Anyone think there is any chance that a child who receives an annuity after reaching age 18 from a malpractice suit due to a problem at birth could be considered as support not provided by the child, thereby passing the qualifying child test. Makes quite a difference for a client I had on April 15th. I filed as if the child provided over 50% of her own support. The annuity is 1500 dollars a month. The child is now 19 and in college but her parent's is still her main home.
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I think it would be treated as the child providing her own support, unless she could show she put it all into savings. -
Personal Injury Annuity
1. This sounds like a structure settlement.
2. Is the annuity for compensation for personal injuries? If so, it is not taxable to the child or child's estate if child has a guardian/conservator/whatever.
3. That said, there is a good argument that this sum is not taxable at all (unless there is some interest or something like that invovled).
4. The IRS issued a new audit technique guide on personal injury settlements in May, 2011 with some updates or revisions in December, 2012.
5. How is the annuity reported to the receipient?
6. Have you, the preparer, seen the settlement agreement/award or whatever? If not, why not?
7. If the child is still a full time college student undger age 24 the child may still be the parent's dependent and qualifying child and all that. Particulary if the child has to "pay" the parents or a third party for care and/or accomdations.
8. If the child is cosidered disabled the annuity payments may or may not be an issue. And, there may be some "dependent care" issues.
9. Burke has a point, but it may be wise to revisit the issue with the taxpayer, the child (assumign child is capable of responding), and OFTB.
10. I would have listed the child as a dependent. But I would have wanted to see the reporting document(s).
11. Is the child or are the parents receiving any governmental benefits (SSI, etc) for the child if disabled?Friends double; family triple. Don't buy an audit for yourself. If someone has to go to jail make sure it is the client. Remember it is only taxes, nothing important.Comment
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The issue of taxation of the annuity was not addressed in the OP. It's the dependency question and whether or not the support test is met for QC. That may depend on what she did with the money. See support worksheet in TTB, 16-9.Last edited by Burke; 04-18-2013, 08:57 AM.Comment
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Exactly ... Whether or not the annuity is taxable was not my dilemma. It is the daughters annuity from a malpractice suit due to some problem at birth. The daughter gets 1500 dollars a month from this annuity. She uses the funds for college tuition, housing, food, clothes, etc. There is no way she does not provide over 50% of her own support. The mom is a single mom and I was just reaching out as to whether or not the annuity could possibly be considered as support considered not provided by the child much as SSI and some other benefits are not. Thereby making the child a qualifying child of mom and opening up various tax benefits.Originally posted by Burke View PostComment
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Unlikely
Mom can claim the child as a dependent. But mom may get eitc.Originally posted by ddoshan View PostComment
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