Dependent Support

[geekgirldany]

I have a client whose son is/was in college.
For 2010 was in college the whole year but made around $13,000 and is 21 years old. $8,000 wages and $5,000 unemployment income. Son still lives at home. Client went ahead and prepared son's tax return without asking me first. Son claimed himself on his return. Son was not claimed in 2009 because he did not go to college.

Add on to that around $4,000 paid in tuition. Well paid through Student Loans. It is in the son's name.

I can amend the son's return so client can claim him... but with that amount of income I am rethinking. Not sure client provided over 50% of support although he said he does.

What would you all do in this circumstance? I am thinking about having the client fill out the support test worksheet. That is the only way I know of getting a correct answer.

Thank you
Dany

[Gary2]

The support worksheet is the way to go. The student had effectively $17K in his name. What did he spend it on? Was any of it put into savings? Can the parent show $17K in expenses on the student's behalf?

[WhiteOleander]

In this scenario, the student is considered a qualifing child. So, your client, the parent, does not have to provide over 1/2 of the support. The child just cannot have supplied more than half of his own support.

[Gary2]

In this scenario, the student is considered a qualifing child. So, your client, the parent, does not have to provide over 1/2 of the support. The child just cannot have supplied more than half of his own support.

You are, of course, quite correct. So it's not necessary that the parent provide $17K worth of support, just that there be some other sources of support that exceed what the student provided for himself. And the $17K is a (probable) upper bound, since there will be taxes and perhaps other non-support items - unless the student also dipped into savings.

One wonders if the student took the refundable part of the AOC. With only $8K of earned income, he probably doesn't qualify for it.

[geekgirldany]

Thank you both for posting. You are correct looking at TTB it does say child can not have provided over half of his/her own support. With what he made though he is getting pretty close but after taxes being deducted the net is riddled down. Student did not take the AOC because... well they did not really know about it. Self prepared by his parents.

[dtlee]

I offer the a work in progress worksheet that I use to document these situations in the attached ZIP file.

It is basically the same as the one in the IRS publication, but more geared to a Qualifying Child than a Qualifying Relative. I find it helps me remember some things which are easy to forget (like withholding and tax refunds). It also attempts to describe scenarios where the dependent is potentially subject to the Kiddie Tax (and thus, not eligible for the refundable portion of the American Opportunity Credit). If you want to use it, feel free.

If you have any issues with it, I appreciate any input.

Doug

[Lion]

Thank You

Thank you for sharing your worksheet, Doug.

[S T]

Thanks for sharing, however, I don't seem to be able to open

Sandy

[dtlee]

Thanks for sharing, however, I don't seem to be able to open

Sandy

I tried uploading again in case there is a real problem with the file.

It is a ZIP file due to the rules of the forum so you may need to have a way to unZip it before opening it.

Another alternative would be to open the Excel file directly from another site. You can download and save it from this location and open it in Excel directly:

http://nytaxexperts.org/Documents/QCSupportStatement.xls

[Lion]

Excel 97

It opened fine for me. It's in Excel 97. I have Excel 2010. It did go through a different, for me, opening. When I clicked on Doug's link, it first listed it as a file in an IE directory (must've been a Zip file, but I didn't notice at the time) and when I clicked on that file, it opened the spreadsheet in Excel. I then saved in the directory of my choosing, and it opens as needed now.

[geekgirldany]

Thank you Doug for providing that worksheet. Really do appreciate that.

The link "Amount contributed by others for the Dependent" is going into the negative. So looks like he provided more than half is support.... just going on my estimates. I will get the right numbers tomorrow I hope.

[dtlee]

Thank you Doug for providing that worksheet. Really do appreciate that.

The line "Amount contributed by others for the Dependent" is going into the negative. So looks like he provided more than half is support.... just going on my estimates. I will get the right numbers tomorrow I hope.

While mathematically a person's support from others could be negative (perhaps if a lot of money is spent supporting others instead), more likely, you have left out some savings or true support items.

Some would argue that he still has the value of his parents' home since school is a temporary absense, although he could not take advantage of food or other amenities there. In your situation, I suspect that he is not able to be claimed as a dependent by anyone since he paid for college and other items with $17,000 from his own funds. Unless the parents or others provided him with a nice car or some other large support amount, I do not see how this would be a Qualifying Child of anyone.

[Dusty2004]

Taxes

You are, of course, quite correct. So it's not necessary that the parent provide $17K worth of support, just that there be some other sources of support that exceed what the student provided for himself. And the $17K is a (probable) upper bound, since there will be taxes and perhaps other non-support items - unless the student also dipped into savings.

One wonders if the student took the refundable part of the AOC. With only $8K of earned income, he probably doesn't qualify for it.

I believe that the taxes would be support by the student. It was money he took in and paid out for himself.

Dusty

[dtlee]

I believe that the taxes would be support by the student. It was money he took in and paid out for himself.

Dusty

I have never included income taxes paid by a dependent as funds used for support. In actuality, they pose a problem not unlike savings since dependents can and do get tax refunds. Per Publication 501:

Do Not Include in Total Support

The following items are not included in total support.

1. Federal, state, and local income taxes paid by persons from their own income.
   
2. Social security and Medicare taxes paid by persons from their own income.
   
3. Life insurance premiums.
   
4. Funeral expenses.
   
5. Scholarships received by your child if your child is a full-time student.
   
6. Survivors' and Dependents' Educational Assistance payments used for the support of the child who receives them.

[Gary2]

I believe that the taxes would be support by the student. It was money he took in and paid out for himself.

Ooops, shouldn't have duplicated what has already been posted by someone else, but I'll keep my addition:

The tricky one is scholarships. They're not part of support when considering whether or not parents may claim the child, but they are part of the support when asking the question for anyone else, e.g. grandparents claiming the child.