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Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 11145
Experience:  Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986
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My wife and i are separating, she left with all the tax

Customer Question

My wife and i are separating, she left with all the tax information for filing. She did that impart because of my step son. We were raising his special needs children with the agreement I would claim them on my taxes. In the end - he claimed them stating since he paid day care and lunches he was entitled. Wasn't our agreement, now I owe money.
Suggestion on how i can fix this?
Submitted: 1 year ago.
Category: Tax
Expert:  Lane replied 1 year ago.

I'm so sorry to hear.

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But IRS will tell you that, regardless of any agreements, the dependency exemption (and the other tax incentives that follow, such as child tax credits) depend completely on whether or not any/each child in question passes one of the two tests (in the correct order) for "qualifying child," and then if NOT a qualifying child, the "qualifying relative" tests.

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Now, it MAY BE that you DO qualify and he doesn't but, again so sorry, the agreement is not relevant in IRS' eyes - It's the qualifying tests - Here they are:

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(by the way, here's a tool that can be used to make the determination: http://www.efile.com/qualifying-child-test-qualified-dependent-tax-tool/ )

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QUALIFYING CHILD:

Relationship — the person must be your child, step child, adopted child, foster child, brother or sister, or a descendant of one of these (for example, a grandchild or nephew).

Residence — for more than half the year, the person must live in your home.

Age — the person must be either

  • under age 19 at the end of the year, or
  • under age 24 and a full-time student for at least five months out of the year, or
  • any age and totally and permanently disabled.

Support — the person did not provide more than half of his or her own support during the year.

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QUALIFYING RELATIVE:

Six Criteria for Qualifying Relatives

  1. The dependent cannot be a qualifying child of another taxpayer.
  2. The dependent earns less than the personal exemption amount during the year. For 2013, this means the dependent earns less than $3,900.
  3. The taxpayer provides more than half of the dependent's total support during the year.
  1. The taxpayer is related to the dependent in certain ways.
  2. If the dependent is married, the dependent cannot file a joint return with his or her spouse.
  3. The dependent must be a citizen or resident alien of the United States, Canada, or Mexico.

TIPS

  • These rules apply to any dependent who is not a qualifying child.
  • They might apply to people such as cousins, parents, grandparents, and other people supported by the taxpayer.

Qualifying Child Test

Generally, taxpayers will not be able to claim a dependent if that dependent qualifies to be the qualifying child of another taxpayer. So you will want to check the qualifying child rules to make sure no one else can claim the dependent

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I truly hope this helps ... Run through the tests carefully, because if they Don't qualify for him, they MAY qualify for you.

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LEt me know if you have questions

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Lane

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If this HAS helped, (and you DON’T have further questions on this), … your positive rating … (by clicking or touching the stars or smileys on your screen) … would be appreciated!That’s how we’re credited for the work here.

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Customer: replied 1 year ago.
I did have legal guardianship papers and they have lived in my home for the entire 2014 tax year and half of 2015 prior to my wife's departure.Does that change anything?
Expert:  Lane replied 1 year ago.

The guardianship alone doesn't do it BUT - since they lived in your home for the entire year, that automatically disqualifies the father under the residency requirement (to live with him for at least half of the year.

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AND if you provide more than half of the support, you're there.

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So what this will come down to is whether the daycare and lunches constitute (add up to) MORE than what you put out for supporting them.

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Let me look up the regs on definition of support ... but I think you're there ... Be right back

Expert:  Lane replied 1 year ago.

Here we go ... work through this and you''ll have your answer.

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In terms of process, you should simply claim the dependency exemption ... and this will in place the process for making the husband support (prove) that he qualifies.

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A best practice here is to paper-file, send in a statement with your return (essentially a cover letter) stating that although you understand that the father claimed the dependants ... that because you qualify under the qualifying relative test, the father does NOT qualify (state why, less than 1/2 support, they lived with YOU all year) under the qualifying child test, you are claiming the dependants.

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http://apps.irs.gov/app/vita/content/globalmedia/teacher/worksheet_for_determining_support_4012.pdf

Expert:  Lane replied 1 year ago.

Make sense?

Expert:  Lane replied 1 year ago.

Let me know that everything was clear.

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If you've already filed and this was caused by am IRS notice, use the explanation statement and any documentation you can send, as the reply to the notice

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Let me know if you have further questions...

Lane

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If this HAS helped, (and you DON’T have further questions on this), … your positive rating … (by clicking or touching the stars or smileys on your screen) … would be appreciated!That’s how we’re credited for the work here.

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Customer: replied 1 year ago.
All I saw was they lived with me. He says his Navy attorney says that since he paid day care and food at the school he has every right to claim them.I haven't any idea. Who is in the right. I just know we had an agreement prior to the kids arrival that I was going to claim them and offset some of my bills. To me a deal is a deal.TJ
Expert:  Lane replied 1 year ago.

Again, the tests are the tests ... IRS could care less about some deal.

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It's the tests that matter ... FURTHER day care and meals don't do it if that doesn't add up to more 1/2 of the total support.

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And he's already failed the first test by not having him live there all year.

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You win here

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His attorney is full of it .. simply run your sitution and his against the tests ... he who wins that get the deduction

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making a deal is illegal, In the sense that there is no way to make a deal to give away something that isn't yours to give

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The ONLY time an arrangement can be made here is in the event of a divorce decree allowing for certain trading off of custody rights ... and even there there is a specific form that has to be filed to allow someone to take a dependency exemption when, under the tests, they don't GET the exemption.

Expert:  Lane replied 1 year ago.

I hope you'll rate me (that's the only way we get credit for the work here) based on thoroughness and accuracy, rather than any good news/bad news content ... Hopefully, having all the facts will help you "see around some corners."

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You really should force the issue, if you pass the test and he doesn't. MAKE him honor the agreement (but again with IRS don't base your argument on that. Simply show that you pass the qualifying relative test and he doesn't pass the qualifying child test

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It's that simple