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.
09-13-2017 08:44 AM
09-13-2017 04:13 PM
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:
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:
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.
Senior Tax Advisor (Tampa, FL)
09-15-2017 03:13 PM
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.