Dependent 22 not student

[bekzm]

The mother lost her job. She earned $6713, cashed in her 401(k) for living expense of $3933 and collected unemployment of $6813. Daughter of 22 - not in school earned $7889. Since she is not a student and although lives at home, I did not let the mother claim her. I told them no but they did not like my answer so left and went down the street. With this being late in season - tired but I really think I did the right thing.
Did I do the right thing and not claim the daughter due to not being a student and making over the standard deduction, cause if I'm wrong - I will call and apologize and correctly let her claim the daughter.

Thank you

[Koss]

Not a dependent

I think you reached the correct conclusion that the child is not her dependent. She's not a qualifying child because she's not a full-time student under the age of 24. She's not a qualifying relative because her income is greater than the personal exemption. End of story.

But how about this for explaining it to the client...

What difference does it make?

Try preparing both tax returns both ways. Allowing her to claim her daughter as a dependent is not the correct way to prepare the return. But it's an interesting exercise. If she claims her daughter as a dependent, then the daughter has to file a return and indicate that she is claimed as a dependent on someone else's return. The result is that all you are doing is shifting the personal exemption from one return to the other. If she claims her daughter as a dependent (which she cannot do, according to the Internal Revenue Code), her tax liability will go down, and her daughter's tax liability will go up. By the same amount. Based on the figures you provided, they are in the same tax bracket...

They still won't get it, unless you can get them to understand that the daughter has to file a tax return if she is claimed as a dependent by someone else. I still deal with clients every year who somehow think that when a teenager or a young adult is claimed as a dependent, that means that the child is somehow "incorporated" into the other person's tax return, and that the child cannot file a return. They simply can't get their head around the idea that not only is the child allowed to file a return to get a refund of tax withheld, the child may in some cases be required to file a return.

Are you old enough to remember a time when a parent could have a child included on their passport? I think that option went away a few years after the 9/11 attacks...

BMK

[geekgirldany]

Great post Burton.

I recently had a similar situation. Sometimes you just have to show that if the parent was able to claim the dependent the difference in tax may not be that much.

[erchess]

You were right

The child is too old to be a QC without being a full time student or disabled and makes too much money to be a QR. What I do in these situations is show them the chart on 3-15 of TTB. That way if they want to be honest they will be convinced. The downside is that if they want to be dishonest they will know clearly what they need to tell the next preparer or the software they buy. I don't like that feature but my credibility in my mind demands that I be clear with them about why they can't do what they want to do.

I was slow again. I started this before Burton and Dany posted.

[bekzm]

Thank you

Interesting points and great response. People are still great people to help others people out. I think they were wanting that extra money from the goverment call EIC which sometimes it is given when it should not be - had that happen. Guess they will get it down the road by explaining it different to them.
Rules are rules and some just do not want to except and it seems to be getting worse.
Where do people come up with some of this stuff - seems there are more crazy stuff then there was 15-20 years ago.

Boy how time has changed like the song by Tim McGraw - "Back When" - any country fans out there will know that....

[Koss]

Earned Income Credit

On your fact pattern, the only way your client could claim EIC for her daughter would be to falsely assert that her daughter was a full-time student or disabled.

Misunderstandings about the dependent exemption are common, and many are based on honest mistakes by unsophisticated taxpayers. The notion that "she lived with me all year, and I'm supporting her," is enough to claim a dependent is clearly wrong, or reflects a misunderstanding of what it means to support someone in the context of federal tax law. But the IRS can be pretty forgiving about this kind of mistake. I'm certainly not encouraging anyone to file a false return. But I think the IRS recognizes that these rules can be difficult for a nonprofessional to understand.

The IRS is not as forgiving when it comes to bogus EIC claims. In a case like this, falsely claiming that the 22-year old is a student for purposes of EIC would be closer to outright fraud--not an honest misunderstanding of the rules for dependents. Software like TurboTax will ask whether the child is a student, in plain English.

This kind of bogus return can be caught by the IRS. The nonexistence of a Form 1098-T with the child's SSN increases this possibility.

BMK