Who claims who as dependants?

August 24, 2007 3:43 PM

I am having a hard time understanding the law on who can claim who as a Dependant in my situation and need some help. (more inside)

I have been living with my in laws in their house since january and my wifes father brought up that he planned to claim she and i and our 3 children as dependants. Now if he had been paying for the food and gas and healthcare i would understand this. However the only support that he has provided is a place to live (which is very kind) We have paid for everything else. I'm not sure that qualifies us as his dependants. The reason this is a problem is because i usually recieve a large refund and i think he want's that for himself, what is the law here, and is there anywhere i can go that i can as this question to a tax pro for free?

Facts:
i will earn approx 30,000 gross this year
we are moving out next month
i have filed all w4's expecting to claim my family as dependants
my wife is a homemaker only

posted by unsurmountable to law & government (15 comments total)

It's going to be tough for him to claim your children as his dependents for that scenario. From what I know, dependents can only be listed by one person/couple.
posted by rhizome at 4:10 PM on August 24, 2007

Look at the definitions of "qualifying child" and "qualifying relative" in IRS publication 501. Then call the IRS at 1-800-829-1040 if you have any more questions.

My non-professional understanding is that your father in law cannot claim you as a dependent (you fail the gross income test), and can claim your wife and children as dependents only if he provided more than half their support this year. Also, he cannot claim your wife as a dependent if you file jointly.
posted by mbrubeck at 4:13 PM on August 24, 2007

The rules can be found here on the IRS website.
posted by MattD at 4:15 PM on August 24, 2007

IANACPA, but I think he'll have a hard time getting away with this. Check out this article, which jives with what I've run into about claiming a dependent. Basically, you need to make less than $3000 and he would need to be providing more than half of your support. Also, you'd need to agree not to file your own return.

I think, and I'm venturing onto shaky ground here, that moving in with your FIL didn't change anything in the IRS's eyes. SIL's are close enough family that if he'd been able to prove you made less than $3,000 and that he'd provided more than half your support, he could have claimed you as a dependent at any time; there'd be no residency requirement.

CPAs correct me if I'm wrong, but I'm pretty sure he's out of luck.
posted by small_ruminant at 4:19 PM on August 24, 2007

From google search, this article says:

Perhaps you've allowed a relative to live with you free of charge during the last year, and that person did not have a job. Can you claim this person as a dependent? The IRS has provided specific guidelines for this type of situation. As of December 31, 2004, the following must apply in order for you to claim the individual as a dependent:

1. The relative should be a child or grandchild of your brother or sister;
2. The relative is under 19 (or 24 in the instance of a full time student);
3. The relative has lived with you for more than half of the tax year in question; and
4. The relative has not provided at least half of his or her own support during the tax year in question.

This page says this in regards to a new tax law passed in 2005:
The child must be under age 19 (or under age 24 if a full-time student) on the last day of the tax year, or any age if totally and permanently disabled.

Personally, if I were in that situation, I'd pony up a little cash to have my taxes done by a pro this year. That way, if there are any conflicts, you'd most likely come out on top.
posted by idiotfactory at 4:20 PM on August 24, 2007 [1 favorite]

oops. $3400 for 2007.
posted by small_ruminant at 4:20 PM on August 24, 2007

This looks like the relevant table.
posted by small_ruminant at 4:28 PM on August 24, 2007

Hmm. What I meant to link to was Table 4, on that page.
posted by small_ruminant at 4:30 PM on August 24, 2007

Idiotfactory's advice is great. Your father in law will not get this exemption in the end, but he may try to claim it anyhow, thereby screwing up your refund (and his) and causing you all sorts of hassles, potentially for years. So make sure he knows what the rule is, and that you plan on taking all the exemptions for your kids - tell him you're doing this so he won't get in trouble. If he doesn't claim 'your' exemptions, you're better off than a tussle with the IRS. Additionally, try to file your taxes before him - if you file before him, you'll get the money first and he won't. This won't matter in the end, since that's how it would eventually shake out, but it's better than you getting temporarily stiffed because he's already gotten a refund.
posted by Dee Xtrovert at 4:37 PM on August 24, 2007

Adults can't be claimed as dependents if they make over $3400 in a year, in addition to other qualifying rules (which excludes you). No one who files a joint return with someone else can be claimed as a dependent (which excludes your wife).

If more than one person claims a dependent, both will be audited to determine who is entitled to take the deduction. Tiebreakers are applied. The first tiebreaker rule is that if a parent and a non-parent both claim a child, the parent always wins. This means that you will automatically receive the deduction for your children.

In short, you most likely have nothing to worry about. Your father in law may want to rethink the guaranteed audit. If he is seriously considering claiming you and your wife, he has a major misunderstanding of how dependent claims work. If I were in this situation, I would file taxes as usual and not worry about a competing claim. I would, however, consider using an inexpensive pro just to make sure your return is 100% in order, since it is more likely to be reviewed if he follows through on his plan. I hope your relationship with your FIL is good enough that he will drop the matter after seeing the IRS publications that others have linked to.

(As a side note, if it ever did come to the point of calculating who provided more support for the children, which it will not since you are the parent, the value of housing support is calculated at fair market value. So if your children live in one room of their house, the value of support they provided would be equal to the fair market rental value of that room for the months they lived in the house.)
posted by pekala at 4:37 PM on August 24, 2007

One year my ex- and I both claimed our son as a dependent. We both got requests for more information from the IRS. So, even if you both claim, therre's a process for it to be resolved. It was in the divorce agreement, so the answer was very clear.
posted by theora55 at 4:37 PM on August 24, 2007

And yes, this could certainly screw up your refund even though there is no question you'll receive it in the end. If he follows through with the plan, file early and be fully prepared for the possibility of not getting that check as promptly as usual. I suspect the IRS has fairly routine procedures for making this determination, especially since this case is not borderline, but you never know.
posted by pekala at 4:46 PM on August 24, 2007

First he would need all of your social security numbers, he then would need you and your wife to sign IRS Form 2120 giving up your rights to claim yourselves. Second, you made too much money for him to claim you even if he were able to get you to sign the form.

He's out of luck, but do file early.
posted by JujuB at 5:06 PM on August 24, 2007

My first year out of college, my father claimed me as a dependent even though I filed my taxes and claimed myself. This was problematic for a couple of reasons, the least of which being that if anyone had claimed me, it should have been my mother (the person who actually paid my tuition and provided my housing prior to my entering the workforce).

But anyhow, my father and I both got nastygrams from the IRS and he was audited. I was not. I also filed first.
posted by wildeepdotorg at 5:44 PM on August 24, 2007

"I have been living with my in laws in their house since january and my wifes father brought up that he planned to claim she and i and our 3 children as dependants."

Everyone's given you the legal answer. I would only add that this sounds like his way of letting you know that he feels this arrangement has cost him something. For the sake of family peace, you might want to bring him the relevant IRS cites AND a thank you note with a token payment inside. "Pops, we appreciate your kindness in giving us a place to live these last few months. To show our gratitude to you both, here's this certificate for a romantic dinner at your favorite restaurant..."
posted by nakedcodemonkey at 8:27 PM on August 24, 2007