ISRP for a non-dependent? Really?

[Possi]

I just got this from NATP, and I am confused. Here is the Q&A, followed by my question:

"Question: Your clients are the parents of a 27-year-old son who lived with them all year. The son has not been able to find a job after college, had no income for the year and was not covered by health insurance. Mom and dad provide more than half of his support. Can mom and dad avoid paying the individual shared responsibility payment (ISRP) penalty (i.e., individual mandate penalty) for their son by not claiming him as a dependent?

Answer: No. Simply not claiming an eligible dependent on a tax return will not avoid the penalty. Taxpayers are liable for the ISRP penalty for themselves and their dependents. An individual is a dependent of a taxpayer for a taxable year if the individual satisfies the definition of dependent under §152, regardless of whether the taxpayer claims the individual as a dependent on a Federal income tax return for the taxable year [Reg. §1.5000A-1(c)(2)]. "

Here's my question:
If the son is 27, he would qualify as a "qualifying relative" and I thought the parents would certainly have an option not to claim him on their tax return. This baffles me. Would they also be forced to pay the penalty for any other "qualifying relative" who lived with them and had no income? I just don't get it. Am I reading something wrong?

[TaxGuyBill]

The penalty applies to anybody that CAN be claimed as a dependent (even if they don't claim the dependent), including qualifying relatives.

If more than one person has the ability to claim the potential dependent, the person who would win the 'tie breaker' rules is responsible for the penalty.


As a practical matter, it would be unusual that the IRS would be able to identify somebody that COULD be claimed as a dependent but is not claimed.

[New York Enrolled Agent]

"Question: Your clients are the parents of a 27-year-old son who lived with them all year. The son has not been able to find a job after college, had no income for the year and was not covered by health insurance. Mom and dad provide more than half of his support. Can mom and dad avoid paying the individual shared responsibility payment (ISRP) penalty (i.e., individual mandate penalty) for their son by not claiming him as a dependent?

I think the language in §5000A suggests the penalty is anyone who satisfies the DEFINITION of dependent - it appears irrelevant whether or not the dependent is claimed on the return.

(3) Payment of penalty

If an individual with respect to whom a penalty is imposed by this section for any month--


(A) is a dependent (as defined in section 152) of another taxpayer for the other taxpayer's taxable year including such month, such other taxpayer shall be liable for such penalty, or ...

The definition of qualifying relative has 4 conditions - if you satisfy the 4 conditions you are a qualifying relative. In §152(a) a dependent means qualifying child or qualifying relative. The definition doesn't say you claim them as an exemption on Form 1040

[David1980]

Almost seems like you could accidentally subject yourself to the penalty. The girlfriend living with you doesn't have insurance kind of thing. I doubt that's something that comes up much in discussions of "moving in together".

[spanel]

Almost seems like you could accidentally subject yourself to the penalty. The girlfriend living with you doesn't have insurance kind of thing. I doubt that's something that comes up much in discussions of "moving in together".

I think this year.. it will still be better to claim these dependents than not most of the time. Now.. 2015/2016+ that might not be the case.

Chris