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  1. #1
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    Default Grandparents Claiming Grandkids

    Is it illegal for grandparents to claim their daughters children on their tax return when the mother supported the children? The mother and children live with her parents. The mother pays for part of the food bill and electric bill for the household, pays for child care and does all of the clothes shopping and buying of medicine for the children. The mother also used a flexible spending account to help with the cost of child care. Now her parents are asking her to claim her children on their taxes stating that it's because she lives with them. If the daughter allows them to claim one or both her children how would she explain the Dependent Care Flexible Spending account? When doing the dependent care claim form she listed both children and the amount she paid for each child bi-weekly. If anyone could help I would greatly appreciate it.

  2. #2
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    Default Re: Grandparents Claiming Grandkids

    Is it illegal for grandparents to claim their daughters children on their tax return when the mother supported the children?
    Yes.

    The IRS has some pretty firm ideas about who may claim a child as a dependent.
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  3. #3
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    Default Re: Grandparents Claiming Grandkids

    It is not illegal per se since the children meet the definition of a qualifying child for both the parent and the grandparent(s). In that case, if only one of the people for whom the child is a qualifying child is the parent, then it is the parent who can claim then as their dependent. That does not mean that the grandparents are doing something illegal if they claim the child since they have no way to compel another person to disclose their tax return to them. The IRS will bring the matter to their attention and then require them to sort things out.

    If the grandparents are paying over half the cost of keeping up the home, then the child's mother would not be entitled to head of household filing status since that is a requirement for that filing status.

    Really, if someone has moved in with their parents and their parents are helping them by giving them a place to live, it would be a shame to get into such conflict, with accusations of doing illegal things, etc. As far as flexible spending accounts, who is compelling an explanation of that?

  4. #4
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    Default Re: Grandparents Claiming Grandkids

    Quote Quoting Shawnypoo
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    Is it illegal for grandparents to claim their daughters children on their tax return when the mother supported the children? The mother and children live with her parents. The mother pays for part of the food bill and electric bill for the household, pays for child care and does all of the clothes shopping and buying of medicine for the children. The mother also used a flexible spending account to help with the cost of child care. Now her parents are asking her to claim her children on their taxes stating that it's because she lives with them. If the daughter allows them to claim one or both her children how would she explain the Dependent Care Flexible Spending account? When doing the dependent care claim form she listed both children and the amount she paid for each child bi-weekly. If anyone could help I would greatly appreciate it.
    The flexible spending account will be a SERIOUS problem if the grandparents claim the children.

    If the children are not mom's dependents, then mom cannot report the daycare payments on her tax return, and she will end up getting taxed on the money from the flexible spending account.

    I also do not think that the grandparents could demonstrate that they provided more than 50% of the children's support.

    All in all it would be a very bad idea for the grandparents to claim the children. I would strongly advise any client of mine against it.

  5. #5
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    Default Re: Grandparents Claiming Grandkids

    There is no requirement to provide over 50% of the support for a qualifying child, only that the child not provide over 50% of its own support.

    Yes, the FSB amount would be taxable.

  6. #6
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    Default Re: Grandparents Claiming Grandkids

    Quote Quoting Bubba Jimmy
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    There is no requirement to provide over 50% of the support for a qualifying child, only that the child not provide over 50% of its own support.

    Yes, the FSB amount would be taxable.
    Actually, if the two parents combined provide more than 50% of the children's support, then they win under the tiebreaker rules.

    Also, I have a client in audit right now, who has been denied certain family dependents because they have not demonstrated to the auditor that they have provided more than 50% of the dependents support. That was specifically noted in the audit results.

  7. #7
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    Default Re: Grandparents Claiming Grandkids

    Thank you all for your responses!

  8. #8
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    Default Re: Grandparents Claiming Grandkids

    Quote Quoting llworking
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    Also, I have a client in audit right now, who has been denied certain family dependents because they have not demonstrated to the auditor that they have provided more than 50% of the dependents support. That was specifically noted in the audit results.

    There are two kinds of dependents, a qualifying child and a qualifying relative. I was referring only to a "qualifying child". Other "family dependents" may be claimed as a "qualifying relative". If someone is being claimed as a dependent as a qualifying relative, then there is a support test that requires the taxpayer to provide over 50% of the support. This test does not exist for a qualifying child. It is important to keep straight the set of rules under which you are qualifying a child. Again, a person can be claimed as your dependent as a qualifying child for whom you provided no support whatsoever as long as that person did not provide over half of their own support. Publication 17 from the IRS spells out all the rules for claiming dependents.

  9. #9
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    Default Re: Grandparents Claiming Grandkids

    Quote Quoting Bubba Jimmy
    View Post
    There are two kinds of dependents, a qualifying child and a qualifying relative. I was referring only to a "qualifying child". Other "family dependents" may be claimed as a "qualifying relative". If someone is being claimed as a dependent as a qualifying relative, then there is a support test that requires the taxpayer to provide over 50% of the support. This test does not exist for a qualifying child. It is important to keep straight the set of rules under which you are qualifying a child. Again, a person can be claimed as your dependent as a qualifying child for whom you provided no support whatsoever as long as that person did not provide over half of their own support. Publication 17 from the IRS spells out all the rules for claiming dependents.
    You are wrong Bubba. You are applying the parental rules to a situation with a non parent.

  10. #10
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    Default Re: Grandparents Claiming Grandkids

    llworking, the rules for a "Qualifying Child" are the same for a parent or a grandparent. I suggest you review IRS Pub. 17 regarding the definition of a Qualifying Child. Table 3-1 on page 26 of the 2008 Pub 17 lists the rules for Qualifying Child. The relationship can be "son, daughter, brother, sister, half brother, half sister, stepbrother, stepsister, or a descendant of any of them".

    Page 28 describes in detail what the support test is for a Qualifying Child. You should reveiw that as well and you will see that I am not wrong.

    Rather than just tell me I'm wrong, please give me an authoritive citation for what you are saying. For a qualifying child there is no requirement that the person claiming the exemption provide over 50% of the support, and if I am wrong please give me your source. This is something of which I am quite certain, and I am absolutely positive that I am not wrong. After reviewing Pub. 17 pages 26-29 I think it will be clearer for you.

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