HOH Source of Funds used question

[tpert]

I have a question that I think may have been asked here before, but I cannot find it.

A client has a household where she lives with here three children. She receives no alimony but received over $30,000 in child support. She used this towards the rent she is paying and other household expenses as well as for clothing, medical expenses and supplies. I compute her household maintenance costs to be roughly 36,000 per year, and that she used more than $20,000 of her child support towards those expenses.

Does the fact that she used child support to pay for the maintenance of this home affect the HOH filing status? If this had been alimony, I would have treated this as her funds, but this is child support. She also received EIC to the tune of about $1,000 last year which may have played into this. I know that public assistance payments used to pay part of the cost of keeping up the home are not considered to be part the taxpayer's funds, but I do not think EIC is considered public assistance and it is not designated for any specific use.

Her available funds were $35,000 approximately from her job (after nonrefundable payroll taxes) plus $32,000 in child support plus the $1,000 in EIC. She put nothing into savings. Can I just say that since her income was over 50% of her total available funds (approximately 53% if I treat the EIC as her funds) that she paid more than 50% of the cost of maintaining the home?

She is checking on this, but her mother (who does not live there) was helping her with the bills last year and may have paid as much as $3,000 towards the utility bills.

Hopefully, I am overcomplicating this. Thanks for any help you can provide. A reference or cite would be appreciated.

[appelman]

I can't find a reference,

But I would say that child support funds used to maintain household are not considered her contribution. EIC is her money.

[JG EA]

This may help one part of your post..

Pub 596

Income That Is Not Earned Income
Examples of items that are not earned income include interest and dividends, pensions
and annuities, social security and railroad retirement benefits (including disability
benefits), alimony and child support, welfare benefits, workers’ compensation benefits,
unemployment compensation (insurance), nontaxable foster care payments, and
veterans’ benefits, including VA rehabilitation payments. Do not include any of these
items in your earned income.

[WhiteOleander]

Child support is money attributed to the mother. It is not considered given to the children. So, it is funds available for the support of the house. She therefore paid more than half the cost of maintaining the house for the dependents.

[Koss]

Agree...

with WhileOleander.

The child support is money that belongs to the mother. She is receiving it from her ex so that she can support the children. And she may have a common-law obligation, or fiduciary duty, to use it to support her children (as opposed to, say, gambling the money away, or taking a lavish vacation without her children). But the money legally belongs to her once she receives it from the children's father.

If she is using it to pay more than half the cost of keeping up the home in which she and the children live, then clearly she is using the money for its intended purpose.

See Pub. 17, page 23, for a discussion of HOH status, and keeping up a home. It says:

Costs you include. Include in the cost of upkeep expenses such as rent, mortgage interest, real estate taxes, insurance on the home, repairs, utilities, and food eaten in the home.

If you used payments you received under Temporary Assistance for Needy Families (TANF) or other public assistance programs to pay part of the cost of keeping up your home, you cannot count them as money you paid. However, you must include them in the total cost of keeping up your home to figure if you paid over half the cost.

Costs you do not include. Do not include in the cost of upkeep expenses such as clothing, education, medical treatment, vacations, life insurance, or transportation. Also, do not include the rental value of a home you own or the value of your services or those of a member of your household.

This doesn't prove anything, because it's not the Internal Revenue Code or Treasury Regulations, and it doesn't specifically address the question at hand.

But it does tell us that a person cannot include public assistance when determining whether they paid more than half the cost of keeping up a home.

Expressio unius est exclusio alterius.

The express mention of one thing implies the exclusion of the other...

In other words, if you couldn't include child support used to pay household expenses, you would think the IRS would mention that in the same paragraph.

BMK

[appelman]

That is a non sequitur in either language.

with WhileOleander.

Expressio unius est exclusio alterius.

The express mention of one thing implies the exclusion of the other...

In other words, if you couldn't include child support used to pay household expenses, you would think the IRS would mention that in the same paragraph.

BMK

Lacking a definitive source, I remain skeptical.

[tpert]

Thanks all.

Not sure what I believe but I am leaning towards allowing the mother to treat the funds as being supplied by her and thus allowing her to claim HOH.

However, I am not sure I buy the argument from Koss completely.

Social Security Payments are intended to support the child (and documented in the child's social security number on a 1099-SSA) but are likewise paid to the parent for the benefit of the child. The major visible difference is that the father does not issue a 1099 with the child's Social Security Number on it when paying Child Support. However, even though Social Security Payments are not mentioned in the quote posted, I think we would agree that had the $32,000 been from Social Security, the mother would not be able to claim HOH.

[WhiteOleander]

I think you are confusing dependency and HOH. Soc Sec paid in the name of the child and child support are not interchangeable. The child support is not ever attributed to the child. You said the only difference is that the father will not issue a 1099 for the funds. It wouldn't matter if a 1099 were issued. The money goes to the mother, not the child. The mother can use the funds in anyway she chooses. Just as she can use any other funds available to her (ie wages, unemployment comp. etc) any way she chooses.

If she pays more than half the cost to keep the home for the dependent, she can claim HOH. No matter the source of the funds.

[jimfrombx]

You say she made $35,000 from her job. The cost of maintaining the home was $36,000. As there are no "tracing" rules to my knowledge her wages are more than 1/2 of the cost of maintaining the home.
And I agree with White Oleander and Kos that child support is also her money.

[dan doshan]

Unless I am missing something from the original post it seems clear to me that mom pays over half the cost of keeping up the home. If she didn't who on earth did?

[taxea]

My thought is child support is attributable to the child, This means that the child is paying his share of the household expenses. In this case unless mom has other income child appears to be paying all of the household expenses.
EIC is calculated on earned income isn't it? Child support is not earned income.

Anyone care to jump in?

[Jesse]

Child support is considered as support provided by both parents.

[Koss]

Child Support

I concede that this issue may not have a definite answer, in the sense that there may not be any clear guidance from the IRS, or any case law or regulations that address this question.

But much of the discussion so far has created a lot of confusion.

Child support is not analogous to social security benefits for the child. Social security benefits are a government entitlement that is paid to the child, and reported under the child's social security number. It is paid to the surviving parent because the child is a minor. These social security benefits are potentially taxable income to the child. In most cases, the child has little or no income from other sources. But if such other income exists, then the social security benefits become taxable to the child--not to the adult receiving the benefits as a nominee.

Child support is never taxable, and it is an obligation of one parent to the other parent. The noncustodial parent is not obligated to pay the funds to the child.

Think about this:

If the father fails to pay child support, he remains obligated to pay the delinquent amount to the mother, even after the child becomes an adult, and even if the child dies.

The child has no vested or even contingent interest in the funds.

Other comments in this thread appear to conflate the question of how we define support for the child with how we define payment of more than half the cost of keeping up the home. These two concepts are not the same.

The question of whether the child support payments are support paid by the mother or support paid by the father is irrelevant. The support test merely requires that the child not be paying more than half of his own support, and that issue is not in question here.

To the extent that that issue may be relevant, it supports my position that the child support payments belong to the mother, that she can use this money to pay for the cost of keeping up the home, and that she qualifies for HOH status.

If the money was considered to be money paid to the child by the father, and merely placed in the mother's hands because the child is a minor, then this could easily lead to the conclusion that the child is providing more than half of his own support. This is not how it works.

The money does not belong to the child. It belongs to the mother. If she is using it to pay household expenses, then it is she who is paying those expenses--not the child, and not the father.

BMK

[dan doshan]

Agree with Koss. Some seem to making way too much of this. Mom is HH. Child support she receives are funds she provides.

[WhiteOleander]

Agree with Koss.