Bill Tubbs invited my input on a question that was posted on the ATX board. I am reproducing the thread here.
I agree with Bill's conclusion, but with different reasoning.
First: the 20 year old college student cannot possibly claim EIC on his own tax return. He does not qualify for EIC for individuals without a qualifying child because he is under age 25. While I concede that in theory his younger brother could be his qualifying child, that child is also the qualifying child of the parents, and the parents have the superior claim. If we assume that the parents do indeed claim EIC for the younger child, then there is no way the 20 year old can possibly be eligible to claim EIC on his own tax return.
I am now going to assume, for this discussion, that the 20 year old is in fact providing more than half of his own support. This means that he fails the support test for the parents. For purposes of the dependent exemption, the 20 year old is not their qualifying child. With income of $9100, he fails the gross income test for qualifying relative. Therefore, the parents cannot claim a dependent exemption for their 20 year old child.
But the support test does not apply to the definition of a qualifying child for EIC. And there is nothing in the IRC or the IRS publications that says that a person has to be your dependent in order to be a qualifying child for EIC. As Bill Tubbs observed, the "uniform definition" notwithstanding, the criteria for EIC are not the same as the criteria for claiming a dependent exemption.
There is no reason why the parents cannot claim EIC for the 20 year old. And there is no reason why the 20 year old cannot claim his own exemption. There is no conflict here, and this is not an aggressive or controversial position. This interpretation does not involve "splitting benefits."
Like Bill Tubbs, when it comes to UDC, I believe that the IRS instructions do not accurately reflect the language of the Internal Revenue Code. I also believe that both the IRS instructions and the Code contain serious defects and internal inconsistencies that cannot be resolved except by changing the law. I have authored a number of posts and some privately published web articles, and I have advanced some rather controversial arguments concerning the division of benefits and the issues that arise in nonstatutory families (unmarried-couple-kid-is-hers-but-not-his).
But my interpretation of the scenario described above does not hinge on my controversial interpretation of UDC. Even if you accept everything in the IRS instructions at face value, allowing the parents to claim EIC for the 20 year old while the 20 year old claims his own exemption does not result in "division of benefits."
A personal exemption is not a dependent exemption.
No one can ever claim himself as a dependent or a qualifying child, or a qualifying relative. These terms define a relation that can only exist between two distinct individuals.
When you claim your own exemption, you are not "claiming yourself" as a qualifying child or qualifying relative. You are not your own dependent. You are independent, which means that you are not a dependent of another person. If you are 27 years old with no children, and you are not a student, and your income is only $4800, you can claim EIC. But you are not your own qualifying child. You are claiming EIC under the code section that allows EIC for individuals who do not have a qualifying child.
The distinction between a personal exemption and dependent exemption may be rather subtle, but it is not just a word game. These exemptions arise under totally different code sections. They are described in different sections of the IRS instructions, and they appear on different lines of Form 1040.
According to the IRS, division of benefits is not allowed. But division of benefits occurs when two different taxpayers claim one or more benefits for the same qualifying child. The IRS has taken the position that this is prohibited even if the two taxpayers are claiming two different benefits.
But the 20 year old in this scenario is not claiming any benefits for any qualifying child. He is merely claiming his own personal exemption, which he is entitled to as long as he does not meet the criteria to be claimed as a dependent by his parents.
When the parents claim him as a qualifying child for purposes of EIC only, they are claiming the benefit of EIC for their qualifying child. And no other taxpayer is claiming any benefits for that qualifying child. A taxpayer's own personal exemption is not one of the five benefits associated with a qualifying child.
I'm not going to provide direct citations unless someone asks for them. The distinction between a personal exemption and a dependent exemption is clear when you carefully read the IRS instructions and the code. The different types of exemptions are discussed in different sections, with different headings. There is actually a third type of exemption: the exemption for your spouse. Pub. 17 has a line that says, "Your spouse is never your dependent." The next paragraph, which very few people have ever read, explains that under certain circumstances it is possible for a taxpayer to claim an exemption for her spouse even if the filing status is Married Filing Separately.
It is certainly true that a person who is claimed as a dependent by another taxpayer cannot claim their own personal exemption. It is also true that a person who is claimed as a dependent by another taxpayer is "treated as having no dependents," and therefore cannot claim any dependent exemptions.
But a personal exemption is not a dependent exemption. When you claim your own exemption, you are not "claiming yourself as a dependent." An individual cannot be a dependent of himself or herself.
For the mathematicians among us: Dependency is not a recursive function.
Burton
Originally posted by SDCPA
Originally posted by Bill Tubbs
First: the 20 year old college student cannot possibly claim EIC on his own tax return. He does not qualify for EIC for individuals without a qualifying child because he is under age 25. While I concede that in theory his younger brother could be his qualifying child, that child is also the qualifying child of the parents, and the parents have the superior claim. If we assume that the parents do indeed claim EIC for the younger child, then there is no way the 20 year old can possibly be eligible to claim EIC on his own tax return.
I am now going to assume, for this discussion, that the 20 year old is in fact providing more than half of his own support. This means that he fails the support test for the parents. For purposes of the dependent exemption, the 20 year old is not their qualifying child. With income of $9100, he fails the gross income test for qualifying relative. Therefore, the parents cannot claim a dependent exemption for their 20 year old child.
But the support test does not apply to the definition of a qualifying child for EIC. And there is nothing in the IRC or the IRS publications that says that a person has to be your dependent in order to be a qualifying child for EIC. As Bill Tubbs observed, the "uniform definition" notwithstanding, the criteria for EIC are not the same as the criteria for claiming a dependent exemption.
There is no reason why the parents cannot claim EIC for the 20 year old. And there is no reason why the 20 year old cannot claim his own exemption. There is no conflict here, and this is not an aggressive or controversial position. This interpretation does not involve "splitting benefits."
Like Bill Tubbs, when it comes to UDC, I believe that the IRS instructions do not accurately reflect the language of the Internal Revenue Code. I also believe that both the IRS instructions and the Code contain serious defects and internal inconsistencies that cannot be resolved except by changing the law. I have authored a number of posts and some privately published web articles, and I have advanced some rather controversial arguments concerning the division of benefits and the issues that arise in nonstatutory families (unmarried-couple-kid-is-hers-but-not-his).
But my interpretation of the scenario described above does not hinge on my controversial interpretation of UDC. Even if you accept everything in the IRS instructions at face value, allowing the parents to claim EIC for the 20 year old while the 20 year old claims his own exemption does not result in "division of benefits."
A personal exemption is not a dependent exemption.
No one can ever claim himself as a dependent or a qualifying child, or a qualifying relative. These terms define a relation that can only exist between two distinct individuals.
When you claim your own exemption, you are not "claiming yourself" as a qualifying child or qualifying relative. You are not your own dependent. You are independent, which means that you are not a dependent of another person. If you are 27 years old with no children, and you are not a student, and your income is only $4800, you can claim EIC. But you are not your own qualifying child. You are claiming EIC under the code section that allows EIC for individuals who do not have a qualifying child.
The distinction between a personal exemption and dependent exemption may be rather subtle, but it is not just a word game. These exemptions arise under totally different code sections. They are described in different sections of the IRS instructions, and they appear on different lines of Form 1040.
According to the IRS, division of benefits is not allowed. But division of benefits occurs when two different taxpayers claim one or more benefits for the same qualifying child. The IRS has taken the position that this is prohibited even if the two taxpayers are claiming two different benefits.
But the 20 year old in this scenario is not claiming any benefits for any qualifying child. He is merely claiming his own personal exemption, which he is entitled to as long as he does not meet the criteria to be claimed as a dependent by his parents.
When the parents claim him as a qualifying child for purposes of EIC only, they are claiming the benefit of EIC for their qualifying child. And no other taxpayer is claiming any benefits for that qualifying child. A taxpayer's own personal exemption is not one of the five benefits associated with a qualifying child.
I'm not going to provide direct citations unless someone asks for them. The distinction between a personal exemption and a dependent exemption is clear when you carefully read the IRS instructions and the code. The different types of exemptions are discussed in different sections, with different headings. There is actually a third type of exemption: the exemption for your spouse. Pub. 17 has a line that says, "Your spouse is never your dependent." The next paragraph, which very few people have ever read, explains that under certain circumstances it is possible for a taxpayer to claim an exemption for her spouse even if the filing status is Married Filing Separately.
It is certainly true that a person who is claimed as a dependent by another taxpayer cannot claim their own personal exemption. It is also true that a person who is claimed as a dependent by another taxpayer is "treated as having no dependents," and therefore cannot claim any dependent exemptions.
But a personal exemption is not a dependent exemption. When you claim your own exemption, you are not "claiming yourself as a dependent." An individual cannot be a dependent of himself or herself.
For the mathematicians among us: Dependency is not a recursive function.
Burton
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