Comments on: Ask the taxgirl: EIC Requirements for Qualifying Child

By: Katiek451

Katiek451 — Sat, 13 Mar 2010 02:13:57 +0000

Thanks I will let you know what I find out and what I decide to do.

By: Carlalala

Carlalala — Fri, 12 Mar 2010 20:30:55 +0000

wow…i would STILL get a second opinion on that! I mean it…I have called the IRS on unrelated issues and gotten 2 entirely different answers ~~~so, don’t always go by what they say.
It sounds like the agent was going by the TIE-BREAKER rules….but you do not sound like you are in a TIE-BREAKER situation so the dependency exemption rule should not apply to you!
The tie-breaker rules come in to play if there was some OTHER person who could also lay claim to your son (his father, or grandparent for example). It is a way for the IRS to decide who has the more valid claim between two parties….but if NO ONE ELSE has a claim to him then it should not matter that you are not claiming him as a dependent to get EIC. If there is a rule that is excluding you because your son is claiming an exemption for himself…then I can’t find it. Seriously, call the IRS again (or, better yet visit an IRS agent at your nearest federal Building….or contact VITA…or consult with an H&R Block preparer (ask for an EXPERIENCED preparer expert in EIC…they will consult with you for free and only charge you if you go forward with filing a return)…..BUT…really….get a SECOND or THIRD opinion! ) Depending on your income…you could be loosing thousands of dollars by being given the wrong info!
Keep me posted!

By: Katiek451

Katiek451 — Fri, 12 Mar 2010 18:46:40 +0000

Thank you Carlalala
Yes all that is true. I did call the IRS – wow it is just like you said someone just asking question that I could look up myself. In the end I was told he would not qualify because I could not claim him as a dependent because of the support test.

I said I didn’t think support was part of the EIC and was told that the “qualifying child” is for all the credits whether or not it specifcally says that.

thanks for your help.

By: Carlalala

Carlalala — Fri, 12 Mar 2010 07:48:41 +0000

To clarify: If your son’s main residence is your residence when he is not away at school then his time at school is considered a “Temporary Absence” For example if your son was at school from Jan-May…then home with you for the summer…then back at school September-December…then back by Christmas vacation…then this would be an example of a qualified child living with you all 12 months of the year!

By: Carlalala

Carlalala — Fri, 12 Mar 2010 07:44:43 +0000

You only have to pass 4 test to claim your son as a Qualified Child for EIC purposes:
1. Relationship: He is your Son. PASS
2. Age. Under age 24 at the end of 2009, a student (the IRS has a definition of full time-STUDENT on page 245 Pub 17., if your son id a full time student in an accredited college…most likely he passes)…also, he must be younger than you (I’m guessing he is!) PASS
3. Joint Return. He’s not married, right? If not…you’re good…if so; there are some other rules. PASS.
4. Residency. Lived with you in the US more than half of 2009. As long as your son considers your home his main residence when he is not at school then you PASS this test. PASS.
The fact that he will claim himself for an exemption should not preclude you from taking EIC. You just need to make sure you work your tax program not to inadvertently take him as a dependent as well.

By: Katiek451

Katiek451 — Fri, 12 Mar 2010 03:35:58 +0000

I read all of this with interest. I was wondering what the thought are on this situation. My son is a 22 year old college student at a school 100 miles from my home he stays in my home during college breaks and is on my health and car insurance.
I meet all the requirements for EIC. But cannnot claim his as a dependent as I don’t meet the support test.
Can I claim him for EIC if he claims himself on his own return. Thanks for any help. Kate

By: Bill White

Bill White — Fri, 12 Feb 2010 21:02:38 +0000

Thanks, and that it what I did.

By: Carlalala

Carlalala — Fri, 12 Feb 2010 20:47:34 +0000

There are worksheets that the IRS provides (and perhaps your program does too) that can justify your determination.
Here is what you do:
Go to Publication 501/ Page 20. Worksheet For Determining Support.
Make certain the $7500.00 is really in the child’s name.
If so, ask how much of the money was actually spent.
——————————————————————————————
(*Here’s an interesting aside: I had a client whose son get SSI because his father died. The son gets $6000.00/per year in his name BUT the client (his mom) puts half of that away in a bank account under that child’s name every year….that means that ONLY $3000.00 per year is used by the child to support himself which means that his parent (making 14,000) can easily prove that the child does not support himself more than half!)
———————————————————————————————
Back to the worksheet in Pub, 501:
You can download this sheet on irs.gov.
You can go line by line with the client showing them how to determine Support. It is important to show the client WHAT the IRS considers support. If the mom spent the son’s $7500.00 then mom must come up with at least $7501.00 in support from her OWN monies according to that worksheet to claim a dependent (and that worksheet is very specific as to WHAT expenses are considered support).If, by chance….she CAN…then it would be OK to file her status as SINGLE with one DEPENDENT…that would open her up for the Child Tax Credit and the Additional Child Tax Credit. AND GUESS WHAT? If she can file Single with one dependent she doesn’t NEED Head Of Household Status! Why?
13,000.00- 5,700.00 (Standard Deduction for Single) – $3650.00 (Her exemption) -$3650.00 (Her dependent’s exemption) = 0
That means She has already zeroed out her tax liability with a Single Status with one dependent. Filing Head Of Household in this case would be OVERKILL…. there is nothing more to GAIN with the HH status and the client is just opening themselves up for compliance problems with the IRS unnecessarily. Clients fixate on getting that Head Of Household Status because their cousin, best friend, baby-daddy… got it and they feel they have to have it too!
____________________________________________________
Now, I’m using my calculator here, so the following are approximations…but the way I figure it….)
As it stands by filing Single with NO dependents she is still in a decent place:
13000-5,700 (Standard Deduction Single) -3650 (Personal Exemption)= 3650 taxable income; so she will have a small tax liability($363). Her tax liability is still going to be covered by claiming the EIC AND she is also going to get the $400 Making Work Pay Credit AND she will get all of the federal income tax she may have withheld (box 2 on the W-2) .
So, at the very least
$3.043 EIC Credit + 400.00 Making Work Pay Credit= $3443(refundable credits)-363(tax liability) = $3080 REFUND! (plus, if she did withhold any federal tax in box 2 you would add that for even more!) Pretty Nice Refund!
Now…if she COULD claim a dependent she would add another $1,000 to that but realistically…SHE CAN’T.
I mean sheesh…and by the looks of it…you’re doing her refund for FREE…so, what’s the problem!?

By: Bill White

Bill White — Fri, 12 Feb 2010 13:41:12 +0000

Hi Carlalala, Thanks again. After your previous post I went to the tax program again and indeed by using the appropriate yes and no’s and a appropriately answering other questions as you suggested , the program did indeed provide EIC for the taxpayer without claiming the child for an exemption. I appreciate your effort. It still will be difficult to tell a clients with children with the parent of the client(at no cost to them) that they do not qualify as HOH, etc.
Thanks again,
Bill

By: Carlalala

Carlalala — Fri, 12 Feb 2010 06:39:24 +0000

Here is what is throwing you off: There is no ONE definition of “Qualified Child”.
A taxpayer should NOT ask themselves.”Do I have a Qualified Child?” they must ask themselves: “Do I have a Qualifying Child to claim a dependent exemption?”…”Do I have a Qualifying Child for the Child Tax Credit?”…”Do I have a Qualifying Child for the Earned Income Credit?” etc etc…Each of the tests are different to determine “Qualifying Child”.

And each and every taxpayer’s situation is different. Sometimes their child is a Qualifying Child For Everything…Sometimes only a few things….sometimes JUST for one thing…sometimes nothing.

In your example with the mother and son w/ $7500. You are applying the correct tests to determine that this child does NOT pass as a Qualified Child for Claim of Exemption for a Dependent
nor does he pass the test for as a Qualified Child for
Child Tax Credit.
But you are NOT applying the correct test when determining if this child is a Qualified Child for the EIC.
———————————————————————————————–
So ask yourself again:
Is this a Qualifying Child for the purpose of The Earned Income Credit?
See Publication 596/Chapter 2/Tests For a Qualifying Child for EIC.
(Remember this is specific to your single mother scenario…other factors would come into play if we were talking about other households with other circumstances.)
1.Must be your son…YES!
2.Must be under age 19(or 24 if in college)….YES!
3, Your son will NOT be filing a joint return…YES!
4. Your son lived with you in the US for more than half the year…YES!
THAT’S IT! She has a Qualified Child for the purpose of EIC. As long as the mother meets the other tests for HERSELF for EIC she is IN! Notice how there are NO SUPPORT Questions or NO REQUIREMENTS that the taxpayer be able to claim the child as a dependent.
IF you need further proof that a child does NOT have to be claimed as a dependent in order for the taxpayer to receive just the EIC…do this:
1. Go to irs.gov
2. Look on the left under ‘IRS Resources’ and click on ‘Frequently Asked Questions’
3. Look under ‘Frequently Asked Questions CATAGORIES and click on #7. Earned Income Credit.
4. There is your question!
“Must I be entitled to claim a child as a dependent to claim the earned income credit based on the child being my qualified child?”
ANSWER: You do NOT have to be entitled to claim the child as a dependent to claim the earned income credit based on the child being your qualifying child.
Ta-Da!
Your challenge is to make that work in your computer program. Make sure you understand each and every question before you answer Yes or NO. Most people would say “Screw It” and just take the dependency exemption/Child Tax Credit/and EIC because they get frustrated with a program that seems to be guiding them to take all or nothing. Don’t take a chance that the IRS will call you on it ; you don’t want that mom having to pay back part of her refund + penalty and interest if she gets caught taking an exemption and a credit she shouldn’t. BUT she needs to get the EIC that is coming to her. You bought a program…do they offer tax support or technical support? Call them and ask. Or, you can always contact the IRS and ask how you can have THEM determine your EIC credit. The IRS says they will do this for FREE if you contact them.
Good Luck…and get that EIC.