Strange But Apparently True?

[ddoshan]

I have never really thought this thru or actually encountered a specific situation in which a client could be claimed as a dependent and may actually be claimed, but still qualify to file and get the EITC with a qualifying child. Maybe everyone was aware of this and I guess I was also, but never actually encountered the situation until this morning. Somehow it just does not feel quite right.

[Gary2]

Someone who is a qualifying child can never claim EITC. But someone who is a qualifying relative and has a qualifying child might be able to.

[ddoshan]

Yes, I did mean to reference someone who might be claimed as a qualifying relative on someone else's return. For example, maybe a live in friend or whoever who actually provides over half of the support.

[Koss]

Agree

Yes, it is possible.

A qualifying child cannot have a qualifying child.

A dependent cannot have a dependent.

But it is possible for a dependent to have a qualifying child who is not their dependent.

Guy supports girlfriend and her child. Girlfriend made $3,000 in wages.

Guy claims girlfriend as qualifying relative.

Girlfriend claims zero exemptions. She herself is a dependent, and she has no dependents. But she can still claim EIC with a qualifying child.

On this fact pattern, the girlfriend may choose not to claim the child. If she does not claim the child, then she is not even required to file a return. She can file a return without claiming the child, only to get a refund of tax withheld. She would have zero tax liability. If she makes this choice, then she is not eligible for EIC without a qualifying child, because she is a dependent of someone else.

If she chooses not to claim EIC with the child, then under the EIC rules, she is not a taxpayer, because she is not required to file, or files only to get a refund of tax withheld.

Therefore, if she chooses not to claim EIC with the child, then the child may be the dependent of her boyfriend under the rules for a qualifying relative--if all the criteria are met.

They do have a choice. If the guy is in a high tax bracket, the value of the exemption for him may be greater than the value of EIC for her.

But she has veto power. Parent always wins the tie-breaker.

BMK