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  1. #1
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    May 2017
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    Default Who Qualifies when Determining Your Deductions from Income on Form 122c-2

    My question involves bankruptcy in the state of: NH

    I do plan on hiring an attorney, but in the meantime I am just trying to gather as much information as possible to see if Ch13 is even a good option for us. On Form 122C-2 question number 5 it says to "fill in the number of people who could be claimed as exemptions on your federal income tax return, plus the number of any additional dependents you support. This may be different from the number of people in your household."

    I have a unique family...so here goes. Living in my house are myself and my husband, my 20 year old daughter, my two youngest children (who I have primary custody of but only claim one for tax purposes) my husbands 2 children who live with us on weekends but whom we do claim on our taxes, and my elderly disabled father 80yrs old who contributes $300 a month to the household (not claimed on taxes).

    My question is...do my step-children count in determining the number of deductions because we claim them on taxes, and support them part time? And can I include my father as well as long as I include his $300 a month as income towards the household?

    Thanks in advance. This does make a huge difference in calculating disposable income as it seems the answer can range anywhere from 4-8 people.

  2. #2
    Join Date
    Sep 2010
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    18,400

    Default Re: Who Qualifies when Determining Your Deductions from Income on Form 122c-2

    As the form says, the "number of people in the household" is distinct from this number. The rules for "dependents" is in IRS publication 501. Obviously, anything that you can legally claim as an EXEMPTION is good. Then there are a few things in 501 where you meet the test for dependent but don't qualify to claim them as an exemption. I suspect the "younger child" that you aren't claiming (presumably you have an agreement with the other parent) meets this if you they live with you and you are providing a majority of their support.

    I suspect the two stepchildren (the IRS lumps children, stepchildren, and foster children together for this) don't meet the tests (support/residence). It's unclear if your father does or not. If he meets the support test and makes less than $4050 on his own, you can count him.

  3. #3
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    Oct 2014
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    6,644

    Default Re: Who Qualifies when Determining Your Deductions from Income on Form 122c-2

    Quote Quoting Heartsick123
    View Post
    My question involves bankruptcy in the state of: NH

    I do plan on hiring an attorney, but in the meantime I am just trying to gather as much information as possible to see if Ch13 is even a good option for us. On Form 122C-2 question number 5 it says to "fill in the number of people who could be claimed as exemptions on your federal income tax return, plus the number of any additional dependents you support. This may be different from the number of people in your household."

    I have a unique family...so here goes. Living in my house are myself and my husband, my 20 year old daughter, my two youngest children (who I have primary custody of but only claim one for tax purposes) my husbands 2 children who live with us on weekends but whom we do claim on our taxes, and my elderly disabled father 80yrs old who contributes $300 a month to the household (not claimed on taxes).

    My question is...do my step-children count in determining the number of deductions because we claim them on taxes, and support them part time? And can I include my father as well as long as I include his $300 a month as income towards the household?

    Thanks in advance. This does make a huge difference in calculating disposable income as it seems the answer can range anywhere from 4-8 people.


    I am assuming that you are planning on filing a joint bankruptcy; if that’s not correct that might change things a bit. The form has not been updated to reflect the passage of the tax law Congress enacted last December. The reason that is important is that for tax years 2018 through 2025 there are no more personal exemptions allowed as deductions on your personal income tax return. Or more precisely, the exemption amount is now zero. That’s a problem here because on your joint income tax return prior to this year you would have gotten one exemption for you and another one for your husband. The way the form is worded, however, read literally it could now exclude you and your husband from the total to put on line 5 because there are no more exemptions and you and your husband are not dependents, either.

    Under the statement issued by the U.S. Trustees Program (USTP), which is the office in the Justice Department that administers the means test, the household size is determined for purposes of Form 22A (which was the old form that asked the exact same question as line 5 of the current 122c-2) as follows:

    "Household size" is the debtor, debtor’s spouse, and any dependents that the debtor could claim under IRS dependency tests. The USTP uses the same IRS test for the definition of both "household" and "family." IRS Publication 501 explains the IRS tests for "dependent."

    The USTP departs from the IRS dependent test (as does the IRS when it determines family size for collection purposes) in cases justifying "reasonable exceptions" (e.g. a long standing economic unit of unmarried individuals and their children). However, if an individual is counted as a family member for median income purposes, that individual’s income should beincluded as income on Part II of Form 22A .

    That statement was also issued before the tax law change, but tells me that the USTP would likely still consider it proper to count you and your husband in the family size even though a literal interpretation of the way the form is written could now exclude you after that tax law change. Including both of you would also make the most sense, but ask your bankruptcy attorney about that to verify that.

    As for the dependents, that statement from the USTP clarifies that the definition of a dependent under Internal Revenue Code (IRC) 152 is what it uses as a starting point for determining household size. Under IRC 152(a) a dependent means someone who qualifies either as your “qualifying child” or “qualifying relative” of either you or your husband. Unfortunately, there is not enough information here to really make a definite determination of which kids, if any, qualify as a dependent or whether your father qualifies as a dependent. For each kid and your father you would need to walk through rules that determine qualifying child and qualifying relative carefully to determine whether they could count as dependents. The rules for that are discussed in IRS Publication 501. Just be aware that the publication is for the 2017 tax returns and thus references to the exemptions are outdated. But the discussion regarding who is a qualifying child and qualifying relative is still good. If you have questions on that after you read it (and it can get rather complicated in some cases) feel free to post back here and ask about it.


    Quote Quoting flyingron
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    Then there are a few things in 501 where you meet the test for dependent but don't qualify to claim them as an exemption.
    That is not technically correct. Under IRC 151(c), an exemption was allowed for each dependent as defined in IRC 152. Thus, a dependent is by definition someone you may claim as an exemption. What the tax law then says is that some child related benefits may still be claimed by a taxpayer if the child would be their qualifying child but for the fact that the special rule for divorced and separated parents gives the exemption to the noncustodial parent.

  4. #4
    Join Date
    May 2017
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    20

    Default Re: Who Qualifies when Determining Your Deductions from Income on Form 122c-2

    Thank you so much for the detailed answers! It is very complicated. I did go see an attorney for a consultation and it seems as though I should be able to claim all the household members. Thanks again!

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