Are taxpayers required to report all dependents on their tax return?

[mikeburg]

I have a client who is getting a refund of $4,700 if he claims not dependents.
If he claims his 30 year son, the refund goes to $3,950.
His 30 year old son qualifies as a dependent of the client but has not health insurance for 2015.

Are taxpayers required to report all dependents on their tax return?

Are there any other liability issues here?

Thank you for any & all information & ideas.

mikeburg

[TaxGuyBill]

No, he is not required to claim the son as a dependent. I think you are fine doing it that way.

[Gretel]

Tax Household

I believe the penalty needs to be paid for the dependent if claimed or not. The definition of "Tax Household" for form 8965 includes dependents that the taxpayer chooses not to claim.

[TaxGuyBill]

I believe the penalty needs to be paid for the dependent if claimed or not. The definition of "Tax Household" for form 8965 includes dependents that the taxpayer chooses not to claim.

That's what I used to think too, but when you navigate the legal gibberish, if the dependent's income is below the filing threshold, there is no penalty if that person is not actually claimed as a dependent.

[Rapid Robert]

if the dependent's income is below the filing threshold

I don't remember seeing that as one of the facts given up front, maybe I just missed it. Oh wait, you're saying that if he's a 30 yr old dependent, his income must be below the filing threshhold. OK lemme think about that for a moment.

[New York Enrolled Agent]

That's what I used to think too, but when you navigate the legal gibberish, if the dependent's income is below the filing threshold, there is no penalty if that person is not actually claimed as a dependent.

TGB - there is still much confusion on this topic so I'm not prepared to fall on the sword for this but I don't think the gross income of the dependent under the filing threshold allows the taxpayer an escape from the penalty for a non-claimed dependent who does not have health insurance..

Take a look at Reg. §1.500A-1(c)(2). What do you think?

[New York Enrolled Agent]

Oops, make that §1.5000A-1(c)(2)

[taxea]

I believe the penalty needs to be paid for the dependent if claimed or not. The definition of "Tax Household" for form 8965 includes dependents that the taxpayer chooses not to claim.

I thought the 8985 only included persons claimed as your dependents. If you have six adults living in a house, sharing rent, why would you have to declare whether or not they have health insurance if you are not supporting them?

[taxea]

I have a client who is getting a refund of $4,700 if he claims not dependents.
If he claims his 30 year son, the refund goes to $3,950.
His 30 year old son qualifies as a dependent of the client but has not health insurance for 2015.

Are taxpayers required to report all dependents on their tax return?

Are there any other liability issues here?

Thank you for any & all information & ideas.

mikeburg

I wouldn't put it past the govt to call this a fraudulent return. Is this son disabled? Did he have any income? Is he filing for a refund?

[Snaggletooth]

Age disqualifier

Has anyone brought up the fact that the son is too old to claim as a dependent (unless permanently disabled)?

He is too old even at 24 unless permanently disabled.

We are living in an era where adult children (some even older than 30) move back in with mom and dad because they can't find or keep gainful employment. This was virtually unheard of when I was 30.

So does he have to claim him as a dependent? Not only is he not required, he simply can't.

Household income and coverage requirements might be another conversation. Household income (from TTB) is AGI of "each individual in the tax household whom the taxpayer can claim as a dependent and who is required to file his/her own tax return." If the 30-year old can't be claimed as a dependent, then taxpayer is apparently off the hook.

[David1980]

Has anyone brought up the fact that the son is too old to claim as a dependent (unless permanently disabled)?

He is too old even at 24 unless permanently disabled.

We are living in an era where adult children (some even older than 30) move back in with mom and dad because they can't find or keep gainful employment. This was virtually unheard of when I was 30.

So does he have to claim him as a dependent? Not only is he not required, he simply can't.

Household income and coverage requirements might be another conversation. Household income (from TTB) is AGI of "each individual in the tax household whom the taxpayer can claim as a dependent and who is required to file his/her own tax return." If the 30-year old can't be claimed as a dependent, then taxpayer is apparently off the hook.

Age doesn't matter under the qualifying relative rules however. They won't be a qualifying child for EIC and the such (unless permanently disabled) but can still be a dependent. Think of people that claim their parents as dependents. Safe bet the parent is age 24 or older.

[Rapid Robert]

If you have six adults living in a house, sharing rent, why would you have to declare whether or not they have health insurance if you are not supporting them?

Because if they are not Qualifying Children and you are not supporting them >50% or their gross income is over the exemption amount, then they cannot be claimed as your dependents. This discussion thread is about people who can be claimed as dependents.

I'm astounded that ten years after UDC rules went into effect, folks in this thread still seem to have basic misconceptions about the rules for dependency.

As for a dependent having income below the filing threshold not needing insurance coverage, that would be like saying anyone's young kids don't need insurance coverage and can thereby avoid the SRP. Clearly not the case. The intent of the law was to require EVERYONE to have minimum essential coverage, unless they meet one of the exemptions.

Now when it comes to CALCULATING the penalty, I vaguely recall that household income wouldn't include a dependent's income if you don't claim them or something like that, but I haven't researched it.

[TaxGuyBill]

Yes, but if you look at the beginning of that, it applies "if the nonexempt individual is a dependent".

"Nonexempt". Now, let's look at §1.5000A-3 to see if the dependent is "exempt" or "nonexempt".

Let's focus on the exemption for having income below the filing threshold in (f). In (f)(2)(ii), we see that "The applicable filing threshold for an individual who is properly claimed as a dependent by another taxpayer is equal to the other taxpayer's applicable filing threshold."

"who is properly claimed". So if a dependent is IS actually claimed ("who is properly claimed"), then the "filing threshold" is based on the parent (or other person that can claim the dependent). However, if a dependent is NOT actually claimed, then the exemption for income below the filing threshold is ONLY based on the dependent's income.


Does that make any sense?

[TaxGuyBill]

TGB - there is still much confusion on this topic so I'm not prepared to fall on the sword for this but I don't think the gross income of the dependent under the filing threshold allows the taxpayer an escape from the penalty for a non-claimed dependent who does not have health insurance..

Take a look at Reg. §1.500A-1(c)(2). What do you think?

Yes, but if you look at the beginning of that, it applies "if the nonexempt individual is a dependent".

"Nonexempt". Now, let's look at §1.5000A-3 to see if the dependent is "exempt" or "nonexempt".

Let's focus on the exemption for having income below the filing threshold in (f). In (f)(2)(ii), we see that "The applicable filing threshold for an individual who is properly claimed as a dependent by another taxpayer is equal to the other taxpayer's applicable filing threshold."

"who is properly claimed". So if a dependent is IS actually claimed ("who is properly claimed"), then the "filing threshold" is based on the parent (or other person that can claim the dependent). However, if a dependent is NOT actually claimed, then the exemption for income below the filing threshold is ONLY based on the dependent's income.


Does that make any sense?

[TaxGuyBill]

Sorry about the duplicate posts, it would not let me edit it to include the quote, and in my efforts to edit it I accidentally created a duplicate post.