Dependent Question

[dmj4]

Mother and Child Lived With her Boyfriend.

Mother had Gross Income of $1560 from 1099R with a penalty.
Gross Income from Babysitting of $2040.
After taking the Standard Meal Allowance, she would be below $3400.


Am I correct?
(1) Boyfriend cannot claim his GF (mother of child) because she had GROSS income of more than $3400 and is required to file to pay 10% early withdrawal penalty and SE tax.

(2) Boyfriend Cannot claim her child because the mother is required to file a return?

What if she chooses to not claim the EIC?

Thanks!

[Jesse]

Is the boyfriend the Father of the Child?

If no I think you are correct on both counts even if she chose not to claim EIC.

Why wouldn't Mom want to claim EIC?

[Koss]

EIC v. Dependent

The value of the dependent exemption for the boyfriend is probably greater than the value of EIC for the child's mother.

At her income level, the amount of her EIC is based on her earned income, not her AGI. Her earned income is her net income from self-employment. Once the meal allowance is accounted for, her earned income will be extremely low, and her EIC will be microscopic.

Even though the boyfriend cannot claim EIC or the Child Tax Credit, the value of the dependent exemption for him could be as much as $850, if he is in the 25% tax bracket.

However, I agree that even if the child's mother chooses not to claim the child at all, the fact that she has a filing requirement means that the child is considered to be her qualifying child. And this precludes her boyfriend from claiming the child as a qualifying relative.

I also agree that he cannot claim the child's mother as a qualifying relative becuase her gross income is over $3400.

Now, if she had rolled over that distribution...

[dmj4]

Koss

You are correct on all counts. He is in the 25% bracket. He has to be to support his Dad, his girlfriend and her two kids. She only got $350 child support all last year. His Girlfriend cares for his father while he works.

I consider you the expert in this area and I really, really appreciate you answering this question.

The tragic thing is the daycare was paid to her by another son and as you said, if she had just rolled the 401K over.

Thanks so much.
Donna

[Koss]

Girlfriend's child

The real solution for this type of family is for the guy to become guardian of her child. At least that's what we call it here in Ohio. But I think if you even mention this to a client, you better include the words "see an attorney" in the same sentence.

There is some IRS guidance which strongly supports the idea that guardianship, for purposes of the tax law, confers upon the taxpayer the same capacity as a foster parent. And that would make the child the taxpayer's qualifying child.

But it's a minefield, particularly if the child's natural father is "materially participating," so to speak.

And even if that's not an issue, there are some unanswered questions about the effect of a guardianship that arises in the middle of a calendar year. If the child lived with the person for the entire year, but the guardianship didn't take effect until, say, August...

I'm not sure the tax code really addresses this situation. To the extent that it does, the guardianship could be construed as merely ratifying or formalizing a relationship between the taxpayer and the child that actually existed all year.

A bit of a stretch, maybe.

[Gary]

Required to File

Even without the 1099-R, if she is self-employed, she is required to file.

What is "standard meal allowance"?

[Jesse]

On Earned income of $2,050 the EIC would be $810, so even if boyfriend is in 25% tax bracket it would only be a difference of $40.


I think by the standard meal allowance Donna means the per diem expense allowed for Breakfast, lunch & supper, and snacks. But who is actually providing the food, the boyfriend (son), or her out of her earnings.

W/ the EIC she would still receive a refund after the SE tax and 10% penalty.

Or am I missing something?

[dmj4]

The standard meal allowance allows for a daycare provider to deduct a certain amount for breakfast. lunch, dinner and snacks for the children they care for.

[dmj4]

She wrote down expenses, so it would not be that much EIC. She would get some EIC anyway based on her low income.

[FEDUKE404]

Looks like a 4/15 return arrived early

The standard meal allowance allows for a daycare provider to deduct a certain amount for breakfast. lunch, dinner and snacks for the children they care for.

Whew! - I thought I was the only person who felt a "meal allowance" really had nothing to do with the underlying question here.

Of course, if the GF is running a day care business (versus "babysitting") then have fun explaining to her the wonderful aspects of Form SE, along with the "whose home is it" type questions for an apparent Sch C.

FE