EIC revisited

[Safire]

Before I send this tax return, would like to hear someone agree with my determination. This will be the first time the new rules were not cut & dry for the situation.

Couple made $28000, 2 children who each drew over $10,000 in SS Benefts, ( they were beneficiaries, their SS number on form)

Children obviously not dependents, so no Exemption and no Child Tax Credit.

EIC allowed. ( They were not qualifying children or relatives for anyone else )

Does this sound correct?

Thanks for any help in advance.

[JoshinNC]

why aren't the kids dependents?

wouldn't the SS benefit be non-taxable, as it is below the base amount?

I may be missing something.

[JoshinNC]

I didn't think about support!

are the kids using the money? then, no they aren't dependents. i knew i was missing something!

EIC yes, if the kids are under 19 and lived with parents at least 6 months.

[Safire]

Yes, it is nontaxable, but Pub 501, page 15 says social security benefits received by the child and spent toward his own support are considered provided by the child.

Gosh, I hate these new rules.

[JoshinNC]

that's the part I didn't think about!

if the kids are spending the money on themselves than no, they aren't dependents.
if it goes in the bank, IRA, 529, etc. than they are dependents.

they would still meet the requirements for EIC though, provided they are under 19 and lived at home.

[Safire]

Well, I assume they had to use the money for their support.

If the parents had more income, then I might think some or most was going into saving accounts, but with no more than the parents made, more than likely the money from SS is going toward their needs.

But the really sucky thing is, if the child provided more than half his own support, no CTC either.

[Safire]

Great. Thanks Josh, that was kinda how I was seeing it, but just needed that affirmation from a colleague.

Since going out on my own, I really miss having that office interaction to discuss returns and odd situations.

I appreciate your help!

[JoshinNC]

ditto

this forum really is helpful!

[jainen]

Get used to it already

>>I hate these new rules<<

The rule you reference on Page 15 of Pub 501 is in the part about Qualifying Relative. That is not a new rule. It is EXACTLY THE SAME as it was last year and the year before that and the year before that. Get used to it already.

The new rule under Qualifying Child is three pages earlier, where it says "to see what is or is not support, see Support Test (to be a Qualifying Relative), later." In other words, on this subject the new rule is identical to the old rule, so get used to it already.

[Safire]

Jainen, are you just being an *** or am I not picking up on your sense of humor?


How can anything be the same as it was before when the "Uniform definitions of a child" are brand new? And there was no such thing as a "qualifying relative" last year.

You have to look at everything in a new light, or risk error. IMHO at least.

[jainen]

a new name

Safire, for many weeks I have been posting that these are not new regs, and you are the first person to respond directly. Let me answer in two parts.

The Qualifying Child definition was effective four years ago, but only for EIC. Now Congress has extended the same definition to dependency and the other three benefits. The only thing new is the self-support provision. Everything else is old, including eligible foster child, age, relationships, six months in the home, all the tiebreakers, and every other little thing. Compare the two rules word-for-word.

As for Qualifying Relative, the only thing that is new is the name. The Congressional Conference Committee report says, "Individuals who satisfy the present-law dependency tests and who are not qualifying children are referred to as "qualifying relatives" under the provision." If that's not clear enough for you, compare those two rules word-for-word too. It is nothing, NOTHING, but a name change. You are the one who cited Pub 501, and it says right there that even for a Qualifying Child when you determine support you have to follow the old rule, the one that has a new name.

[Unregistered]

Questioned earlier whether foster care payments are considered provided by a third party or by the children for purposes of determining dependency.

Anyone care to comment.

[Safire]

Well thanks Jainen, maybe IRS should hire you to write their publications for them, because you did a better job explaining things than they have.

I know all you old hats are tired as hell of hearing about this issue but I just wanted to be sure I was still doing it right before I have to explain to a new customer that she cannot take her children as dependents and that she will not get any child tax credit and that her refund will only be 3k when "most of her other friends are getting back 5k"

[jainen]

my sense of humor

>>IRS should hire you<<

Thanks for the compliment, but I don't think the government hires white males these days.

So anyway, did you figure out whether I am an *** or you are just not picking up on my sense of humor?

[Safire]

Sense of humor for sure. Feel free to correct me if I wrong, LOL

I just read a few of your comments on another board, the one about "directions to the pub" was a good one.