All Things Tax

All Things Tax

Like the title says, from the filing process and tax questions to tax policy and reform, you can search and share All Things Tax here. This is the place to find answers to all your general questions that don't fall under the other categories. And just a reminder: questions about software or online filing should be posted in DIY Products.

Reply
Pioneer
Posts: 2
Registered: ‎09-13-2017

Can I claim dependents

My sister in law and her two children have lived with me for several years. She does not work not have any source of income. She does however receive some benefits from the state such as food stamps and medical coverage. Since she has no income my wife and I provide everything else for her and the kids: clothing, shelter, food, utilities, pay for school activities, and so on. My wife and I had claimed her and her children on our taxes every year until last year. This last year my sister in law informed us that we should not have ever been claiming her or her children on our taxes as they are homeless in the eyes of the state. She told us that we are never allowed to claim them again because she could lose her state benefits. My question is two parts, one why are we not allowed to claim the children when I pay for everything, and two, what impact would my claiming them have on her ability to receive her benefits?
Highlighted
Tax Pro
Posts: 5,536
Registered: ‎02-23-2016

Re: Can I claim dependents

Hi Ap362709,

 

 

Welcome to the H&R Block community.

 

I've run into this same scenario many times before so I am quite familiar with it.

 

Under the tax law, if your sister-in-law received less than $4,100 of taxable income then she can absolutely be claimed as your dependent.  If she is claimed as your dependent and you also provide for her kids then you have the right to claim her kids as well.  State benefits are not affected because .  State benefits are based on your income & needs alone, not on your tax return.  Further, if she has no taxable income and is living on state benefits, your sister-in-law cannot get any tax benefits for the kids and will not need to file a tax return.

 

Based on the information you've provided you can claim your sister-in-law as a qualifying relative, provided that all of the requirements for someone who is unrelated to you to be claimed as a qualifying relative are met.  Those requirements are:

 

  • the person must have lived with you for the entire year
  • the person must have received less than $4,100 worth of taxable income for the year
  • the person must have received more than 50% of his or her support from you
  • the person must not be the dependent of another taxpayer

You can claim descendants of a sibling (your brother & sister-in-law's kids) as your qualifying children provided that they meet all of the qualifying child requirements.  Those requirements are:

 

  • the child must live with you for more than half of the year
  • the child must have provided less than 50% of their own support
  • the child must be related to you
  • the child must be under age 18 or under age 24 if in school full time
  • the child must not file a joint return with another taxpayer

 

Provided of course that all of the above requirements are met, you can not only claim an exemption for each of your sister-in-law and each of her kids, you can also claim the child tax credit of $1,000 per child for the kids, the dependent care credit if they are in daycare and you're paying for that, and the earned income credit as well if your income is within the limits for the EIC.

 

If you are not married and you meet all of the above requirements then you can also file as a head of household provided that you claim the kids & you provide more than 50% of the upkeep of your home.

 

If you have any other questions I'll be glad to help.

 

Louis,

Senior Tax Advisor (Tampa, FL)

Pioneer
Posts: 2
Registered: ‎09-13-2017

Re: Can I claim dependents

Louis-

 

Thanks for the reply. So, now to the next issue. I did not claim her or her children last year. Should I do an amended tax return at this point to claim them? 

Tax Pro
Posts: 5,536
Registered: ‎02-23-2016

Re: Can I claim dependents

Ap362709,

 

 

You're welcome.

 

Absolutely.  So long as your situation was the same last year (you qualified under the rules in my previous post) it is to your benefit to claim your sister-in-law and the kids.  Their exemptions alone will reduce your taxable income by $12,150.

 

You can still claim & receive an additional refund for 2014, 2015, and 2016 if one is due.

 

All you need to do for prior years in which you were eligible to claim them is complete & mail Form 1040X (Amended Tax Return) to the IRS.  Since we're talking about claiming dependents, and because the IRS has been checking things more and more thoroughly over the past couple of years when it comes to dependents, I would recommend including some sort of proof that they lived with you during the year for which you are claiming them, at least for the kids.  School or dentist office records that show the child's name & addresses for the year would be sufficient.

 

Louis