Author Topic: Claiming siblings as dependents  (Read 11178 times)

griffin

  • Stubble
  • **
  • Posts: 152
  • Location: Portland, OR
Claiming siblings as dependents
« on: February 04, 2014, 05:17:09 PM »
Hi all,
This might be a long shot, but I was wondering if anyone else has been in a situation similar to mine.
I am 22 years old, living at home and recently started a job that pays me ~55k a year. Both my parents are retired, and in a low enough tax bracket that they do not claim my younger brother and sister (15 and 13) on their taxes. It occured to me that I may be able to claim my brother and sister as dependents, and snag some nice deductions/EIC for next year.
My research thus far has been a bit confusing, and I am having trouble figuring out the legality of this...inadvertantly commiting tax fraud is not high on my to-do list :)
Thanks for taking the time to read this, and any input is greatly appreciated!
Cheers,
Griffin

seattlecyclone

  • Magnum Stache
  • ******
  • Posts: 4803
  • Age: 34
  • Location: Seattle, WA
Re: Claiming siblings as dependents
« Reply #1 on: February 04, 2014, 05:22:14 PM »
My understanding is that you can claim someone as a dependent if and only if you actually pay for at least half of their living expenses. Do your siblings live in your parents' house, eat their food, etc.? If so, your parents are the only people who can claim them as dependents.

soccerluvof4

  • Magnum Stache
  • ******
  • Posts: 4959
  • Location: Artic Midwest
  • Retired at 50
    • My Journal
Re: Claiming siblings as dependents
« Reply #2 on: February 04, 2014, 05:39:04 PM »
^ +1. I would agree and you don't want to mess with that.

griffin

  • Stubble
  • **
  • Posts: 152
  • Location: Portland, OR
Re: Claiming siblings as dependents
« Reply #3 on: February 04, 2014, 07:12:39 PM »
Thanks for the quick answers! That's what I figured, but thought I should double check.
Cheers,
Griffin

grantmeaname

  • Magnum Stache
  • ******
  • Posts: 4750
  • Age: 26
  • Location: NYC
  • Cast me away from yesterday's things
Re: Claiming siblings as dependents
« Reply #4 on: February 04, 2014, 08:11:10 PM »
The rules can be found with a quick google search.

Do you have enough documentation to convince your unfriendly neighborhood IRS auditor that you provide more than half of your siblings' support?

chucklesmcgee

  • Pencil Stache
  • ****
  • Posts: 613
Re: Claiming siblings as dependents
« Reply #5 on: February 04, 2014, 09:59:58 PM »
inadvertantly commiting tax fraud is not high on my to-do list :)

Well, rest safely, it's impossible to inadvertently commit tax fraud as it has to be deliberate in order for it to be fraud! At worst you'd suffer massive fines, interest and penalties!

mlipps

  • Handlebar Stache
  • *****
  • Posts: 1085
Re: Claiming siblings as dependents
« Reply #6 on: February 04, 2014, 10:08:44 PM »
WAIT! There's no support test for the EITC.

Source: http://www.irs.gov/uac/A-%E2%80%9CQualifying-Child%E2%80%9D

But, are you thinking of claiming it for the 2014 tax year? You will likely make too much. The max income is $43,756 w/two qualifying children. 401k contributions will reduce your AGI though, and if you max out your 401k you might sneak under the bar for EITC. You could use a calculator like this one: http://www.bankrate.com/calculators/tax-planning/earned-income-tax-credit-calculator.aspx to estimate how much you could get back.
« Last Edit: February 04, 2014, 10:25:14 PM by mlipps »

griffin

  • Stubble
  • **
  • Posts: 152
  • Location: Portland, OR
Re: Claiming siblings as dependents
« Reply #7 on: February 11, 2014, 10:47:12 AM »
Yes, maxing out my 401k, HSA and IRA I'd be able to sneak under the AGI income limit, but I think i'll play it safe and avoid aggravating the IRS. Thanks again for the input everyone, I love these forums! :D

phred

  • Pencil Stache
  • ****
  • Posts: 506
Re: Claiming siblings as dependents
« Reply #8 on: February 11, 2014, 11:31:12 AM »
As long as your siblings make no more than $3650(?) and you provide at least 50% of their support then no problem.  You can claim them as a dependent deduction.  I doubt you can incorporate them into an additional EIC as well

mlipps

  • Handlebar Stache
  • *****
  • Posts: 1085
Re: Claiming siblings as dependents
« Reply #9 on: February 11, 2014, 01:28:03 PM »
As long as your siblings make no more than $3650(?) and you provide at least 50% of their support then no problem.  You can claim them as a dependent deduction.  I doubt you can incorporate them into an additional EIC as well

No, you can claim the EIC for a qualifying relative (which includes a sibling) without being subject to the support test, as I said above, with citations.

seattlecyclone

  • Magnum Stache
  • ******
  • Posts: 4803
  • Age: 34
  • Location: Seattle, WA
Re: Claiming siblings as dependents
« Reply #10 on: February 11, 2014, 04:18:34 PM »
Actually, after reading the documentation more closely, I want to retract my previous statement. I think it's actually possible that you might be able to qualify to claim your siblings as dependents. This publication goes over the rules for claiming a person as a dependent. Dependents can either be a "qualifying child" or a "qualifying relative." Let's focus on the rules for a qualifying child, because I think these are the ones that might actually apply to you.

Overall rules for being able to claim dependents at all:
Quote
* You cannot claim any dependents if you, or your spouse if filing jointly, could be claimed as a dependent by another taxpayer.
As long as you're no longer a student, you're too old to be your parents' qualifying child. If you are a student, you would have to prove you provide half of your own support to be ineligible to be your parents' qualifying child. You can't be a qualifying relative because your income is over $3,900. I think you're pretty safe on this one.

Quote
* You cannot claim a married person who files a joint return as a dependent unless that joint return is filed only to claim a refund of withheld income tax or estimated tax paid.
I assume from your siblings' ages that they aren't married yet. You're probably safe here too.

Quote
* You cannot claim a person as a dependent unless that person is a U.S. citizen, U.S. resident alien, U.S. national, or a resident of Canada or Mexico.
Are your siblings US citizens or permanent residents? If yes, then proceed.

Quote
* You cannot claim a person as a dependent unless that person is your qualifying child or qualifying relative.
Your siblings can't be your qualifying relative because they qualify as the qualifying child of another taxpayer (namely, your parents). Let's focus instead on the qualifying child requirements.

Tests To Be a Qualifying Child
Quote
1. The child must be your son, daughter, stepchild, foster child, brother, sister, half brother, half sister, stepbrother, stepsister, or a descendant of any of them.
Check.

Quote
2. The child must be (a) under age 19 at the end of the year and younger than you (or your spouse if filing jointly), (b) under age 24 at the end of the year, a student, and younger than you (or your spouse if filing jointly), or (c) any age if permanently and totally disabled.
Check.

Quote
3. The child must have lived with you for more than half of the year.
Did you live at home with your siblings for more than half of the year? If so, check.

Quote
4. The child must not have provided more than half of his or her own support for the year.
Check (assuming your siblings actually don't pay for half of their living expenses). Note that it doesn't say you have to provide the majority of the support. This is where I was mistaken before.

Quote
5. The child is not filing a joint return for the year (unless that joint return is filed only to claim a refund of withheld income tax or estimated tax paid).
Check (again, assuming they aren't married).

So they actually do meet the tests to be your qualifying child. Does this mean you can claim them as dependents? Read on...

Another wrinkle:
Quote
If the child meets the rules to be a qualifying child of more than one person, only one person can actually treat the child as a qualifying child. See the Special Rule for Qualifying Child of More Than One Person described later to find out which person is the person entitled to claim the child as a qualifying child.

...

Sometimes, a child meets the relationship, age, residency, support, and joint return tests to be a qualifying child of more than one person. Although the child is a qualifying child of each of these persons, only one person can actually treat the child as a qualifying child to take all of the following tax benefits (provided the person is eligible for each benefit).
  • The exemption for the child.
  • The child tax credit.
  • Head of household filing status.
  • The credit for child and dependent care expenses.
  • The exclusion from income for dependent care benefits.
  • The earned income credit.
The other person cannot take any of these benefits based on this qualifying child. In other words, you and the other person cannot agree to divide these tax benefits between you. The other person cannot take any of these benefits for a child unless he or she has a different qualifying child.

Tiebreaker rules.    To determine which person can treat the child as a qualifying child to claim these six tax benefits, the following tiebreaker rules apply.
  • If only one of the persons is the child's parent, the child is treated as the qualifying child of the parent.
  • If the parents file a joint return together and can claim the child as a qualifying child, the child is treated as the qualifying child of the parents.
  • If the parents do not file a joint return together but both parents claim the child as a qualifying child, the IRS will treat the child as the qualifying child of the parent with whom the child lived for the longer period of time during the year. If the child lived with each parent for the same amount of time, the IRS will treat the child as the qualifying child of the parent who had the higher adjusted gross income (AGI) for the year.
  • If no parent can claim the child as a qualifying child, the child is treated as the qualifying child of the person who had the highest AGI for the year.
  • If a parent can claim the child as a qualifying child but no parent does so claim the child, the child is treated as the qualifying child of the person who had the highest AGI for the year, but only if that person's AGI is higher than the highest AGI of any of the child's parents who can claim the child. If the child's parents file a joint return with each other, this rule can be applied by dividing the parents' combined AGI equally between the parents. See Example 6.

  Subject to these tiebreaker rules, you and the other person may be able to choose which of you claims the child as a qualifying child.
The way I read these rules is that your parents have first crack at claiming each of your siblings as a qualifying child. If they do so for the purpose of claiming any of the listed tax benefits, you will be able to claim none of the tax benefits.

However, if your parents choose not to claim the dependent exemption, the child tax credit, head of household filing status, credit for child and dependent care expenses, exclusion from income for dependent care benefits, and the earned income credit, and your AGI is higher than theirs, you may actually be able to claim all of those things instead. That could be a pretty big boost to your tax refund.

griffin

  • Stubble
  • **
  • Posts: 152
  • Location: Portland, OR
Re: Claiming siblings as dependents
« Reply #11 on: February 16, 2014, 07:38:24 PM »
Hi seattlecyclone,
I really cannot thank you enough for taking the time to write such an indepth post; I am once again humbled by the generosity of strangers. You have literally saved me thousands of dollars! I'll look into the publication you linked, but your analysis arrives at the same conclusion I did when I took an (admittedly cursory) look at the IRS website.
Again, thank you for taking the time to compose such a helpful and well thought out post.
Cheers,
Griffin

mcneally

  • Stubble
  • **
  • Posts: 176
Re: Claiming siblings as dependents
« Reply #12 on: February 17, 2014, 09:47:02 AM »
You don't get to choose who claims a dependent based on who benefits the most. Only one person (or joint return) qualifies and there are tiebreaker rules for when more than one person otherwise qualifies and OP's parents "win" the tiebreaker.

I'm an IRS auditor BTW.

Tiebreaker rules.    To determine which person can treat the child as a qualifying child to claim these six tax benefits, the following tiebreaker rules apply.
  • If only one of the persons is the child's parent, the child is treated as the qualifying child of the parent.
[/list]

Carrie

  • Pencil Stache
  • ****
  • Posts: 603
Re: Claiming siblings as dependents
« Reply #13 on: February 17, 2014, 10:05:44 AM »
Since you are living in someone else's home (are you paying any portion of those living expenses?), I would agree that the parents are the ones who provide over half the child's support.

I claim a sibling as my dependent, but she has lived with me in my home for five years.  My husband and I provide over half of her support (we get measly child support from one parent that doesn't even begin to touch the cost of support).

I would be safe on this; since you don't support your siblings, it's a no-go.

seattlecyclone

  • Magnum Stache
  • ******
  • Posts: 4803
  • Age: 34
  • Location: Seattle, WA
Re: Claiming siblings as dependents
« Reply #14 on: February 18, 2014, 03:15:55 AM »
You don't get to choose who claims a dependent based on who benefits the most. Only one person (or joint return) qualifies and there are tiebreaker rules for when more than one person otherwise qualifies and OP's parents "win" the tiebreaker.

I'm an IRS auditor BTW.

I am not an IRS auditor, but I believe your interpretation may be contrary to the tiebreaker rules and examples listed in the publication. The OP's situation actually sounds a lot like Example 1:
Quote
Example 1—child lived with parent and grandparent.

You and your 3-year-old daughter Jane lived with your mother all year. You are 25 years old, unmarried, and your AGI is $9,000. Your mother's AGI is $15,000. Jane's father did not live with you or your daughter. You have not signed Form 8332 (or a similar statement) to release the child's exemption to the noncustodial parent.

Jane is a qualifying child of both you and your mother because she meets the relationship, age, residency, support, and joint return tests for both you and your mother. However, only one of you can claim her. Jane is not a qualifying child of anyone else, including her father. You agree to let your mother claim Jane. This means your mother can claim Jane as a qualifying child for all of the six tax benefits listed earlier, if she qualifies (and if you do not claim Jane as a qualifying child for any of those tax benefits).

In this example, the child met the "qualifying child" test for both the parent and another relative (a grandparent in this example). The first tiebreaker rule that you quoted makes clear that the parent generally "wins" against a non-parent, but the last tiebreaker rule seems to create an exception that allows a non-parent relative to claim the child if the parent decides not to claim the child and the other relative has a higher income than the parent. That exception is what is illustrated in Example 1.

mcneally, can you explain why this tiebreaker would allow the higher-earning grandparent in Example 1 to claim the child as a dependent, but this tiebreaker would not allow the higher-earning older brother in the OP's family to do the same?


Quote from: Carrie
Since you are living in someone else's home (are you paying any portion of those living expenses?), I would agree that the parents are the ones who provide over half the child's support.

I claim a sibling as my dependent, but she has lived with me in my home for five years.  My husband and I provide over half of her support (we get measly child support from one parent that doesn't even begin to touch the cost of support).

I would be safe on this; since you don't support your siblings, it's a no-go.

For a qualifying child, it doesn't matter who provided over half of the support. If it did, figuring out who gets to claim the child would be a lot easier: look at who provides the support. Instead the rules allow for a situation where multiple taxpayers potentially qualify to claim the child, and that whole set of tiebreaker rules comes into play if more than one taxpayer potentially qualifies. I was mistaken about this point too before I looked more closely at the rules.

MustachianAccountant

  • Bristles
  • ***
  • Posts: 433
  • Age: 41
Re: Claiming siblings as dependents
« Reply #15 on: February 18, 2014, 09:26:08 AM »
+1 to SeattleCyclone.
Dependency rules are rather complex, and it takes a bit of research and attention to detail to figure them out. Especially since even tax preparers (and IRS agents, apparently) don't deal with the more complex dependency situations very often (or at all).

griffin

  • Stubble
  • **
  • Posts: 152
  • Location: Portland, OR
Re: Claiming siblings as dependents
« Reply #16 on: February 18, 2014, 12:55:03 PM »
Obviously I have an interest in being able to claim my siblings as dependents, but even putting that aside seattlecyclone's arguments are very convincing. I do find that the wording is kind of misleading, at times. For example:
 
Quote
•If only one of the persons is the child's parent, the child is treated as the qualifying child of the parent.

Quote
•If a parent can claim the child as a qualifying child but no parent does so claim the child, the child is treated as the qualifying child of the person who had the highest AGI for the year, but only if that person's AGI is higher than the highest AGI of any of the child's parents who can claim the child. If the child's parents file a joint return with each other, this rule can be applied by dividing the parents' combined AGI equally between the parents. See Example 6 .


The second quote seems to me to directly contradict the first, since in that case "the child is treated as the qualifying child of the person who had the highest AGI for they year, NOT the parent". It seems like the first rule is trying to say that "in the event multiple people are trying to claim the child as a dependent, the parent has first dibs".
It might also be helpful to think of "tiebreaker" as something that arises only when multiple people are trying to claim the same dependent...if there is no "competition", there is no need for a tiebreaker.
Quote
You don't get to choose who claims a dependent based on who benefits the most
The way I'm reading these rules, it looks like this is actually encouraged. They have a specific example (in seattlecyclone's previous comment) where they do exactly that.
Again, I know next to nothing about this subject, except what I've read on the IRS's website...I'd love to learn more!