, kidnapped children, and children of divorced or separated parents. A child can be temporarily absent for school, but I don't think Marshac's girlfriend is temporarily absent from her parent's home. Therefore, she wouldn't be a qualifying child. (oddly, the support test for a qualifying child is different than for a qualifying relative)

One thing I have learned from working through a variety of tax problems is that you have to be sure to read everything on point when a question is asked. This is especially true when reading the tax code. You usually have to read many other code sections just to understand one small provision. I think this is why the IRS gets so many questions wrong on the phone. They don't have the time to sift through everything necessary to properly answer a question.

This is one example. You can claim as a dependent a "qualifying child" and any "qualifying relatives." Some people in Marshac's position would not even consider a girlfriend as a dependent because they would assume she is not a "relative." Instead, you have to go on and read how "qualifying relative" is defined and learn that the person doesn't actually have to be related to you. Once you work through that entire definition, you have to see if any other provision in the code would prohibit you from claiming the person as a dependent. You find out from your reading that the person can't (in most circumstances) be the qualifying child of another. So then you have to learn the ins and outs of what is a qualifying child. Not necessarily a quick and easy question for an IRS representative to answer on the phone.

 

[kaneohe]

Martha, I agree with you that the answer to this question hinges on the residency test. I don't think I ever said Marshac could not claim her as his dependent, just that if she would be claimed by parents then he could not claim her. Seems like the answer might depend on the history---did she go from high school directly to college and then moved in w/Marshac or did she move away from home to work and then went back to school after moving in w/Marshac or ----or maybe it just depends on the IRS auditor's mood when he has to determine the answer. This will be a good question for the tax aide class next year.

 

[Martha]

Or depends what Marshac and his girlfriend think about where she resides. Inotherwords, I think it is his girlfriend's intent that matters.

 

[Marshac]

Or depends what Marshac and his girlfriend think about where she resides.    Inotherwords, I think it is his girlfriend's intent that matters.

We would be married at this point if it weren't for the financial aid Her mom stopped claiming her as a dependant years ago, and this is really the first year my fiance made less than the cutoff amount, so it has never been a possibility before.

I think everything is Kosher, so i'm going to go ahead and claim her. Since I always help her on her taxes, i'll be sure she is marked as a dependant on her own return... we don't want to trigger any audit flags

 

[Martha]

We would be married at this point if it weren't for the financial aid

Didn't I tell you to have a baby last year, when you were bored? By now you would have yet another dependent.

 

[retire@40]

... so i'm going to go ahead and claim her. Since I always help her on her taxes, i'll be sure she is marked as a dependant on her own return... we don't want to trigger any audit flags

If you claim her and she is marked as a dependant on her own return, that will definitely trigger a red flag.

When you claim her, nobody else can claim her, not even herself.

 

[kaneohe]

Talked to another IRS help guy.   He said the key factor is the fact that they lived together for the ENTIRE year (and not a day less) which disqualifies the parents' home from being considered the residence (normally would be with school time as "temporary absence") and disqualifies the fiancee from being parents' dependent.

So congrats on your new dependent and tax exemption.

I should suggest that this be put on next years tax aide test.

btw---did you mean you would mark your fiancee as being claimed by
some other person (you) on her tax return? I was wondering the same thing as retire@40

 

[Nords]

I think everything is Kosher, so i'm going to go ahead and claim her.

Congratulations on your "engagement"!

 

[Cut-Throat]

Marshac,

Just for grins - Would you come out better if you filed a joint return? Or is better filing single and taking the dependent?

 

[kaneohe]

Don't think you can file joint unless you are married. By the way how come you are filing a return for fiancee if she only made <1K? My chart says single, age <65, needs to file only if gross income >= $8200. Did she have investment or other income to bring her over threshold?