CTC for Non-Dependents

[jainen]

Why... ??

>>Why... ??<<

How long have you been in this business, Sandy? You know that "Why?" is the question we can never answer. It's just because Congress or the courts or the IRS says so, that's why.

If you want to know why jainen says so, in this case it's because I read it on page 31 of Pub 17. Yes I can see, that's supposed to be for qualifying relative, but the qualifying child rules also say go there to answer the same question. I don't usually rely on Pub 17, but I've never had occasion to research the underlying authority on this point. I believe it because it's an old rule dating back to before there was any need to distinguish the dependents "own" support.

[S T]

J- you don't know?

Oh cmon Jainen,

You always have an answer and explanation for everything!

I just have been fussing with this situation and circumstance way too long, just like Snags, and trying to apply the rules and regulations.

so the support issue and children receiving SSA benefits on one client that lost her husband is throwing me for a loop.

Like Veritas said on another post, the income isn't taxable, so the t/p should be thankful for that, but on the other hand, well I just don't know what to say.

Support worksheet is not in favor of the parent based on the benefit amount, unless she can explain and prove that $$ went to savings, which I doubt.

So still working at filing status and dependent qualifying! If I don't make HOH I wont make the dependent deduction either.

Sandy

[Black Bart]

Sorry to be so thick-headed, and I know but

...not...every child...meets the qualifying child rules. Maybe they don't live in the home half the year, or maybe too old. In that case you can still fall back on the old rules, which are now called qualifying relative...

answer/confirm this for me and then I think maybe I've got it. I was looking at those two test boxes in the pub and:

For dependency, are you saying that if the kid, for whatever reason, doesn't meet the "qualifying child" standard, then you can simply switch over to the "qualifying relative" side of the page and if you (the parent) meet the four tests there, one of which is you provided more than half the support, then you've got him/her?

And, if that's so, does the same thing apply for CTC?

If you make me "evaluate the issues" I'll hound you to the ends of the earth.

[S T]

I think so

BB,

Yes I think that is correct, but then I am never sure anymore! For me the "support" is the issue! So not sure about the CTC which is what Snags issue was!

Jainen I am sure will confirm for you.

Sandy

[jainen]

No I won't

>>Jainen I am sure will confirm for you<<

No I won't. While there are two ways to qualify for dependent, Head of Household, and Child/Dependent care credit, you have to have a qualifying child for CTC and EIC. (Well, CTC works with a Form 8332, so I guess that's a second way too.)

Now aren't you glad you asked me to clarify this?

[Brad Imsdahl]

Here is my take - correct me if I'm wrong....

The old support test rules where the taxpayer has to provide over 50% of total support no longer apply. The over 50% support test now depends on whether it is a qualifying child or a qualifying relative.

Under the qualifying relative rules, the taxpayer must still provide over 50% of the relative’s support, with the exception of the rules for divorced parents or multiple support agreements.

Under the qualifying child rules, the requirement is the child cannot have provided over 50% of his or her own support. It does not say the taxpayer has to provide over 50% of the total support.

A typical example of this is where Grandma, Mom, and 5 year old daughter live in the same house. Grandma pays 90% of the child’s support, Mom pays the other 10%. Mom is not a dependent of Grandma because she is 25 and makes over $3,300 total income.

Therefore, the child is a qualifying child of Mom even though she did not provide the most support for the child.

In your situation, an adopted child or a foster child can be a qualifying child of the taxpayer, if all other tests are met, including the rule that the child cannot have provided more than 50% of his or her own support. TTB page 3-19 lists foster care payments, welfare benefits, Social Security benefits, and similar payments as not coming from the taxpayer. It does not say whether these payments are considered to have come from the child or not. So it depends on the circumstances.

If mom is on welfare because she is poor and has kids, the welfare benefits are not support provided by mom, nor are they support provided by the child. It is support provided by a third party. However, if mom and all of her kids receive family survivor benefits from Social Security, then mom can only include her own Social Security benefit as coming from her support. The child’s Social Security benefit would be considered support provided by the child. This is because the child receives the Social Security benefit as a direct payment to the child, and potentially taxable on the child’s return. However, even in this case, it is not considered support provided by the child unless the benefits are actually used for the child’s support.

So you still have to do a worksheet analysis with three columns; 1) Money provided by parent to support the child, 2) Money provided by child to support the child, 3) Money provided by a third party such as state foster care payments or welfare to support the child.

Under the qualifying child rules, number 2 above cannot be greater than 50% of total support.

[jainen]

You are right

>>The old support test rules where the taxpayer has to provide over 50% of total support no longer apply.<<

You are right, but I have two comments.

I prefer to say that the old rules haven't changed at all. All that is new is the qualifying child category, but when that doesn't fit, the old rules are as good as ever. They just have a new name.

In your example, the child is qualifying for BOTH the mother and grandmother. They can pick which one claims the child.

[Brad Imsdahl]

In your example, the child is qualifying for BOTH the mother and grandmother. They can pick which one claims the child.

True, but if Mom wants to claim the kid, Mom gets first dibs, even though she only provided 10% of total support.

That is why you can't rely on old law logic. Even though there are some similarities, there are differences. Qualifying relative rules may be close to the old rules, but not entirely. For example, the old rules did not have a “not a qualifying child test” rule. If boyfriend supported his girlfriend’s kid, he could claim the kid. Not true under the new rules. So you have to be careful when you try to apply old law logic to the new rules. It’s a new ball game.

[jainen]

to prod our memory

>>For example, the old rules did not have a “not a qualifying child test” rule.<<

That's not an example, Brad. That's the whole thing. You must apply the qualifying child rules first, but if they don't work then the "old" rules, with the new name "qualifying relative," are identical to what we learned before. Word for word. Same section of the tax code. Same precedents and authorities.

Well, there are two other changes. First, the gross income test is updated annually with the personal exemption amount. And we use a different quick reference book to prod our memory.

[GIMoe]

Simple math...

answer/confirm this for me and then I think maybe I've got it. I was looking at those two test boxes in the pub and:

For dependency, are you saying that if the kid, for whatever reason, doesn't meet the "qualifying child" standard, then you can simply switch over to the "qualifying relative" side of the page and if you (the parent) meet the four tests there, one of which is you provided more than half the support, then you've got him/her?

And, if that's so, does the same thing apply for CTC?

If you make me "evaluate the issues" I'll hound you to the ends of the earth.

________________________

This has really been a great discussion with good points from all concerned. After reading through all of it, I felt like I needed to put my own 2 cents in. You can tell me if you don't think this makes any sense or if you feel I am way off base, but I think it all really just boils down to simple math.

From the perspective that all other dependcy tests are met for both "Qualifying Child" & "Qualifying Relative" and the only test that remains to be determined is the support test, then the question is, "Did the child provide more than 50% of their own support?" If, after doing the worksheets and adding all the support from all sources, it is determined that the answer is "Yes", then that child does not qualify as a dependent. You can not at this point jump over to the rules for "Qualifying Relative" to try and qualify them because if the child did in fact provide more than 50% of their own support, then there is no way that the parents could have provided more than 50% of that childs support, as they would indeed have had to do under the rules for "Qualifying Relative". The inverse is also true. If the parents do pass the support test under "Qualifying Relative" then they would pass the support test under "Qualifying Child" for that same child. Because, if they do, in fact, provide more than 50% of the support for Child A, then there is no feasible way that Child A can pay more than 50% of their own support.

I don't know if I've cleared things up or muddied the waters... you be the judge.

[jainen]

determine qualifying child first

>>cleared things up or muddied the waters<<

You are right as far as your analysis goes, but it leaves out some very important and very common possibilities.

First, what if the child lives with several relatives? Only one can provide more than half the support, but another may be entitled to claim the child.

Second, what if neither the child nor the parent provides more than 50% of support? This happens with welfare recipients, help from grandparents, or other third-party support.

A subset of that is the notorious boyfriend scenario, in which the child lives with a parent and a non-relative who supports her. Qualifying relative rules might not apply because you must determine qualifying child first.

[GIMoe]

Just trying to keep it simple.

...but it leaves out some very important and very common possibilities.

All that is true, but I was just trying to keep it basic. Either the child did provide over 50% or they did not. If they did not, and presuming they met all the other tests for "Qualifying Child", then you need go no further. You can determine this by adding up the total cost for support, (Clothing, education, medical and dental care, transportation, travel, recreation,
transportation, dependent’s share of household expenses, including food, FMV of lodging, utilities, repair, and other expenses, and any child care expenses), then add up the total that the child spent, (Which would include wages of the child, Social Security benefits, other income, savings, and amounts borrowed by the child that were used to pay for
items of support), -- if that total is more than 50% of the previous figure (total support), then they are neither a "Qualifying Child" or a "Qualifying Relative" because then it goes to reason that the parents could not have paid over 50% of that childs support. This knocks them out of both because regardless of the situation, the child, or dependent, can not provide over 50% of their own support. Under the "Qualifying Relatives" rule, the taxpayer must provide at least 50% of the support, with exceptions for divorced or seperated parents, or multiple support situations. However, even in those exceptions, total support provided by the child, or would be dependent, can not equal 50% or more.

So, to summarize, if the child or would be dependent, provided more 50% of their own support, you need go no further. They do not qualify as a dependant under either set of rules

[Snaggletooth]

News You Can Use

Thanks Brad, for perhaps the clearest and most useful light on the subject. Thanks to Jainen, GIJoe, and Sandy for a great discussion and peripheral "what ifs".

[Black Bart]

An outright gift of several dependents and free money

...foster parents received $7,602.95 from...Tennessee...This seems like a tremendous amount of money....I think I have my answer, but it seems incredible that the parents can exclude all of the above income, then simultaneously claim these children as dependents and CTC.

is what it seems like (although it's nice to see deserving souls get a break on occasion). It's a lot of money in Arkansas too.

I agree with Snag that it certainly seems to turn logic on its head and is contrary to common sense for the basic requirement of CTC (per jainen--thank you very much) and sometimes dependency is that you do not furnish the majority of support for that "qualifying child'" and, in fact, it no longer particularly matters who supported them since they're adopted/related/lived with you.

Moe had good points too about 51% self-supporting kids automatically eliminating qualifying relative status.

So, anyhow, it appears that Snag's church folks get the dependency and the CTC.

And to think, Congress said -- about those "kid-related" credits -- "This thing's a real mess with all these different rules for each credit; let's simplify it."

[Bonnie]

[QUOTE=Snaggletooth;32021]Thanks Jainen - your last post is MUCH clearer.

Of the four children, only one of them has a statement from Social Security Administration. Of course, this could be either Social Security or SSI. So I'll need to find out.


I do believe if they have a statement from the Social Security Administration that ii is Social Security. I have never seen the Socia Security Adm issue a statment for SSI. I could be wrong, but I have never seen this.

Bonnie