Dependent

[BP.]

But... the 50% question is hard to justify either way.

Not sure if/what your question is, but maybe it's in the phrase above? If so, check out TTB p. 11-8- "Support test for dependents does not apply." Child meeting all other requirements, and providing over half of their own support, can still be qualifying child for EIC.

[MAJ]

SSDI and EIC

In following this thread I have a similar situation which I feel in this case it is warranted.

Mother has been claiming son for a number of years. He is on SSDI and received about $720 per month. He lives with the mother 7-9 months per year because in NJ you are not likely to find a place for $700 per month. She purchases his food, clothes, etc. He's 48/49. He purchases his cigarettes and other 'items'. (Don't get me started on this - SSDI should be a Debit card with restrictions like a health care spending card).

Mother has never claimed EIC - Her (2nd) husband died in June 2009 and reducded her income. They received SS payments (24k). Total earned income was ($8,487 wages, $500 interest). So the SS comes back as 100% non-taxable.

If I complete EIC form she appears to be entitled due to the son being Disabled (SSDI). Seems on the edge to me. I'm not a big fan of EIC - promotes laziness or out-and-out falsification of the facts. I know here in NJ $8k isn't buying all that much. But... the 50% question is hard to justify either way. She did mention he can't afford a place year round.both due to costs and poor budgeting abilities. He's with her 7-9 months - She buys all the essentials.

I have not approached her on the EIC amounts as I don't want her to know the significant difference and get her hopes up (you know how that goes).... EIC: 3842 Fed/State or $239 without. Yikes!

[dtlee]

I know that this was discussed on the forum before and Social Security Retirement Benefits and Social Security Disability Income are both considered contributed by the recipient when used for the support of the recipient. Both of these are also reported on Form SSA 1099.

SSI is different and most people I know treat this the same as welfare payments, i.e., support contributed by someone other than the individual when used for the individual's support.

If that is not what is being agreed to in this thread, I disagree. It is a bit hard to follow here.

[Zip2001]

During my 30 years as an IRS Auditor/Agent, I never ONCE encountered a taxpayer or dependent who could prove this. Also people who have such benefits such as SSDI, SSA, etc. are generally not in a financial position to be able to save anything.
People who receive social security benefits almost never maintain records which
could establish what was saved or the cost of the support of the claimed dependent.

I know two who do just as I described. Both well-to-do families with completely disabled children.

[dyne]

It is possible but extremely unlikely that a dependent or taxpayer could prove that
the SSDI, SSA or other income was put into a savings account, etc. They would need
to be able to show deposits of the amount of the monthly benefits received or perhaps a
lessor amount. During my 30 years as an IRS Auditor/Agent, I never ONCE encountered a
taxpayer or dependent who could prove this. Also people who have such benefits such as
SSDI, SSA, etc. are generally not in a financial position to be able to save anything.
People who receive social security benefits almost never maintain records which
could establish what was saved or the cost of the support of the claimed dependent.

[S T]

Thanks

On behalf of Grandma ( as Zip2001) posted, yes we (Grandma and I) are very thankful for this thread and the knowledge, and thoughts that have been posted. I have been "lurking" and "watching" and had not anticipated so many thoughts to this issue.

Very valuable information and insight, so as with my "Grandma" issue, I do also hope that it assisted some other posters on the Board with their "dependent issues".

What is nice is the thread will remain and we can research it later for reference

Thanks to everyone that shared in this post.;

Sandy

[Zip2001]

IRS will NOT buy the argument that the
dependent just BLEW the money!

My example was a hypothetical to illustrate the point. Not likely, but possible.

…unless the dependent or taxpayer
can PROVE otherwise.

Yes, and the IRS shifts the burden of proof to the TP on a lot of things.
It's not necessarily difficult to prove.
Show deposits to daughter’s bank account and all disbursements for support paid by daughter (if any) and records of grandmother's expenditures for support. FMV of Grandma's lodging, utilities, food, clothing, recreation etc add up fast.

Example: If daughter shows deposits of $15K and the year-end balance is $14K, kind of makes it clear those funds were not used for support.

What a long thread!
I hope grandma appreciates everyone’s efforts on her behalf )

[dyne]

IRS takes the position that SSDI, SSI, SSA, wages and all other income of a dependent is
ASSUMED to be used for support of the dependent unless the dependent or taxpayer
can PROVE otherwise. This is difficult to prove. IRS will NOT buy the argument that the
dependent just BLEW the money!

[David1980]

For the purpose of determining support for a QC, income is irrelevant. So it's not a question of 'if' she could pay her support, but a question of did she 'actually pay' more than 1/2. She could have spend all of it on gambling or invested the money.

Precisely. So, is SSDI support paid by the child or is SSDI support provided by the state? Because only support provided by the child matters for QC.

[Zip2001]

But wouldn't SSDI be considered support provided by the state, not support provided by the daughter?

For the purpose of determining support for a QC, income is irrelevant. So it's not a question of 'if' she could pay her support, but a question of did she 'actually pay' more than 1/2. She could have spend all of it on gambling or invested the money.

[dyne]

Thank you Erchess and others. I thought I had missed something.
We agree that SSDI would normally be considered as being used toward support
received from the government but is NOT Gross Income as far as the
rules regarding a dependent is concerned. Best wishes to all!

[BP.]

I thought I had read that in TTB last year but I can't find it and I found in both this year's and last year's books the pages where I thought I remembered seeing it.

Just so we are clear are we saying that all monies from the SSA count as income for purposes of the gross income dependency tests? This blows my mind but luckily I don't think I have ever done a return where this question was relevant.

Are you thinking of this- TTB 3-18 under "Gross income- "Gross income does not include nontaxable Social Security?" And maybe thinking "gross income test" & income counted towards the "support test" are the same, which they aren't?

[David1980]

Disabled allows daughter to pass the age test, but doesn't help with the support test. If the daughter paid more than 1/2 of her own support she can't be anyone's QC.

But wouldn't SSDI be considered support provided by the state, not support provided by the daughter?

[erchess]

Ya'll caught me

I thought I had read that in TTB last year but I can't find it and I found in both this year's and last year's books the pages where I thought I remembered seeing it.

Just so we are clear are we saying that all monies from the SSA count as income for purposes of the gross income dependency tests? This blows my mind but luckily I don't think I have ever done a return where this question was relevant.

[Zip2001]

If it was social security the mom received that would be true. SSDI is easy to confuse with SS.

It's not a question of taxable SS or nontaxable SSDI income. It's a question of who paid daughters support. Did the daughter pay more than 1/2 of her own support?

Funds could come from many places - savings, pouch of gold coins under the mattress, SSDI, insurance proceeds, gifts, etc. How those sources are taxed is irrelevant to the support question.