Tax time question: claming a dependant

I’ll start with the standard disclaimer. You are not my Tax Attorney nor my accountant. I am not look for binding legal advice just a hint or pointing in the right direction.
Ok, here is the situation, I got divorced in 2006 and have FULL legal and physical custody of my 9 yr old daughter. My sister and mother have been very helpful in assisting me with being a single parent. I work afternoons M-F so my sister has my daughter Monday after school till Friday night (about 11pm). May or may not be relavent but I go there every morning to help my daughter and my 2 nieces get ready for school. Depending on my sister’s mood, I may or may not drive them to school.

Legally, my daughter’s address is the same as mine and there has not been anything set up in the courts giving my sister any legal rights. I have filled out emergency forms at the school for my sister to be contacted if I cannot.

She mentioned to me that she smight be able to claim my daughter on her taxes. Of course, that would mean that I could not claim my daughter and I do not want that to happen. My sister mentioned it last year around tax season but she did not do anything about it then.

She wants to bring it up with her tax preparer about the possibility and I need to know if I have to prepare to “fight” her on this. I do not want to create bad blood because I am so dependant on her to watch my daughter during the week while I work.

I pay my sister 150-200 dollars a month regardless if she has my daughter there (i.e. I took vacation when my daughter had her tonsils removed last year and had the week between Christmas and New Years off so my daughter stayed at home with me) For the 2009 year, I gave her a total of $2050 and I am not claiming it on my taxes as child care so she does not have to claim it as income.

If this is a possibility, I am thinking of trying to negotiate with her by offering her 10% of my return if I still can claim my daughter but I really need that money to pay off credit cards and other debt.

All the information I am finding on the IRS site are examples of non-custodial parents and single parents living with the child in the home of a relative.

This is mainly for Federal taxes. I usually use TurboTax and she uses a service (H&R Block I believe).

She is a daycare provider, you are the parent. You claim the kid, not her. I understand the tax benefits of being able to claim your daughter, and I understand not wanting to tick her off. Maybe remind her that you haven’t claimed child care deductions to make her life a little easier?

I am not a Tax Lawyer. But, working with employee benefits I encounter this issue occasionally.

Here is some pertinent information about claiming a “qualifying child”:

Qualifying Child

It appears that your sister may have a case as the child’s Relationship is “sibling or stepsibling, or a descendant of one of these.”

I see the touchy details are in defining Residence.

I notice that at Icarus’ link, the IRS also states:

Disclaimer: I am not your lawyer. This communication is not intended to give rise to a lawyer-client relationship and may not be relied upon for any purpose. This is not legal advice; it is just anonymous chat.

True that in a dispute the regulation supports that the parent would prevail.

But, answering the nugget of the OP, the sister does appear to have a leg to stand on in claiming the child as a dependent (thereby setting up the dispute). I would hope a wise tax preparer would present the risks in such a move.

It would, however, be up to the IRS to sniff out the duplicate claim (child’s SSN) and pursue.

The parent Odaran09 might have to defend their biological parenthood throughout the process.

It appears to me that the key issue is residency.

The qualifying child test requires that the child live with the taxpayer “more than half the year.” On the surface, that would appear to disqualify the OP whether not the sister wants to claim the kid.

However (and I should bold, capitalize, underline and color that however), a temporary absence is still counted as time living with the parent. So the OP can make a very legitimate assertion that the child is living with the sister as part of a temporary absence. For example, a college student might be away 9 months of the year, but still considered living with the parents all year because of the temporary nature.

That means that I would come down in the OP’s favor. On the other hand, I’d also point out that a legitimate argument could be made either way and that it might be beneficial to look at what situation produces the largest total tax refund.

If the IRS investigates because of a dispute over the status, my experience is that they’ll start by asking for two things: birth certificates and school registration. If both of those point to the OP as parent and as the legal residence of the child, then she’ll win if IRS has to resolve a dispute between two people claiming the daughter.

Thank you very much for the information and your opinions. I am hoping that, like last year, she just lets the matter drop.

If anyone else has an opinion, please feel free to chime in. I really don’t want this to come between my sister and I, but I do want to make sure that there is something there in the first place before it boils over.

P.S. I am the dad and my ex is not in the picture concerning this issue.

Here’s the lowdown on claiming dependents.

If you are the custodial parent, ie, you got custody in the divorce, you get to claim the child unless you fill out an 8332 granting the ex or whoever permission. If there is some weird joint custody deal, then you need to look at the time spent, but that’s fairly rare, and addressed in an msa/jpa.

Anyway, if you claim her, and you haven’t filled out an 8332 granting your sister permission, then you win. Unless there is a court order granting the other parent permissions to claim (every other year is the most common), you have control. The IRS will not settle a dispute – if you are the legal custodian, then you get the deduction, end of story, unless there are extreme circumstances (probably not these). Especially in this case, where the sister is nothing more than a care provider, and not a parent. She has no right whatsoever to claim the kid as a dependent; the IRS doesn’t care if she gets paid or not for childcare services except as to how much tax she owes.

You also appear to have helped your sister cheat on taxes. You gave her money, therefore it’s income to her unless it’s child support. Child support has to be court ordered (with some rare exceptions, and you don’t pay CS to your sister anyway). It doesn’t matter if you deduct it or not; income is income. Those payments, if characterized as child support (not gonna happen), would be taxable to you, but I don’t think that’s gonna happen.

In summary, she has about as much right to claim your kid as a dependent as the school district does – none.

Of course, what you need to do is consult a lawyer in your own jurisdiction who will help you, because I have no idea what I am talking about.

Odaran09, I hope you won’t be offended by a personal observation, but it sounds like there’s some hostility at work between you and your sister. Is she perhaps growing displeased with her role in this arrangement? Does she really need this money, or is she just trying to needle you for some reason?

Please don’t feel obliged to answer; I’m not trying to pry. These are just some things that you might want to think about.

I wouldn’t just jump to the conclusion that there’s cheating going on.

The payments are being made regardless of where the daughter lives, which sounds like a gift to me.

Even if you wanted to insist it was a fee-for-service arrangement, the sister would have no problem finding expenses to cancel out the entire $2050. She is, after all, providing room & board for the majority of each week to the daughter. Her extra food costs are probably more than $2000.

Most of that stuff is not deductible. I doubt it would qualify for business expenses, either. Support for family members is not deductible unless it is for a dependent. Even if it is deductible, she still needs to declare that income.

As far as it being a gift, that’s a possibility, but if were the IRS, I would argue that the “gift” is in exchange for services, as opposed to a no-strings sort of gift the tax code implies. It’s a reach to call it a gift. The IRS is pretty immune to technicality arguments like that.

Of course, the IRS is highly unlikely to care very much, as it sounds like OP and sister are not major taxpayers. It might not be intentional cheating, but it sounds to me like there are a few violations going on.

I am not offended by you asking, I even had a nice 3 paragraph answer written out. Unfortunetely, upon preview, I decided that my sister might not appreciate me getting too personal on a public forum.

I will sum it up by saying that she helps me a lot and I try helping her as much as I can with not only my daughter but with her three children as well. I think part of it is needling to see my reaction as well as wanting a little more money from her tax return. I am not sure how serious she was about it. When she mentioned it last year, she mentioned it once then dropped it.

I asked about this because I wanted to know if I needed to look for a tax preparer for myself about this or if there was info on the irs site about the situation.


Yes, we are not major tax payers, my income for 2009 was below 30k and her’s with two jobs and child support from her ex was below 40k.

As a practical point, I’d suggest that you determine what the difference would be if she claimed the child vs. if she didn’t claim the child. Explain how great she’s been, how much you appreciate the help, etc. Offer to pay her the difference. If I remember correctly, it’s $1000 credit per child. $1000 is about $20 a week. Give her the $1000 upfront. Then instead of paying her $150-200 a month, give her $150 always. That works out to be an additional $30 a month for her help.

Don’t get high-and-mighty about who has the right to claim what. In my proposal, you’re getting quite a value in care for less than $60 a week. Quality daycares in my area charge that for one child for a single 8am-6pm day. Consider the cost of losing this help. You’d need to put your kid in a boarding school to meet your schedule demands. That’s going to cost a lot more than $2800 a year, and probably won’t be year-round.

Shit, you’d still be better off just by offering to pay her double or triple what the tax credit would’ve been.

Do NOT rock this boat. You’re the one not wearing the life preserver.

ETA: I know that advice isn’t easy to swallow. I’m sorry if it’s harsh and unsolicited.

JerseyFrank, a kid is worth more than $1000 (the Child Tax Credit amount). There is also the dependency exemption: at at $3650 reduction in taxable income, that’s generally worth $500 to $800. And we don’t know the sister’s income level, but qualifying for Earned Income Credit could be another $3000. If the one kid would qualify her to file Head of Household, she’d get an increased standard deduction and more generous tax brackets.

That’s part of why a tax pro should look at the numbers and determine who can get the best benefit (and how it can be done legally).

As with Tom Tildrum’s post, this is more an observation than advice, but it kind of sounds to me like there a two different viewpoints regarding where your daughter lives. I’m not talking about legal residency but your daughter’s perceived home. Since you are her parent and have physical and legal custody and have your address on her paperwork, and since you see your daughter on a daily basis through the work week and have her with you when you aren’t working, you feel she lives with you and simply stays with your sister. But it sounds like your sister, who has her through the work week, may consider her niece to live with her. In other words, she may feel that she is the one raising your daughter. And then it may follow, in her mind, that she should therefore be the one to claim her as a dependant. Of course you are the one who knows your sister and can best guess what she may be thinking or feeling, but I’ve seen this sort of situation in my own family, where 2 or more adults (other than a married couple) are participating in the care of a child, and each means well, and each is completely convinced that they are the individual actually raising the child and that the others are serving as babysitters.

Claim your daughter on the return. If your sister claims her as well (does she even know your daughter’s SS#?) then the IRS will pick it up via the electronic files showing the same SS# being claimed by two different payers. They will then likely challenge your sister’s return and based upon what I’ve read above, she’ll lose the deduction. You have no reason to negotiate with your sister on this.

If she feels like you owe her more for child care…well that’s a different matter that you’ll have to negotiate.

You don’t think that would cause some problems for their relationship or adversely affect his kid or if the care the sister provides would be available?

Fill out your return honestly. If you need help with determining what this means, consult a tax professional.

I think the best advice here will be to talk to your sister to find out how she really feels about this. I’m with others who think that 2K per year for the kind of care you are getting is an INCREDIBLE deal. Starting a confrontaion over this is not going to end up benefiting you if she decides she can’t provide for your daughter anymore.

Sure, maybe you have credit card debt, etc that you need to pay off, but how much more would you pay if you had to put your daughter in an after-hours daycare 5 days a week?

I think yor answer is that, bottom line, your sister can’t usurp this from you without your consent, but you might think about giving consent , or a share of the money, based on how dependent you are, and how much she’s doing for you.

I doubt she could do it with consent.