Message Font: Serif | Sans-Serif
 
No. of Recommendations: 0
I have a question that should be pretty easy to answer even though the situation is complicated, but Google is giving me all kinds of conflicting info!

Can a legal guardian claim as a dependent a kid who graduated from high school in June 2013, turned 18 in August 2013, but only lived in her home until the first week of June 2013.

She has already claimed him. She claimed him on the basis that she was legally responsible for him for 8 months, even though he physically lived there for just over 5 months.

He made about $6500 and qualifies for a full refund. The problem is that his taxes were rejected because he didn't know that she claimed him. Refiling won't be a huge problem, I don't think (just have to check a different box) but he is mad that she claimed him and madder that he didn't know about it and wants to report her to the IRS for tax fraud. Seems like an irrational over-reaction and that it would be easier to just refile his taxes since it affects his refund not at all.

Was she entitled to claim him on her taxes? What should he do?

Thanks!

Rebecca
Print the post Back To Top
No. of Recommendations: 4
What should he do?

1. Take a chill pill.

2. Realize that it is HIS return that was wrong by claiming his exemption. He is under 19. His parents, (or in this case the legal guardian) is entitled to his personal exemption.

3. Take another chill pill, because he's going to pay a few dollars in tax (or his refund is going down by a few dollars). His standard deduction is $6100, so he's going to have about $40 in tax.

Next year will be a different issue.

--Peter
Print the post Back To Top
No. of Recommendations: 0
2. Realize that it is HIS return that was wrong by claiming his exemption. He is under 19. His parents, (or in this case the legal guardian) is entitled to his personal exemption.

Under 19, check. Relationship test, check. Not providing half his own support, probably true but hard to get real world numbers.

But there's the residency test. He only lived with his guardian for 5 months and a week, less than half the year. It wasn't stated that he was away at school; is there some other reason he would be considered to have lived with the guardian more than half the year?

If he fails the residency test, he's not a qualifying child; and earnings of $6500 would keep him from being a qualifying relative. In this case, it would be the guardian's return that is in error. An unfortunate answer, to be sure, as his exemption likely has a bigger impact on the guardian's return than on his own; but there it is.

Is there something I'm missing here?

Patzer
Print the post Back To Top
No. of Recommendations: 0
But there's the residency test. He only lived with his guardian for 5 months and a week, less than half the year. It wasn't stated that he was away at school; is there some other reason he would be considered to have lived with the guardian more than half the year?
-------

He was not away at school. There was a falling out, and he went to stay with his friends (at their parents house) about a week before graduation.

Rebecca
Print the post Back To Top
No. of Recommendations: 5
He was not away at school. There was a falling out, and he went to stay with his friends (at their parents house) about a week before graduation

Sorry, but Patzer was right, and the guardian was wrong.

The kid doesn't meet the residency test (at least 6 months in the home) to be a qualifying child. He fails the gross income test for a qualifying relative.

The kid needs to file his return again, exactly as it was before, on paper. He cannot get an e-file through for 2013. The guardian needs to file an amended return not claiming this dependent.

See Pub 501 for the dependency rules.

Phil
Rule Your Retirement Home Fool
Print the post Back To Top
No. of Recommendations: 4
Having now gone through my list of dependency worksheets and other such reference material, I will stand corrected. Phil and Patzer are right on the money. I should know better than to answer dependency questions from the top of my head. It's not something I have to worry about often, and when I do, I turn to those reference materials.

On the other hand, I'll stand by my chill pill recommendations. This isn't fraud, it isn't the world out to get him, it's something called life. People make honest mistakes. All the time. Get over it.

--Peter
Print the post Back To Top
No. of Recommendations: 1
He was not away at school. There was a falling out, and he went to stay with his friends (at their parents house) about a week before graduation
=========================
The kid doesn't meet the residency test (at least 6 months in the home) to be a qualifying child. He fails the gross income test for a qualifying relative.

========================
I wonder about that. I wonder if the kid wasn't required, under the terms of the guardianship, to be a resident at the guardian's home, and he was "just visiting" at the friends' house. [Which raises a question in my mind about the legal risks the friend's parents may have incurred.]

He wouldn't have to be physically present in the guardian's home if he WAS away at school, or in the military, or in jail, for that matter.

Bill
Print the post Back To Top
No. of Recommendations: 1
Can a legal guardian claim as a dependent a kid who graduated from high school in June 2013, turned 18 in August 2013, but only lived in her home until the first week of June 2013.

She has already claimed him. She claimed him on the basis that she was legally responsible for him for 8 months, even though he physically lived there for just over 5 months.


Not exactly a tax question but should kid want to file for financial aid to go to college, he is considered likely to be considered a dependent student needing legal guardian to complete FAFSA.
Print the post Back To Top
No. of Recommendations: 0
I really appreciate everyone's help. I have another couple of questions...

First, I got his income wrong. It was actually just under $6100. Does that make a difference?

If he refiles his taxes as they are and she does NOT file an amended return, then what happens? Because she says she won't re-file. (She's already gotten her refund, which would have included EIC.)

I actually convinced him to go with the most liberal definition of lived with, the 8 months she was his guardian, but he needs her SSN to file his state return. (Trying to get everyone to compromise here!!!)

She won't give him her SSN. (Well, she won't give it to me because she doesn't want him to have it.) She'll file his taxes for him but not let him keep a copy of his return with her SSN on it. (I know he will not agree to give her his W-2's and other info, anyway. I had to argue with him to get him to agree to check the box that someone else can claim him.)

So, he can file without checking the box that he can be claimed by someone else, which is technically right since he only lived there for 5 months. But she said that she'll say he lived there if the IRS asks.

She also said that because he didn't have permission to have a job on the books until he turned 18 (and therefore worked for 3-ish months under the table) that if the IRS comes after her that she will say he lived there AND she'll get him in trouble for working under the table. (Seems like if he was her responsibility that would come back on her, too. I imagine it would mostly screw his employer. He had this job for a couple of weeks while he was still living with her, not just after he left.)

What should I tell him to do now? Suck it up and give her his W-2's? File his return on paper the same way he originally e-filed? Do something on his return with the cash he earned? (I don't even know how that works, but it would put his income back up over $6100 and she wouldn't be able to get him in trouble.)

I really appreciate you guys helping me with this!!! I'm trying to help him, but before I tell him what she said to me, I need to know what his best course of action is. I am sooooooo not cut out for all of this drama!!!

Rebecca
Print the post Back To Top
No. of Recommendations: 3
Do something on his return with the cash he earned? (I don't even know how that works, but it would put his income back up over $6100 and she wouldn't be able to get him in trouble.)

You mean *not* cheat on your income taxes?
Yeah, that sounds like a good advice to give. (to put it mildly)


I need to know what his best course of action is. I am sooooooo not cut out for all of this drama!!!
IMO - Tell him to file an extension.
Then he has until mid-October for the two of them to calm down and work it out.

If she doesn't want him to have her SSN, the easy solution for that (IMO) is that they meet at a post office, he lets her fill in the SSN on the form and he watches as the form gets dropped into the mailbox.

Alternatively, they use a professional tax preparer who will put up with the two of them...
Print the post Back To Top
No. of Recommendations: 3
She also said that because he didn't have permission to have a job on the books until he turned 18 (and therefore worked for 3-ish months under the table) that if the IRS comes after her that she will say he lived there AND she'll get him in trouble for working under the table. (Seems like if he was her responsibility that would come back on her, too. I imagine it would mostly screw his employer. He had this job for a couple of weeks while he was still living with her, not just after he left.)

At times it costs a little money to remove people who are destructive from your life.

He should declare the cash income, and pay the taxes. It takes the wind out of her threats. Other than you shouldn't commit tax fraud, it is really bad to have someone obnoxious knowing you have done something illegal. The IRS isn't going to care about whether or not he had her approval to work before he was 18.

If he really does want to cause her issues, he can then file his return stating he cannot be claimed as a dependent. It won't make much difference on his taxes. She has claimed EIC which can be significant. It is going to cause her pain for him to be disallowed as a dependent.

A possible compromise is for her to pay his additional taxes (apparently around $40), and the two of them never to speak again.
Print the post Back To Top
No. of Recommendations: 4
Alright, I need to stand corrected again. I said she wasn't committing fraud, just an innocent error in understanding the confusing details of tax law. I may be wrong on that.

If it were me, I'd distance myself as far as I can from the situation. Then again, I do not like conflict and do my best to avoid it. So I am definitely biased in that suggestion.

It sounds to me like the kid is not grown up enough to be an adult, and neither is his now former guardian. I don't see any good coming from that situation.

However, if you insist on preparing his tax return, you now know too much to ignore facts. He needs to report his under the table earnings or you cannot prepare the return. It is possible that you might not be able to file his state return given the discord between the parties. I do like the suggestion of having the guardian insert their SSN on an otherwise completed return and then watch as it is mailed.

What is on her return is her problem and not yours. Nor is it the kid's. If claiming his own exemption is the right thing to do from a tax perspective, you'll probably have to file on paper and let the chips fall where they may. The kid might have to answer additional questions about the situation. So might the guardian. Then again, the IRS might not ask anything and let both returns stand despite their inconsistencies.

At any rate, good luck. It sounds like you'll need it.

--Peter
Print the post Back To Top
No. of Recommendations: 0
Peter,

Thanks. So, he pays taxes on under the table $$$ and let her deal with whatever she needs to if the IRS contacts her? Is there a way to do this so his boss doesn't get in trouble? Obviously, he can't afford to lose his job.

And does her right to claim him, based on 5 months residence change since his income was under $6100?

Thanks.

Rebecca
Print the post Back To Top
No. of Recommendations: 0
Never mind on that last part. His income isn't under $6100 with the under the table money...
Print the post Back To Top
No. of Recommendations: 2
So, he pays taxes on under the table $$$ and let her deal with whatever she needs to if the IRS contacts her?

Yep.

Is there a way to do this so his boss doesn't get in trouble? Obviously, he can't afford to lose his job.

Report it as self-employment income. The only way the IRS would question the employer is if he filed Form 8919 claiming his employer misclassified him as an independent contractor.

That still raises some issues if you are a circular 230 tax preparer. If you are just a friend helping another friend with his taxes, you're probably OK unless you also prepare tax returns for others as well.

And does her right to claim him, based on 5 months residence change since his income was under $6100?

No. These are two independent tests. At 5 months, he fails the residency test and is not her dependent. At 8 months, he passes the residence test. But then he'd still have to pass the other tests to be a dependent.

One of those other tests is the income test. That test is waived for qualifying children. For other potential dependents, the cutoff is the standard deduction amount (which is either $3900 or $3950 for 2013 - I'd have to look it up and I'm too lazy at the moment). We haven't really talked about whether he is a qualifying child or not. If he's not, he's well over the income limit.

The $6100 figure is the standard deduction for single people. He gets that whether or not he is a dependent of his guardian. If he were under that amount, the question about being a dependent would be irrelevant to his tax calculation. He would have no tax either way. With his income over that amount, the question of dependency becomes important to figuring his tax.

--Peter
Print the post Back To Top
No. of Recommendations: 0
The $6100 figure is the standard deduction for single people. He gets that whether or not he is a dependent of his guardian. If he were under that amount, the question about being a dependent would be irrelevant to his tax calculation. He would have no tax either way. With his income over that amount, the question of dependency becomes important to figuring his tax.

The answer may be different for the state return. In the State of New York, someone who can be claimed as a dependent on another person's return starts paying taxes when the income is above $3000.

I infer that this is not in New York, since New York would not require him to provide the guardian's SSN as was mentioned earlier in the thread. I suspect there is a way to file on paper if he is supposed to supply her SSN but she won't give it to him; that is what happens for MFS where the spouse's SSN is not known. But that really comes down to what does his state require.

Patzer
Print the post Back To Top