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  #1  
Old 03-09-2000, 10:54 AM
Yarster Yarster is offline
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Join Date: Oct 1999
Well why not?

Everyone says that when the IRS started requiring social security numbers (SSN) for dependents that suddenly the number of dependents people claimed shrank dramatically (indicating people were making them up and cheating on their taxes)

So I'm thinking, why make them up? If the deduction for a dependent is, say $2,500, why can't I make a deal with a homeless guy where I give him, say $2,000, and he lets me use his SSN for the year as my dependent. He gets $2000 to get back on his feet, and I save $500 overall on my taxes so everyone wins...

I'm aware that nothing stops the homeless guy from selling his SSN to multiple people to try to get more money which screws this up, but lets assume for the moment we have an honest bum, or that we set up a business set up that gives out the SSNs only once (and manages the $2000 for the homeless guy so he doesn't blow it on a drinking binge, or get mugged by other bums).

I'm sure the IRS would audit people who did this to try to discourage it since it means money they would lose out on, but what's otherwise legally wrong with this idea? I assume dependents can be non-family members such as if you were caring for a sick invalid friend dying of AIDS, so why not a homeless guy/gal?

My wife tells me I'm an idiot for suggesting this, but has offered no counter argument, so I turn to you...the teaming millions...to tell me why I am off my nut.
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  #2  
Old 03-09-2000, 11:05 AM
UncleBeer UncleBeer is offline
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I think I see a couple problems with this.

What percentage of a person's total support do you have to be responsible for before you can claim him/her as a dependent? I'm really don't know off the top o' my head, but I think it would probably work out to considerably more than 2000 bucks. If this is the case, you could not legally claim this person as a dependent.

The other snafu here is the way you calculated your tax savings. The standard $2500 deduction is subtracted from your gross wages to yield net wages. The amount of tax you pay is a percentage of your net wages. It looks to me like you are assuming that $2500 deduction is simply subtracted from your total income tax bill. This is not the case.

Anyway, aren't you already supporting these people with the taxes you pay now? I'm assuming, of course, that your hypothetical hobo is collecting some sort of federal/state assistance.
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  #3  
Old 03-09-2000, 11:54 AM
Bricker Bricker is offline
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There are five tests a person must pass to be claimed as a dependent:

1. Relationship Test. The person must be your relative or have lived in your home as a family member all year. If not a relative, the relationship must not violate local law.

2. Joint Return Test. If the person is married, he or she cannot file a joint return.

3. Citizen or Resident Test. The person must be either a US Citizen or legal resident alien, or a resident of Canada or Mexico. There is an exception for certain adopted children.

4. Income Test. The person's gross income must be less than $2,750. But your child under 19 may have income that exceeds this figure, as can your child under 24 is he or she is a full-time student.

5. Support Test. You must have provided over half that person's support in the tax year. Exceptions: some children of divorced parents, persons supported by two or more taxpayers.

I don't think your Bums-For-Cash idea is going to work.

- Rick
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Old 03-09-2000, 06:37 PM
tomndebb tomndebb is offline
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This is a Hijack. Everyone sit still with your hands off the keyboards and no one will get hurt.

Ever since the MB dropped and came back this afternoon, a number of threads have been sitting on the top of the stack with tomorrow's date.

I am borrowing this post to see what happens when I respond to it. (It was the shortest/oldest thread with a 3/10 date when I grabbed it.)

As I post, Uncle Beer's last post shows a date/time of absolutely nothing! None of the posts have date/time stamps. Before I posted, the date/time on the Forum page for this thread was 03/10/2000 04:03 PM.

It is 7:40 EDT (6:40 board time--or, probably, 6:49 board time the way their clock has been running).

I now return you to your previously scheduled ponderings. Have a nice flight.

------------------
Tom~
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  #5  
Old 03-10-2000, 12:43 AM
Yarster Yarster is offline
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UncleBeer, I fully expected to get the numbers wrong (as I don't have any dependents now so I don't know what you get to take off, where, or how much). I guess my point was, a situation where I give the homeless guy/ gal less money than what I get off in taxes in the long run, thus incentivizing me to do it.

Regarding the five tests offered by Bricker, I'm pretty certain (at least in California) that the person dosen't have to be a relative (see the friend dying of AIDS scenario previously mentioned). Now if they have to live under my roof, well then you're right and I'm screwed in my bums-for-tax credits ideas. Any tax people out there who can confirm this, or tell me a loophole to get around this one?
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  #6  
Old 03-10-2000, 08:19 AM
C K Dexter Haven C K Dexter Haven is offline
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So, tom, now you've licked time travel, what about resolving some age-old paradoxes for us?
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  #7  
Old 03-10-2000, 04:01 PM
Bricker Bricker is offline
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Quote:
Originally posted by Yarster:
Regarding the five tests offered by Bricker, I'm pretty certain (at least in California) that the person dosen't have to be a relative (see the friend dying of AIDS scenario previously mentioned). Now if they have to live under my roof, well then you're right and I'm screwed in my bums-for-tax credits ideas. Any tax people out there who can confirm this, or tell me a loophole to get around this one?
My source, by the way, is the United States Government. I quoted the 1040 Form Instructions for tax year 1999, page 19, beginning with the paragraph entitled "6c".

http://ftp.fedworld.gov/pub/irs-pdf/i1040gi.pdf

The instructions clearly provide that the person does not have to be a relative. However, if they are not, then they must "...have lived in your home as a family member all year." Nothing could be plainer.

- Rick
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  #8  
Old 03-10-2000, 04:03 PM
UncleBeer UncleBeer is offline
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Just another quick quibble here, Yarster. What would California laws have to do with the federal income tax? Federal taxes are regulated by federal laws, not state laws.
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