Customer: Bill (6), their son, lived with Carol the entire year. Carol has waived her right to Bill’s exemption for 2015 by signing Form 8332. Jackson and Carol together provided more than 50% of Bill’s support. Jackson’s wages were $37,000; Carol’s were $15,000; Bill’s gross income was $0. Jackson’s taxable income was $22,900.
-What is the taxpayer’s correct and most favorable 2015 filing status?
Bill is a qualifying relative of Jackson since the following tests are met (from IRS Pub 501, page 22 – (https://www.irs.gov/pub/irs-pdf/p501.pdf)):
A child will be treated as being the qualifying relative of his or her noncustodial parent if all four of the following statements are true. 1. The parents: a. Are divorced or legally separated under a decree of divorce or separate maintenance, b. Are separated under a written separation agreement, or c. Lived apart at all times during the last 6 months of the year, whether or not they are or were married. 2. The child received over half of his or her support for the year from the parents (and the rules on multiple support agreements, explained earlier, don't apply). 3. The child is in the custody of one or both parents for more than half of the year. 4. Either of the following statements is true. a. The custodial parent signs a written declaration, discussed later, that he or she won't claim the child as a dependent for the year, and the noncustodial parent attaches this written declaration to his or her return. (If the decree or agreement went into effect after 1984 and before 2009, see Post1984 and pre2009 divorce decree or separation agreement, later. If the decree or agreement went into effect after 2008, see Post2008 divorce decree or separation agreement, later.) b. A pre1985 decree of divorce or separate maintenance or written separation agreement that applies to 2015 states that the noncustodial parent can claim the child as a dependent, the decree or agreement wasn't changed after 1984 to say the noncustodial parent can't claim the child as a dependent, and the noncustodial parent provides at least $600 for the child's support during the year.
If statements (1) through (4) are all true, only the noncustodial parent can:
- Claim the child as a dependent, and
- Claim the child as a qualifying child for the child tax credit.
However, this does not allow the noncustodial parent to claim head of household filing status, the credit for child and dependent care expenses, the exclusion for dependent care benefits, the earned income credit, or the health coverage tax credit.
Since all of these tests are met, Bill is a qualifying relative of Jackson. Jackson can file as a single taxpayer with one exemption for himself and one for Bill, to total two exemptions.
Carol could be claimed as a dependent of Jackson if she meets the definition of ‘qualifying relative”. Since her income exceeds $4,000, she does not qualify.
Therefore, single with two exemptions is Jackson’s correct and most favorable 2015 filing status.
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