Claiming parents as dependents who lives in Mexico

[nwtaxlady]

Has any of your clients been audited for claiming their parents as dependents and the parents live in Mexico?

I have a client that is being denied their parents exemptions on their 2009 return. They said they have sent them $ thru Western Union anywhere from $200 to $2000 at a time. However, they don't have any of the Western Union slips for proof. They had been thrown out. Now what? He said his parents are low proverty and don't know how to read or write and have NO income.

Taxpayer and his spouse have combined wages over $100,000. They have ITINS for the parents etc.

Any suggestions on how to go about this?

[David1980]

Well, it is necessary that the taxpayer provides over half the support. Sounds like that is true, however the taxpayer has no way to prove it? Unfortunately, pinky swearing doesn't work with most IRS auditors. Can they show that they provide the support in some other way? The money sent via Western Union, for example. Did they pay Western Union by debit card - perhaps something they could get amounts at least from bank statements? Or perhaps some other evidence?

[Roland Slugg]

Any suggestions on how to go about this?

Yes. Advise your clients to give up on the issue, since they have no proof of (1) their support payments, or (2) the parents' own income.

[JohnH]

No receipt, no deduction.

However, Western Union might be able to provide transcripts. It's interesting how much information Western Union retains. Of course, if you tell them this and then they reply "Well, maybe not all of it went by Western Union" then you know they are playing fast & loose with the truth.

[Burke]

Yes. Advise your clients to give up on the issue, since they have no proof of (1) their support payments, or (2) the parents' own income.

And as far as #2, how in the world would you prove what their support items really consist of even if you could prove what TP paid? IRS could in no way document any income of a non-resident alien in most cases if they got nothing from the US.

[erchess]

question

How then does anyone claim dependents in Canada or Mexico? I do get it that the burden of proof is on the taxpayer and I have to agree with everything said in this thread. However while it's never come up in my practice, I had been under the impression that claiming as dependents parents or children residing in Canada or Mexico was not very hard to justify.

[David1980]

I would think completing a support worksheet like from Publication 501 combined with documentation as of the support you actually provided would probably suffice most auditors. It would be difficult to prove someone didn't have income, so I can't imagine that actually being required. But if you can't show that you provided any support (situation in OP) that would be a problem.

[erchess]

David

That's what I would have thought too. IOW most auditors will take the taxpayer's word for it that the parents in Mx or CA had these and only these expenses provided that there was iron clad proof of the support amounts allegedly provided by the taxpayer and as long as the numbers make sense. As you point out the situation in OP is so far lacking in proof of the amount of support provided so barring a change in that situation there's not going to be a deduction.

[JohnH]

I think this client is setting themselves up for a multi-year audit.
Or maybe that train has already left the station...

[FEDUKE404]

Additional question

Do these referenced parents/children "dependents" living in Mexico or Canada have a valid Social Security number?

How does the presence, or absence, of such affect things overall?

[erchess]

Itin

I believe it was stated that the parents have ITIN's. That's all a dependent needs to have unless the taxpayer is otherwise entitled to the EIC for that dependent is it not?

[David1980]

Do these referenced parents/children "dependents" living in Mexico or Canada have a valid Social Security number?

How does the presence, or absence, of such affect things overall?

ITINs, but shouldn't affect anything. The dependent would need to be a U.S. citizen, U.S. resident alien, U.S. national, or a resident of Canada or Mexico.

[FEDUKE404]

Well,

ITINs, but shouldn't affect anything. The dependent would need to be a U.S. citizen, U.S. resident alien, U.S. national, or a resident of Canada or Mexico.

Thanks - I was more curious as to what HAS happened versus what SHOULD HAVE happened. Just figured a board member could make a relevant comment re the former.

For my 2¢ worth, I tend to agree with Roland Slugg's post of 11/14.

FE

[appelman]

Maybe I'm just a softie.

But I think it is far more likely than not that the situation is exactly as your clients claim. There must be thousands of families in similar situations -- that's what keeps Western Union in business. I would go along with David and JohnH and work with your clients to develop some kind of trail to show that the money was sent.

[OtisMozzetti]

...They said they have sent them $ thru Western Union anywhere from $200 to $2000 at a time. However, they don't have any of the Western Union slips for proof. They had been thrown out. Now what? He said his parents are low proverty and don't know how to read or write and have NO income.

In many instances, it may end up accurate that the support expenses for persons living in Mexico are quite low. In other cases, the cost of living in Mexico may be substantial.

The statement that the parents had "NO" income often is nothing more than a refusal to discuss what income they did have. Income is anything in the form of money, property, or services. Even if the parents did not have income with which to provide their support, they might have provided the support from assets other than current income.

Taxpayers always do have the burden of substantiating what they claim.