New client. MFJ total income is $64,710. on top of that their is two young girls each get $15,564 social security EACH. I asked the Mom what does she do with the money and she said spends it on household items and everyday items, just spends it. Nothing goes into the bank for the girls. So total household income would be $95,834 for the year of which $31,128 comes from the 2 girls social security. My logical thinking is that you take the total income $95,838 and divide it by 4 (# of people in H/H) = $23,960 each. And if the girls get $15,564 soc sec EACH, that is 65% of their allocated amount. So the girls would be supporting themselves more than 50%. Is my thinking correct here? And realistically I doubt that the parents are actually spending $15K on each girl. Probably more like the girls are help supporting their parents. What do you do in this case? TIA.
-
-
You help the parents fill out the support worksheet so everyone understands if the girls paid more than half their own support. Keep a copy for your files and give a copy to the parents. If your software doesn't have one, use the worksheet in IRS Pub. 501. -
Actually, the two are related in that the taxpayer who used the funds solely for the benefit of the children based on the documentation provided to Social Security probably should not be using contradictory information to claim them as dependents. Social Security does allow that the funds be put into savings for the children which can make it easier for the child to be treated as a Qualifying Child.DougComment
-
No. You should study up in Pub 17 on support, it does not work at all as you describe here. Support is based on two things: what did it cost, and who paid it. Income is never a direct factor. For example, money for support can come from debt financing, gifts, or savings. And income can be spent on things other than support, such as savings, or paying down debt. Since it is a MFJ return, perhaps you need tin interview the other spouse as well as part of your due diligence.Originally posted by nwtaxlady View Post
"You said it, they'll never know the difference. Come on, we'll paint our way out!" - Moe HowardComment
-
This comment does not address the original post, but social security eligibility is an interesting topic.
Over the years I've heard of retirees on social security having children & the kids then become eligible to collect substantial monthly benefits.
Had my children in my 20's ( I'm nearing age 70 now ) and don't mean to be critical of anyone here, but it kinda seems that if this is true, the
social security system is providing something of a financial incentive for old people to have children.
With the SS system seemingly teetering on the edge, how can this make sense for the long term health & survival of the program ?
Comment
-
I have a couple different clients who married for the first time in their 40s. One had a couple children in her late 40s; the other adopted a couple of children overseas a few years apart. Due to unexpected health/family issues, both dads starting drawing SS benefits at 62 (one was early-onset Alzheimers; the other downsizing of both parents lowered their earned income) when at least one child was still under 18 so also receiving benefits. Neither thought they were old when they had kids (although the OB/GYN of one of the mothers told her she was old) nor thought their earning power would drop before all their children finished high school. Both dads gave up the increased benefits they would've been due at FRA to start drawing at 62 due to unplanned income drops. I'm glad they have that safety net.
I'm glad you were able to have your children in your 20s. I wanted to, but nature disagreed and gave me children at 34 and 40. Our health and earning is OK so we both postponed SS until 70, but our kids wouldn't have been eligible to draw benefits unless nature postponed another 3+ years.Comment
-
I have always had an issue with this. Have had clients who qualified, usually with second marriages, but not always. Our president is one who would qualify with an adolescent child. I know he doesn't take a salary, but he never mentioned whether he gives back the SS benefit. Not even sure you can do that, anyway. I have always felt this particular benefit should be income-based at the very least, if not eliminated. The system cannot be sustained as is, and this benefit has been addressed in Social Security reform along with other reasonable adjustments, like raising FRA. We did it once; we can do it again.Originally posted by RWG1950 View PostLast edited by Burke; 03-15-2020, 01:29 PM.Comment
-
I agree. I have an older sibling who at an old age had a third child who qualifies for SS benefits, but neither he nor the child need it. On the other hand, he also is subject to the WEP (windfall elimination provision) so he doesn't get anywhere near the full retirement benefit he theoretically paid for. But then, OASDI is insurance (it's right there in the name), not an investment in an annuity, even though most people treat it that way. I've paid tens of thousands of dollars to insurance companies for which I've never received one penny in return.Originally posted by Burke View Post
Along with other reasonable adjustments, like raising or eliminating the Soc. Sec. wage limit for FICA.Originally posted by Burke View Post
"You said it, they'll never know the difference. Come on, we'll paint our way out!" - Moe HowardComment
-
What is this social security (WEP) windfall elimination provision ?Comment
-
I don't know all the details, but essentially it means if you have a "full" government pension (from fed or state employment), based on wages that were not subject to FICA, and then you also had additional non-government employment that was subject to regular FICA, you get your SS benefits based on the FICA wages reduced (WEP), since you are also getting a separate government-sponsored pension.Originally posted by RWG1950 View Post"You said it, they'll never know the difference. Come on, we'll paint our way out!" - Moe HowardComment
Comment