Qualifying child issue - Form 2441

[FEDUKE404]

Client is in military, and even though child did not live with TP >6 months the "exception" (so far as I know) for being in the military/temporary absence....and attending college for some folks ....does allow the child to be claimed as a dependent.

All of the other issues for "qualifying child" and dependent are met.

However, the rules for Form 2441 appear to state that a qualifying child MUST live with TP for more than six months of the year. I cannot find any "exception" as related to dependent care expenses.

I thought the IRS intent was to make a uniform definition across the board, such as what a "qualifying child" is. Unless someone can show me otherwise, the best I can now do is say "yes" to dependent exemption (cannot claim HOH either) but "no" to claiming any dependent care expenses.

So where I am: filing single (not HOH), claiming child as a dependent (high degree of confidence), NOT being able to deduct any dependent care expenses.

Am I completely missing something here?

FYI: Allowable dependent care expenses were only incurred Aug-Dec of 2011.

Thanks for any path out of this maze!

FE

[Koss]

Qualifying Person

Yes, I think you're missing something.

How are you reaching the conclusion that the exception for temporary absences is not applicable?

As I read Publication 503 and Section 21 of the Internal Revenue Code, all I see is that you must have a qualifying person. There are three types of qualifying persons, and the first one is a dependent under age 13.

If the child in question meets the definition of dependent in Section 152(a)(1), then that child is a qualifying person for purposes of the child care credit.

152(a)(1) is the section of the IRC that defines a qualifying child. I don't think the notion of "temporary absence" is directly addressed here. To be a qualifying child, the child and the taxpayer must have the same "principal place of abode" for more than half the year. When someone is away on a military deployment, they have not changed their principal place of abode. In other words, the parent did not move to Afghanistan. I don't know whether the temporary absence stuff is covered somewhere in Treasury Regulations, or only in IRS instructions. But the concept seems to be built in to the definition of a qualifying child.

BMK

[Koss]

Form 2441

Even the instructions for Form 2441 contain the following language:

A qualifying person is:
- a qualifying child under age 13 whom you can claim as a dependent.
- your disabled spouse who was not physically or mentally able to... <snip>
- any disabled person who was not physically or mentally able to... <snip>

The requirement that the child must live with the taxpayer is incorporated by reference to the definition of a dependent. It is not an independent requirement for the child care credit.

BMK

[dan doshan]

Curious .. Single parent in the military. Where did the child live? But do concur with others that the parents absence would be considered temporary. However, was he maintaining a household for HH status might be questionable. Maybe the child lived with grandparents or whoever for much of the year.

[FEDUKE404]

Additional info

Reverting to software Q&A (OK - I was desperate!), same balks at "did the child live with taxpayer for more than six months?" A "no" answer bombs out - "you cannot take any dependent care expenses."

This situation is a bit strange. Child lived with another family member, in that person's home, for first part of year. Parent paid significant amounts to that person, with funds designated for support etc of child. Hence the >50% rule for dependency is met, along with the inclusion of "temporary absence" due to whatever issues.

There is no attempt for claiming any dependent care expenses during that earlier time frame, as IMHO such would be disallowed. Funds paid were for support expenses (24/7) and not for "dependent care." Along a similar line, filing status will be single and not HOH.

So....mom paid actual dependent care expenses for the fall of 2011 only, when parent/child both finally resided in on-base housing.

Thanks for the input, all of which is welcomed!

FE

[dan doshan]

I think you can say that the child did live with the parent for more than 6 months for the dependent care credit. Do believe temporary absence applies to that for time spent with the child. Does appear the HH would be questionable.

[Kram BergGold]

Tough call

You have to make this call, had the taxpayer not been temporarilly away in the military would the child have been living with the taxpayer. If yes, take the dependency exemption as a qualifying child (this assume the child did not provide over 1/2 of his or her support, which I would assume is accurate) and child care expenses paid for by the taxpayer.
As for H of H, you only get his if the taxpayer provided over 1/2 the support for the household the kid lived in for more than 1/2 of the year. So maybe yes, maybe no.

[FEDUKE404]

Living situation further explained

You have to make this call, had the taxpayer not been temporarilly away in the military would the child have been living with the taxpayer. If yes, take the dependency exemption as a qualifying child (this assume the child did not provide over 1/2 of his or her support, which I would assume is accurate) and child care expenses paid for by the taxpayer.
As for H of H, you only get his if the taxpayer provided over 1/2 the support for the household the kid lived in for more than 1/2 of the year. So maybe yes, maybe no.

The answer to your question is "yes." For the first part of 2011, the military situation disallowed any dependents from living with parent(s). That situation changed in the late summer due to relocation.

The decision has been (validly) made that the child qualifies as a dependent.

My problem is still reading the rules for Form 2441. ( http://www.irs.gov/pub/irs-pdf/i2441.pdf ) Look for the "caution" sign at top of right column on page 1. So far that obstacle bothers me.

Logic says the Aug-Dec dependent care expenses should be allowable. But logic does not always prevail.....

FE

[dan doshan]

Looks like things could be interpreted a couple of different ways. The instructions indicate that you use the same rules as for the child tax credit which takes into account temporary absences. But then, as you state, they have that caution statement.

[Gary2]

My problem is still reading the rules for Form 2441. ( http://www.irs.gov/pub/irs-pdf/i2441.pdf ) Look for the "caution" sign at top of right column on page 1. So far that obstacle bothers me.

Look at Pub. 503, under Qualifying Person Test, and pay close attention to the differences in wording between the qualifying child case and the other two cases.

If that doesn't help, check the code and regs for section 21.

[taxea]

In a military situation under MFJ the spouse not considered away from the home ergo the spouse at home cannot file HH. In a case of a single parent in the military and "outposted", as in your case, the parent has placed the child elsewhere during tour of duty. This parent does not qualify for HH. He does qualify to take the child as his dependent. Grandparents would not take the dependent for the child because the parent is supporting child while in their care.
If parent is paying additional child care expenses in addition to support then grandparents should have to declare the addition as income and a F2441 for the parent may apply

[FEDUKE404]

Repeating the facts

In a military situation under MFJ the spouse not considered away from the home ergo the spouse at home cannot file HH. In a case of a single parent in the military and "outposted", as in your case, the parent has placed the child elsewhere during tour of duty. This parent does not qualify for HH. He does qualify to take the child as his dependent. Grandparents would not take the dependent for the child because the parent is supporting child while in their care.
If parent is paying additional child care expenses in addition to support then grandparents should have to declare the addition as income and a F2441 for the parent may apply

We have already established and discussed here previously:

1 - Child CAN be claimed as dependent by parent
2 - Unmarried parent CAN NOT (and will not) file as head of household for 2011. Filing status will be "single."
3 - Grandparents CAN NOT (but may try!) to claim child as dependent

No "child care" expenses were ever paid to anyone prior to August of 2011.

The question was, to repeat, whether the single parent can legitimately claim dependent care expenses incurred for (only!) August through December which is consistent with the time frame the child was present in the home of the working parent.

The previously cited source ( http://www.irs.gov/pub/irs-pdf/i2441.pdf ), rightly or wrongly states the qualifying person must have lived with the parent for more than six months. Whether that is "must with an asterisk" remains unresolved.

FE

[Gary2]

In a military situation under MFJ the spouse not considered away from the home ergo the spouse at home cannot file HH. In a case of a single parent in the military and "outposted", as in your case, the parent has placed the child elsewhere during tour of duty. This parent does not qualify for HH. He does qualify to take the child as his dependent. Grandparents would not take the dependent for the child because the parent is supporting child while in their care.

While the parent would have priority, if the grandparents' AGI is higher than the parent's, then the parent may allow the grandparents to claim the child as a dependent. It doesn't matter which one is actually supporting the child. If they do this, then it's possible the grandparents may qualify for the 2441 credit, even though the parent wouldn't.

If parent is paying additional child care expenses in addition to support then grandparents should have to declare the addition as income and a F2441 for the parent may apply

In a divorce situation, the fact that a custodial parent may use child support funds for daycare doesn't change the child support into taxable income. If the non-custodial parent chooses to chip in a bit more than the divorce agreement requires, it's still not taxable income; worst case, it's a gift. I don't see why this would be any different.

If anything, daycare is a legitimate parental expense whether or not the expense qualifies for the credit. I don't see paying for daycare (or reimbursing the grandparents) as any different than the parent paying for the child taking music lessons or joining a sports or scouting club.

[Gary2]

3 - Grandparents CAN NOT (but may try!) to claim child as dependent

I'm not quite sure what this is based on, unless it's merely that the parent intends to, so that the grandparents would lose the tie-breaker.

The previously cited source ( http://www.irs.gov/pub/irs-pdf/i2441.pdf ), rightly or wrongly states the qualifying person must have lived with the parent for more than six months. Whether that is "must with an asterisk" remains unresolved.

I'll assert wrongly if read strictly; please see the previous cites to Pub. 503 and IRC 21, which both BMK and I mentioned.

The IRC, which is authoritative (while the pubs and instructions aren't) clearly uses the "six month" wording for the cases other than qualifying child. The fact that it omits the extra wording for the qualifying child case indicates to me that the usual residency rule for dependency applies.

I'll step out on a limb and say that the alert in the 2441 instructions is really just a very simple way of saying "If a qualifying child, then (of course) the six month residency requirement for qualifying children applies, but if it's one of the non-qualifying-child cases, there's an explicit six month requirement." I don't fault them for that, and I certainly wouldn't expect that alert to include all the caveats about temporary absences, etc.

[FEDUKE404]

Only unsettled issue is dependent care credit

While the parent would have priority, if the grandparents' AGI is higher than the parent's, then the parent may allow the grandparents to claim the child as a dependent. It doesn't matter which one is actually supporting the child. If they do this, then it's possible the grandparents may qualify for the 2441 credit, even though the parent wouldn't.

In a divorce situation, the fact that a custodial parent may use child support funds for daycare doesn't change the child support into taxable income. If the non-custodial parent chooses to chip in a bit more than the divorce agreement requires, it's still not taxable income; worst case, it's a gift. I don't see why this would be any different.

If anything, daycare is a legitimate parental expense whether or not the expense qualifies for the credit. I don't see paying for daycare (or reimbursing the grandparents) as any different than the parent paying for the child taking music lessons or joining a sports or scouting club.

IMPORTANT NOTE:

There is no way, shape, or form that the grandparents EVER could factually prove they provided more than 50% of the child's support. Both biological parents made regular payments to the grandparents (who do not live in a mansion nor drive a Mercedes). Tax-client parent also personally paid several other support items (medical insurance premiums et al).

There is no divorce/separation issue here as the parents were never married in the first place.

This does not preclude the likelihood that they will (again!) try to claim the exemption for the grandchild - but they WILL lose on the facts. This battle is one they cannot possibly win, unless much "truth distortion" occurs. And my client is fully armed with the relevant facts/records.

And at the risk of repeating myself: Prior to August of 2011 there were no "day care" expenses for anyone involved. If you want to figure out what portion of a 24-hour day in a 7-day week "might have been" dependent care expenses (shift work involved for parent), that is a maze I care not to enter. The grandparents were basically paid funds for the 24/7 support of the child, before the child started living with parent in a new location and before "day care" ever entered into the picture.

As for the "any difference" comment: Of course a (grand)parent must provide things such as music lessons or sports participation to a child, but those things generally do not make it to a Form 2441.

I am strongly leaning to the "unexpressed caveats" explanation by Gary2, i.e. there is wiggle-room here due to the totality of the circumstances involved.

It's Monday, so I gotta do some real work now!!

FE