Lump Sum Payment

[Super Mom]

I have a client who got SS/disability lump sum pay and her kids did too. I'm assuming I just fill out her SS income just like any other SS recipient and just report the kids that had other income as SS income, the smallest kid that had no other income I know is not taxable. Am I right?

[New York Enrolled Agent]

I have a client who got SS/disability lump sum pay and her kids did too. I'm assuming I just fill out her SS income just like any other SS recipient and just report the kids that had other income as SS income, the smallest kid that had no other income I know is not taxable. Am I right?

When the child receives a lump sum payment such as this, they may fail the test in §152(c)(1)(D) to be a qualifying child.

[TaxGuyBill]

If any of the Social Security is taxable, you can try the alternative Lump Sum calculation. Otherwise, yes, that sounds correct.

https://www.irs.gov/publications/p915#en_US_2017_publink100097893

As New York Enrolled Agent pointed out, if the children received a large amount of money, you may need to run to the calculations to ensure that the children did not pay for over 50% of their own support.

https://apps.irs.gov/app/vita/content/globalmedia/teacher/worksheet_for_determining_support_4012.pdf

[Rapid Robert]

As New York Enrolled Agent pointed out, if the children received a large amount of money, you may need to run to the calculations to ensure that the children did not pay for over 50% of their own support.

I don't understand what receiving income per se has to do with support. Support is a matter of what it cost and who paid it. Income is not a factor. A child could receive $10 million income and still not pay over half of their own support.

[TaxGuyBill]

In many cases, receiving income results in spending that income, so you need to run the support tests to see what was paid for by the children. What is why I stated to ensure the children did not pay for over 50% of their own support.

[Rapid Robert]

In many cases, receiving income results in spending that income, so you need to run the support tests to see what was paid for by the children. What is why I stated to ensure the children did not pay for over 50% of their own support.

Sure, but I think there are many tax preparers who don't really understand that support is not DIRECTLY related to income in any way.

As a hypothetical (since I suspect the issue rarely gets examined to such a degree), isn't a parent legally responsible for supporting their children? I wonder whether the parent can legally take money belonging to the child, such as a gift, or Soc. Sec. income, and spend it on the child's basic support? Maybe it depends on state law? I'm sure it happens, but my question is, in a perfect world, under what circumstances can a parent take a child's property and spend it on the child? I'm sure there are some situations, but what are they?

Put another way, why would a child, living with parents, yet acting in his own best interests, choose to spend his own money on basic support expenses, rather than saving it for future?

Then again, why do children even get SS benefits in the first place? Seems to me, similar to child support payments from the other parent, that the SS money for the child should just go to the parent.