Unit 3: Dependency Relationships

Question 1

What are the primary tests for dependency?

Answer 1

1. Dependent taxpayer test
2. Joint return test
3. Citizenship or residency test

Question 2

Dependent Taxpayer Test

Answer 2

Any taxpayer who can be claimed as a dependent can’t claim a dependent themselves. Only 1 person can claim an individual

Question 3

Joint Return test

Answer 3

Married persons who file a joint return cannot be claimed as a dependent by another taxpayer

Question 4

When does the joint return test not apply?

Answer 4

If the return is filed by dependent only to claim a refund and neither spouse would have tax liability l, even if separate returns were filed

Pg 85

Question 5

Citizenship or Residency Test

Answer 5

Dependents must be a citizen or resident of the United States or a citizen or resident of Canada or Mexico.

U.S. citizens or us nationals that legally adopt a child overseas are an exception to rule as long as the child lives w taxpayer as a member of household all year.

Question 6

Qualifying child tests

Answer 6

1. Relationship test
2. Age test
3. Residency test
4. Support Test
5. Tiebreaker test(for qualifying child of 1more person)

Question 7

Qualifying Child: relationship test

Answer 7

• must be related to taxpayer by blood, marriage, or legal adoption
• child, stepchild, adopted child
• sibling, half sibling, step sibling, (half siblings, step - etc.)
• descendant of one of above
• foster child

Adopted children treated as normal child

Question 8

Qualifying Child: Age test

Answer 8

Dependent must be:

• under age 19 at end of the tax year
• under the age of 24 at end of tax year and a full time student
• permanently and totally disabled at anytime during year regardless of age

Child must be younger than taxpayer claiming as dependent
For joint filing, child doesn’t have to be younger than both parents, one is enough.

Question 9

Qualifying Child: residency test

Answer 9

Must live with taxpayer for more than half’s a tax year. Home is where taxpayer regularly live - homeless shelter, traditional home etc

Question 10

Exceptions of residency test for qualifying children

Answer 10

Divorced parents
Kidnapped children
Children born or passed during tax year
Hospitalizations that are long term
Temporary absences

Question 11

What is considered a temporary absence?

Answer 11

Illness, college, vacation, military service, institutionalized care for a child permanently and totally disabled and incarceration in a juvenile facility

Typically assumed that child will return to home after the above is complete.

Question 12

Qualifying Children: support test

Answer 12

• Child cannot provide more than half of their own support.
• social security benefits used by child are considered self support
• full time students don’t take full time scholarships into account when calculating support test

Question 13

What is the definition of support?

Answer 13

Pg 89
Income actually used for living expenses.
Persons own funds not considered support unless they’re actually spent for that reason.
Ex: child’s bank savings not considered support since it was not spent

Question 14

What circumstance do you apply the Tie Breaker Test?

Answer 14

When a child meets rules to be qualifying child for more than one person.

only 1 person can claim a child on the tax return

Question 15

The Tiebreaker Rules to determine a qualifying child applies in sequence:

Answer 15

• Child’s parents if they file a joint return
• by the parent, if only one of the taxpayers is the child’s parent
• by the parent with whom the child lived the longest during the year
• by the parent with the highest AGI, if the child lived w each parent for the same length of time during the tax year
• by the taxpayer with the highest AGI, if neither of the child’s parents can claim the child as a qualifying child
• by a taxpayer with a higher AGI than either of the child’s parents who can also claim the child as a qualifying child but does not

Question 16

When do you use the Qualifying Relative designation?

Answer 16

• individuals not considered family members can be a qualifying relative
• any age
• used when tests for qualifying child not met

Question 17

What are the tests to determine a Qualifying Relative?

Answer 17

1. Not a qualifying Child Test
2. Member of household or relationship test
3. Gross income test
4. Support test

Question 18

Qualifying Relative: “Not a qualifying child” test

Answer 18

• taxpayers can’t claim an individual who can be claimed dependent on another tax return pg 90
• may qualify as taxpayer’s dependent under tests for qualifying relative, even if that child is QC for another taxpayer. If….
  
  • child’s parent is not required to file income tax return, and either does not file a return
  • only files to get a refund or income tax withheld or estimated tax paid

Question 19

QR: Member of Household or Relationship test

Answer 19

Dependent not related to taxpayer must have lived with the taxpayer the entire tax year in order to meet the member of household or relationship test.

Question 20

What are the exceptions to the Member of Household or Relationship test?

Answer 20

• family members don’t have to live w/ the taxpayer to meet test:
• child, step child, foster, descendant (grand child)
• sibling, step and half
• parent, grand, step, a direct ancestor (not foster parent)
• niece, nephew, son and daughter in law, mother, brother, sister in law

Question 21

Taxpayers may not claim

Answer 21

Housekeepers or other household employees even if the employee lives with the taxpayer all year

Question 22

QR: Relationships established by marriage does not end as a result of death or divorce

Answer 22

Ex: if taxpayer supports mother in law, taxpayer can continue to claim her as a dependent even if he and his ex spouse are divorced or if he later becomes widowed

Question 23

QR: Gross Income Test

Answer 23

• Dependent’s gross income for tax year must be less than threshold amount.
• qualifying relative can’t earn more than deemed exception amount: $4400 in 2022
• there are no gross income tests for qualifying child

Question 24

Define “Gross Income”

Answer 24

Income in the form of money, property, and services not exempt from tax

Question 25

QR: Support test

Answer 25

• taxpayer must provide more than 1/2 of the dependent’s total support during the year.

Question 26

What does support include in the “Support Test” for a Qualifying Relative?

Answer 26

• food, clothing, shelter, education, medical, and dental care. Includes amounts from social security and welfare payments even if support is nontaxable
• fair market value of housing
• Different from qualifying child definition

Question 27

Dependent supported by divorced, separated parents or live apart

Answer 27

• can be claimed by custodial parent
• custodial parent can permit noncustodial parent to claim but must use a Form 8332

Question 28

A child may be treated as a qualifying child for the Noncustodial parent if…

Answer 28

1. Parents divorced or legally separated or if lived apart at all times during last 6 months of year
2. Child received over half of his/her support for the year from the parents
3. Child in custody of one or both parents
4. Custodial parent signs form 8332 and noncustodial attaches declaration to their return

** does not determine head of household filing or eligibility for earned income tax credit; only custodial parent can do this**

Physical custody of child majority of the year determines who has custody of child if not specified during divorce

Question 29

Equal amount of nights shared between parents means

Answer 29

The custodial parent is the parent with a higher AGI

Custodial parent can revoke release via form 8332.
- must be attached to taxes, must be provided a copy to noncustodial parent - or make reasonable effort to provide a copy
Custodial parent must keep a copy for evidence to provide a copy or ahead notice

• the earliest revocation will apply is the year following the year the revocation was provided to noncustodial parent

Question 30

Multiple Support Agreements

Answer 30

When 2 or more people jointly provide for a person’s support.

Happens when adult children take care of their parents. Under a multiple support agreement, family members together must pay more than half of persons total support but no one member individually may pay more than half

Question 31

Form 2120

Answer 31

Multiple support declaration form used to report multiple support arrangement

Form acknowledges they don’t pay more than half the cost of supporting a dependent but that other individuals who share costs allow the taxpayer to claim that person as a dependent

Taxpayer who claimed dependent must provide more than 10% of persons support. Only one family member can claim a dependent in a single year but different qualifying family members can agree to claim dependent in other years.