Lost difficult child as tax deduction

[Nancy]

Just another way difficult child has stuck it to us. Getting our tax records together we discovered even though she is 19 and we provided all of her support last year we can no longer claim her as a dependant on our tax return because she made $4,000 in her part time job which she used for drugs and alcohol and we got no benefit and she was not in school.

We also lost easy child this year because she graduated from school too so we really got hit.

Nancy

 

[susiestar]

I'm sorry. Taxes are one thing that they just don't even consider at that age. Is she getting a refund of the taxes on her $4000 and can you pressure her to give part of that to you as repayment of the various things you have provided for her on the conditions that she has not met? Or is this not worth the fights over?

either way I hope the taxes are not too horrible.

 

[rlsnights]

I expect you already know this but even if she has too much income to be claimed as a dependent for the purposes of taking an exemption you may be able to deduct any medical expenses you paid for her and for easy child. You would have to meet the 7.5% floor first of course.

http://www.irs.gov/publications/p502/index.html

If you provided more than half of easy child's support and easy child didn't have more than $3650 income you may still be able to claim easy child as a qualifying relative. You'll have to check Publication 501 to make sure you can claim easy child.

http://www.irs.gov/publications/p501/ar02.html#en_US_2010_publink1000220868

I feel your financial pain. Hope you don't end up owing a ton especially penalties for under-withholding.

Patricia

 

[TerryJ2]

Good point, rls. I would look into other avenues as well.

Sigh. Oh, Nancy.

 

[Nancy]

Thanks rls, yes I spent most of yesterday gathering together all the medical expenses and that will help. We spent over $30,000 in medical bills last year.

Nancy

 

[svengandhi]

You may also be able to claim an education credit for her up to $2500 for tuition, books and other expenses you paid for in 2010. Ask you tax advisor. This should also apply to easy child since she recently graduated.

 

[busywend]

It is actually 'under age 19' anyway, so if she was not a student you could not claim her no matter how much she made.

 

[Star*]

What if -

They were 19
You paid for nearly all their care
They lived with you 7 months
They attended school

And you forgot to put them on your original filing?

 

[svengandhi]

Busy -

Are you sure? I recall my parents claimed me till I was 25 and finally began working after grad school (which they did NOT pay for). I was planning on claiming oldest boy who is 20 because he lives here and I support him, even though he dropped out of school.

 

[rlsnights]

Star -

You can always amend a previous return if you believe you made a mistake that will significantly affect your tax obligation. You should review Publication 501 for the tax year you want to amend to make sure that you can claim that person as a dependent. It sounds like you can but you should double check if you're going to amend a return. You then submit form 1040X with the changes. You can find form 1040X and it's instructions at the IRS website www.irs.gov

One thing to be aware of when you amend a previous year's return. It starts the clock ticking again for the IRS to question or audit the return for up to 3 years from the time you amend the return.

If you do amend a return for this reason, I suggest you add a statement at the end explaining that you are only amending the return because you overlooked claiming your son as a dependent.

Busy -

If your son is over 18 and not a student (as defined by the IRS) then you cannot claim him as a dependent child. He may however meet the rules for dependent relative if his earned income for the year is less than $3650 and he meets the other tests of dependency. See publication 501 if you're not sure or look at the instructions for Form 1040.

http://www.irs.gov/publications/p501/ar02.html#en_US_2010_publink1000220868

Everyone with an adult dependent child who is a student should be aware of the IRS rules regarding grants, loans or scholarships. Depending on your particular situation, grants, loans and scholarships may make it difficult for you to show you provided more than 50% of your adult student's support or may result in your loss of the child as a dependent because their earned income exceeds $3,650.

That's because sometimes these sources of income are treated as unearned income to the student and other times as earned income to the student. For example, loans count differently according to who took the loan out and what it was used for. If a loan was taken out by the child then that unearned income may affect your ability to show that you provided half the child's support if the loans paid for housing and food expenses.

When in doubt check the IRS publications about the specific subject areas at www.irs.gov. The info in the 1040 instructions is often not complete enough to answer more detailed questions about dependents and exemptions.

Patricia

 

[susiestar]

Many of these things are handled in both turbo tax and tax cut. I believe you can also file the amended return using them. I tend to depend on these programs because the IRS publications can be very hard to understand, even if you have some knowledge of accounting and taxes.

You can also call the IRS to get answers to these questions and almost anything else. It is free to call and they can answer most anything. You will spend a bit of time on hold, but if you put the phone on speaker you can do other things while you wait.

 

[rlsnights]

I expect that if you aren't entitled to the child tax credit your return will be either rejected or they will send you a notice that it was wrong and here's the correct figure. If your son is 19 you definitely do not qualify to take the credit as the child must be 16 or younger at the end of 2010 to take the credit. Ouch - that means we won't get the credit for our twins in 2012. Glad you brought that up.

The IRS phone people are, in my experience, not always knowledgeable about the subject they are advising you about. I have in fact had them be dead wrong. And they will tell you that reliance on their advice is not an acceptable defense should you make an error on your return.

I also think that Turbo Tax will do an amended return. I've used it for several years myself but have learned that I have to be cautious if I have an unusual situation. typical teen makes the assumption that you understand the underlying rules and know what should be entered. This is a problem in the residential real estate section of typical teen if you haven't used typical teen before but have had your rental for a while or if you convert it from a residence that year.

For these reasons, I have learned that I must read and do my best to understand the publications as they will often answer my question accurately.

You could also take your return to one of the big tax preparers like H & R Block and have them do their "free look" at your return. I don't know how that works but if it's really free then you wouldn't have spent anything but time - perhaps as much as waiting on the phone with the IRS.

And you can post your question to the typical teen community forum where you will often get an accurate reply from some folks who make taxes their hobby (yeah I know, who would want to do that?) or are professional preparers that typical teen is paying to answer questions.

https://ttlc.intuit.com/

Patricia

 

[busywend]

You are right - relative would work with the right income level.