EIC, CTC, Dependent Exemption for Grandparents Caring for Granddaughter

[Steve Stang]

I have a couple who are supporting their grandchild who has lived with them F/T for more than 3 years. The mother of the child is deceased and the father lives more than 3 hours away providing no financial support. The grandparents receive SSI and a W2. The grandchild receives SSI as well. They already care for a disabled adult son - who should qualify for EITC. Raising a 10-year old is certainly an added financial burden. The father has always claimed the daughter and probably gets the CTC (don't know his income for EITC) but it certainly seems unfair.

Grandparents file 1040 with itemized deductions (medical, mortgage interest, property taxes, charity). AGI of about $35k and taxable income of $4500.

The granddaughter meets all the dependency rules (qualifying relative, support, residency, US citizen, unmarried, etc.).

The way I read things, the father would likely win if challenged by IRS if the grandparents were to try to claim EITC as he is the parent - though not the custodian.

Can I at least get the grandparents the dependency exemption and CTC even if not EITC? I think I can override my software and check off that the grandchild is not EIC eligible and just use the other credit and deduction.

Thoughts and feedback appreciated.

[TaxGuyBill]

From your description, the child does not meet the residency test for the father. The father can not claim the child at all.

http://www.irs.gov/publications/p501/ar02.html#en_US_2013_publink1000220898

http://www.irs.gov/publications/p596/ar02.html#en_US_2013_publink1000297706

Therefore the grandparents can claim everything.

[Gretel]

I agree, if child does not live with father, only grand parents can claim the child. If he does not even provide any support (or maybe anyway) I would encourage the grand parents to amend the last tax returns and claim the grandchild.

[Steve Stang]

I could try to amend prior years but that is a whole different can of worms as father has received the tax benefits and would cause a host of issues. The grandparents are not that concerned about prior years (keeping peace in the family) but are concerned about this year.

I'm reading the dependency test chart on TB 3-20 and it just seems that the grandparents should be able to claim her for at least the exemption and possibly the EITC.

But I'm just concerned about whether I'm reading the rules about income and tie-breakers correct. It just seems wrong that the parent (even a non-custodial one) has a right that supersedes the taxpayers who are actually providing care.

[Steve Stang]

From your description, the child does not meet the residency test for the father. The father can not claim the child at all.

http://www.irs.gov/publications/p501/ar02.html#en_US_2013_publink1000220898

http://www.irs.gov/publications/p596/ar02.html#en_US_2013_publink1000297706

Therefore the grandparents can claim everything.

I want to thank you both. I think that they can claim all benefits but just wanted to make sure. I know that the father will not be happy and there will be issues when the IRS gets the same child claimed by both taxpayers.

While the grandparents have lots of documentation to support this position, I was concerned by numerous other older postings on similar topics from 2005/2006 with forum replies indicating that the parent's claim would rule.

[TaxGuyBill]

I want to thank you both. I think that they can claim all benefits but just wanted to make sure. I know that the father will not be happy and there will be issues when the IRS gets the same child claimed by both taxpayers.

While the grandparents have lots of documentation to support this position, I was concerned by numerous other older postings on similar topics from 2005/2006 with forum replies indicating that the parent's claim would rule.

If the child also lived with the father, you are right. The parent would get to claim the child. However, if your case, the child is NOT a "qualifying child" of the father. The child is ONLY the qualifying child of the grandparents, so the tie breaker rules do not come into play.

[Steve Stang]

If the child also lived with the father, you are right. The parent would get to claim the child. However, if your case, the child is NOT a "qualifying child" of the father. The child is ONLY the qualifying child of the grandparents, so the tie breaker rules do not come into play.

Thanks again for your help and prompt response.

As an aside, I'd just like to see a tax lawyer actually do one of these types of returns. They know how to write the rules but I'm sure they couldn't get this straight. Just my two cents.