Decoding The Irs Dependent Rules! How Do I Know When To Claim A Dependent?

Everyone who earns any type of income knows how confusing federal taxes and dealings with the Internal Revenue Service can be. When the April 15th deadline begins to sneak up every year, the entire nation begins to feel the frustration of sorting out their income taxes. With the thousands of areas in which people can find deductions, one of the most confusing areas to consider is the handling of dependents.

Having a dependent may seem straight forward; however, there are many situations which bring up questions. For example, claiming a child as a dependent typically requires providing that child’s social security number. However, what if you’ve just adopted the child and have no access to that number yet? In this situation, there are two solutions. If the child was adopted domestically, the parents must request an Adoption Taxpayer Identification Number (ATIN). This will allow the parents to claim the child as a dependent AND file for the child care credit. If the adoption is of a child that is not a U.S. citizen or resident, the application should be for an Individual Taxpayer Identification Number (ITIN).

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.

In this day and age, many people are choosing to file separately, even if they are married. If you have both provided the same amount of care and support for a child, can you both claim that child as a dependent? Unfortunately, a child can only be claimed as a dependent on one tax return. Therefore, you should discuss between the two of you which will claim him. If you cannot come to an agreement, Publication 501 from the IRS has a “Tie-Breaker Rule”, which will aid you in the determination.

What about separated couples? For instance, the child has lived with his or her mother for the majority of the tax year in question. However, the father has provided all financial support for the care of the child. Who would claim the child as a dependent? In this situation, the party with which the child resides maintains the right to claim him or her as a dependent. This, however, can be waived to allow the financially supportive parent to claim the dependent by filling out Form 8332, entitled “Release of Claim to Exemption for Child of Divorced or Separated Parents”.

As you can see, there are many situations in which the dependency of a child is not straight forward. However, with the right sources, you can find the answers to most or all of your tax questions regarding the filing of dependent credits.

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