Should I Claim Foster Children?

[Guide2003]

Hello, this is the first year I'll be filing with foster children. It looks like we can claim them as dependents (a couple were in our home for more than half the year) and the state DHR office concurs and has given us the info necessary to do so. Does anyone have experience with that?

Also, we've waited until now to get our brokerage statements, and I can only assume that the birth parent has already filed and claimed all her children even though they weren't in her care. The kids are currently back with the mother, we have a good relationship with her, and she definitely needs the money more than we do. Any tips on how to handle the situation when we ask her if she's already filed and claimed the kids? I guess its more a relational question than a tax question, but its a bit of a quandary for us. I want someone to get the tax benefit, but I also don't want her to owe back a couple thousand dollars that she doesn't have.

[Hargrove]

Drumroll...

Be honest!

Hi Joan, do you have a second? Yes, I just wanted to touch base with you on filling out our taxes this year because they may involve the kids - see, Bill and I haven't had foster kids for quite so long before, and we want to make sure we have the tax info right so no one gets a penalty. Can you just tell me if you claimed them as dependents? That's what the state advised us to do, but I don't think that works if you have the deduction already, and we don't want to cause an issue for you. We would be thrilled to give you the difference if you didn't claim it yourself, we just want to make sure we didn't accidentally both skip the deduction.

Oh? Aw, thank you Joan. No, your hair looks nice today! Oh stop.

(bonus points if her name is Joan)

[smacpa]

I claimed a foster child I had in my home for 5 months in 2014.  If you qualify for the dependent then you can claim them.  You will have your rifle rejected if someone else has claimed them, so filing early will decrease your headaches as the second filer will have to prove their right to claim in order to take the exemption.  Your question about getting permission from the birth parent is trickier.  Depends on your own evaluation of the ethics of the situation and balancing that with the desire for a continued relationship with the family.  I can't speak to that as it was not the case in my situation.

[Lucky Recardito]

The IRS has rules about who claims the dependent -- it's not generally a "flip a coin" or "make a mutually beneficial decision" situation, even if your intention is to be nice.

Start here: https://apps.irs.gov/app/vita/content/globalmedia/overview_of_the_rules_for_claiming_4012.pdf

And if needed, tie-breaker rules are here: https://apps.irs.gov/app/vita/content/globalmedia/when_more_than_one_person_files_4012.pdf

That said, if the birth mother already filed with the children as her dependents, even if they technically should have been yours to claim, it seems to me like the IRS is unlikely to catch that unless you double-claim them (even if you are right). The path of least resistance is probably Hargrove's note -- let it roll if she already claimed them and don't create trouble for her or you (especially since you note that you don't need the money); if she has not, claim away (assuming they're indeed yours to claim) and then do what you want with the resulting $$ (keep it for yourself, give it to the birth mom, or sock it away in savings for the kids for a later date).

[wscott]

We have been a foster family for many years. The money you are paid is not a big profit making scheme. If you have had custody of a child for more than 6 months in a year then legally you are the person to claim them on your taxes. If that is going to reduce your taxes, then do it and don't feel bad about it.  Yes, having the case manager remind the birth mother than she shouldn't claim the kids isn't a bad idea.

Recently we have been using the lovely alternative minimum taxes so claiming extra kids didn't do be any good, but otherwise we claim them.

[ducky19]

Drumroll...

Be honest!

Hi Joan, do you have a second? Yes, I just wanted to touch base with you on filling out our taxes this year because they may involve the kids - see, Bill and I haven't had foster kids for quite so long before, and we want to make sure we have the tax info right so no one gets a penalty. Can you just tell me if you claimed them as dependents? That's what the state advised us to do, but I don't think that works if you have the deduction already, and we don't want to cause an issue for you. We would be thrilled to give you the difference if you didn't claim it yourself, we just want to make sure we didn't accidentally both skip the deduction.

Oh? Aw, thank you Joan. No, your hair looks nice today! Oh stop.

(bonus points if her name is Joan)

Thanks for the early morning giggle. =)

[Guide2003]

Haha, thanks for the tips (and humor!). I called the mom right before I clicked the "submit" button, and found out that she had only claimed one of the two kids, so we ended up taking a child a piece. The program we used had a clear tutorial that included foster children in the dependents category which confirmed my research. Although I know in my head she needs the cash more than us, it was pretty frustrating that she didn't snow any awareness that what she was doing was fraud, and that legally we were the victims. I was caught a little off guard on the phone, but I'll know how to handle it better next year if we find ourselves in a similar situation.

[Erica]

Hello, this is the first year I'll be filing with foster children. It looks like we can claim them as dependents (a couple were in our home for more than half the year) and the state DHR office concurs and has given us the info necessary to do so. Does anyone have experience with that?

Also, we've waited until now to get our brokerage statements, and I can only assume that the birth parent has already filed and claimed all her children even though they weren't in her care. The kids are currently back with the mother, we have a good relationship with her, and she definitely needs the money more than we do. Any tips on how to handle the situation when we ask her if she's already filed and claimed the kids? I guess its more a relational question than a tax question, but its a bit of a quandary for us. I want someone to get the tax benefit, but I also don't want her to owe back a couple thousand dollars that she doesn't have.

In theory you can report them but if you talk to a CPA, you'll find out you cannot do so anyhow.
Trust me, I was a foster parent for years. Just be glad someone got the deduction and let it go. IRS often goes after foster parents later on.

Also it's been a while but I got food stamps for a foster child in Calif. Husband lost his job temporarily during our fostering.  If you read their official manual, then go read the actual law, you will see that descriminating against foster kids is not in the law. It is only in their manual, just tossed in there with no law to back it up. If you have the  law, you can call the phone # to contest the denail then win in adminstratiive court because an administrative judge is the one who rules on it. Not the food stamp office. This was 15 yrs ago. Just a tip