Using the Qualifying Child Charts Why and How

Using the Qualifying Child Charts Why and How TAX-AIDE NTTC – Qualifying Child Charts 2013 1

Why? A better tool for a comprehensive, clearer answer TAX-AIDE NTTC – Qualifying Child Charts 2013 2

What do you mean? ● We tend to interview taxpayers with the dependency rules in front of us. ● If a family or household member isn’t a dependent, sometimes we don’t include him or her on the tax return. . . even when he should be included as a non-dependent for EIC, DC, or other benefits. TAX-AIDE NTTC – Qualifying Child Charts 2013 3

Replaces a dozen 4012 charts ● Pages B-1, B-2, B-3, C-5, C 6, C-7, C-8, G-3, G-8, G-9 and I-4 TAX-AIDE NTTC – Qualifying Child Charts 2013 4

Qualifying Child Tri-Fold ● Simplifies Determining Filing Status Identifying qualifying persons ● To eliminate mistakes that otherwise might not ever be caught or corrected TAX-AIDE NTTC – Qualifying Child Charts 2013 18

Qualifying Child Charts How to Use Them? TAX-AIDE NTTC – Qualifying Child Charts 2013 19

Read the Introductory Page TAX-AIDE NTTC – Qualifying Child Charts 2013 20

Terms You Need to Know ● Permanently and totally disabled ● Full-time student ● Temporary absence ● Tie-breaker rules ● Who is a taxpayer ● Incapable of self-care TAX-AIDE NTTC – Qualifying Child Charts 2013 21

Terms You Need to Know ● Permanently and totally disabled Person cannot engage in any substantial gainful activity because of a physical or mental condition; AND Doctor determines condition has lasted or can be expected to last continuously for at least a year or can lead to death TAX-AIDE NTTC – Qualifying Child Charts 2013 22

Terms You Need to Know ● Full-time student Student enrolled for the number of hours or courses the school considers to be fulltime On-the-job training course, correspondence school, or school offering courses only through the Internet do not count as a school TAX-AIDE NTTC – Qualifying Child Charts 2013 23

Terms You Need to Know ● Temporary absence Circumstances such as illness, education, business, vacation, or military service ● Custodial and noncustodial parent Custodial parent is parent with whom the child lived for the greater number of nights during the year TAX-AIDE NTTC – Qualifying Child Charts 2013 24

Terms You Need to Know ● Tie-breaker rules 1. Parent 2. Parent with whom the child lived the greater number of nights 3. Parent with higher AGI 4. If parent could claim the child but doesn’t, another household- and family-member whose AGI is higher than the AGI of any parent who could claim the child 5. If neither are parents, the person with the higher AGI TAX-AIDE NTTC – Qualifying Child Charts 2013 25

Terms You Need to Know ● Taxpayer Someone who has a filing requirement or files to claim a refundable credit. Not a taxpayer if filing only to get a refund of income tax withheld or estimated tax paid TAX-AIDE NTTC – Qualifying Child Charts 2013 26

Terms You Need to Know ● Mentally or physically incapable of selfcare TAX-AIDE Persons who cannot dress, clean or feed themselves, OR Persons who must have constant attention to prevent them from injuring themselves or others NTTC – Qualifying Child Charts 2013 27

Start with Qualifying Child Chart ● Use one taxpayer (or a taxpayer couple if filing MFJ) – referred to as “you” ● And one child or other person – referred to as “him” or “her” ● Use the child’s name when asking the questions TAX-AIDE NTTC – Qualifying Child Charts 2013 28

Use the Child’s Name ● If the child’s name is Joe, start at Box 1 and ask, “Was Joe a U. S. citizen or national or a resident of the U. S. , Mexico or Canada for some part of the tax year? ” TAX-AIDE NTTC – Qualifying Child Charts 2013 29

Follow the arrows ● If the answer to the question in Box 1 is “yes, ” follow the yes arrow to Box 3. TAX-AIDE NTTC – Qualifying Child Charts 2013 30

Box 3 ● Ask, “Was Joe your son, daughter, stepchild, eligible foster child, brother, sister, half-brother, half-sister, stepbrother, stepsister, or a descendant of any of them? ” TAX-AIDE NTTC – Qualifying Child Charts 2013 31

Follow the arrows ● If the answer to the question in Box 3 is “yes, ” follow the yes arrow to Box 5. ● And ask the question in Box 5 TAX-AIDE NTTC – Qualifying Child Charts 2013 32

Blue boxes When you get to a blue box, STOP. ● The blue box lists ALL the benefits for which this child qualifies the taxpayer. ● Read the whole box. Important information is included in parentheses after most benefits. TAX-AIDE NTTC – Qualifying Child Charts 2013 33

Repeat for Other Children ● If there is an additional child (or household or family member) ● Whose situation is different, You may get to a different blue box. TAX-AIDE NTTC – Qualifying Child Charts 2013 34

Start with the older generation ● If the household has multiple generations, don’t start with the grandchildren, start with the children. ● You’ll need to determine if they ARE dependents before you can determine if they HAVE dependents. TAX-AIDE NTTC – Qualifying Child Charts 2013 35

Start with Qualifying Child Chart ● Even if you are analyzing a person who is not a qualifying child, start with the Qualifying Child Chart (Chart 1). You will be directed to the Qualifying Relative Chart (Chart 2) if appropriate. ● It is easy to mistake the child of a noncustodial parent as a qualifying relative. Start with the Qualifying Child Chart. TAX-AIDE NTTC – Qualifying Child Charts 2013 36

It looks very complicated, but. . . ● If your child’s situation is straightforward, the chart will take you straight down the left-hand side to Box 29. ● These are the same 10 questions you would answer from Page C-3 of the Resource Guide TAX-AIDE NTTC – Qualifying Child Charts 2013 37

1. 2. 3. 4. 5. 6. Citizenship? Relationship? Age? Younger than you? Residency? Child of more than one taxpayer? 7. Child filing MFJ? 8. Can you be claimed as a dependent? 9. Parent separated and filing separate returns? 10. Did the child provide more than ½ of his own support? Then, person is qualifying child for all possible benefits

If situation is not straight-forward ● Follow the arrows and you will arrive at the correct answer TAX-AIDE NTTC – Qualifying Child Charts 2013 39

Example 1 ● Child (John) is self-supporting (because he receives social security survivor benefits used for his support). TAX-AIDE NTTC – Qualifying Child Charts 2013 40

Start with John as QC of parents Ask: Was John a US citizen or Ask: Was your son, national or John a resident aliendaughter, of the Ask: Was John under 19 at the stepchild, eligible foster child, US, Mexico or Canada for age some Ask: Wasyear? John younger than end ofsister, the year brother, half- you? part of the tax Ask: Except for temporary absences, sister, stepbrother, stepsister, or a did John with the youqualifying for more than Ask: live John child descendant of. Isany of them? half the (See exceptions for Did foryear? any other taxpayer? [i. e. birth, John deathlive or with kidnapping. ) any other close relative (for example, parent, grandparent etc. , aunt, uncle, older sibling)] for more than ½ the year? TAX-AIDE NTTC – Qualifying Child Charts 2013 41

Continue with John as QC of parents Ask: Is John filing a MFJ tax return? [Answer “no” Ask: Can you, the TP, beif filing get a refund claimed as ato dependent on of Ask: Areonly John’s parents divorced, withholding or or estimated anyone else’s return? legally separated lived apart all tax lastpaid. ] ½ of the year? TAX-AIDE NTTC – Qualifying Child Charts 2013 42

Continue with John as QC of parents Ask: Did John provide more than ½ his own support? John is your qualifying child for earned income credit IF 1. He is not married, 2. Both you and he have valid SSNs, and 3. You are not the qualifying child of another person. TAX-AIDE NTTC – Qualifying Child Charts 2013 43

Continue with John as QC of parents But note: • No head of household • No dependency exemption • No child tax credit, etc. TAX-AIDE NTTC – Qualifying Child Charts 2013 44

Enter John in Main Info Sheet ● Not a dependent, but yes for EIC TAX-AIDE NTTC – Qualifying Child Charts 2013 45

Example 2 The TP (Al) paid medical expenses for his live-in girl friend (Ann) who is NOT his dependent (gross income too high). TAX-AIDE NTTC – Qualifying Child Charts 2013 46

Start with Ann as QC of Al Is Ann a U. S. or daughter, Was Ann citizen your son, national or aisresident ofqualifying stepchild, eligible child, Ann not yourfoster the brother, U. S. , Mexico Canada sister, half-brother, child. See or Chart 2 to for some part of the tax is your half-sister, stepbrother, determine if she year? stepsister, or arelative. descendant of qualifying any of them? TAX-AIDE NTTC – Qualifying Child Charts 2013 47

Continue with Chart 2 (Ann as QR of Al) Was Ann your Was a stepchild, US citizen, • Ann Child, eligible foster Was Ann your qualifying national resident alien or child a descendant of any of child ororor the qualifying child them? Did Ann live provide withoryouover all year a resident of you Mexico Did half as or • any other taxpayer? , sister, half-sibling a. Your member of your household Canada for any part of the ofbrother Ann’s support? or a son or daughter of any of for temporary absences year? except them? relation-ship does not • (and Your your stepbrother, stepsister, violate local laws)? stepfather or stepmother? • Your father, mother, or an ancestor or sibling of either of them? • Your son-in-law, daughter-in-law, father-in-law, mother-in-law, brother- in- law or sister-in-law? Let’s say those laws have been struck down in your state. TAX-AIDE NTTC – Qualifying Child Charts 2013 48

Continue with Chart 2 (Ann as QR of Al) Did Ann have gross income (excluding Was Ann totallytax and exempt income such as permanently disabled? social security) more than the exemption amount? TAX-AIDE NTTC – Qualifying Child Charts 2013 49

Input ● If Al paid Ann’s qualified dependent care expenses – Main Info (& complete Form 2441): ● If Al paid Ann’s qualified medical expenses – Sch A Detail: TAX-AIDE NTTC – Qualifying Child Charts 2013 50

If situation is not straight-forward ● Example 3: TP (Tom) pays child support and pays for medical insurance for his child (Billy), but his ex-wife won’t sign Form 8332. TAX-AIDE NTTC – Qualifying Child Charts 2013 51

Start with Billy as QC of Tom Ask: Was Billy a US citizen or Ask: Was Billy your son, daughter, national or a resident alien of the stepchild, eligible foster child, US, Ask: Mexico or Canada Was Billy underfor agesome 19 halfat the brother, sister, half-brother, Ask: Was Billy younger than you? part ofof the taxyear? Ask: Except for temporary absences, end the sister, stepbrother, stepsister, or a did Billy with you for descendant of any them? Go tolive Page 2 of. Block A more than half the year? (See exceptions for birth, death or kidnapping. ) TAX-AIDE NTTC – Qualifying Child Charts 2013 52

Continue in Block A (Billy as QC of Tom) Are you the noncustodial Were the parents divorced parent? or legally separated, had a separate maintenance agreement, or did not live together during the last ½ Does Billy receive at least Was in thefrom custody of of the year? half his. Billy support yourparents divorcemore decree one. Does oror both Do you have a written parents their new orhalf separation agreement than the year? declaration (Form 8332 or spouses? unconditionally allow similar document) signed by the you to claim Billy for tax custodial parent releasing the purposes? exemption for Billy? TAX-AIDE NTTC – Qualifying Child Charts 2013 53

Billy ● Do not list in Main Info Sheet ● Can claim medical on Sch A Detail: TAX-AIDE NTTC – Qualifying Child Charts 2013 54

Example 4: ● Mary has a baby (Lele). Mary and Lele live with Mary’s parents while Mary continues with high school. ● Support agreement requires baby’s father (Sam) to pay $200/month in child support and gives him the child’s tax exemption. ● Sam wants to claim Lele’s exemption. TAX-AIDE NTTC – Qualifying Child Charts 2013 55

Example 4 Continued: ● Mary’s parents are providing room and board for Lele (about $1, 000/mo) and think they should be able to claim her exemption. ● Mary believes Sam is entitled to claim the exemption but is willing to give to her parents whatever would be hers. TAX-AIDE NTTC – Qualifying Child Charts 2013 56

Start with Lele as QC of Sam Was Lele a US citizen, Was Lele your daughter? national or resident alien or a Was Lele under age 19 at resident Was of Canada or Mexico Lele younger the end of the year? than Except for temporary for any part you? of the year? absences, did 2 Lele live. A Go to Page Block with you for more than half the year?

Go to Block A (Lele as QC of Sam) Are you Lele’s Are the parents divorced, noncustodial parent? Did Lele receive at least legally separated, had a written half of her support from separation agreement, or did parents (or their new not live together during the last spouses)? ½ of the year? Before we do that, let’s see if Lele is the qualifying child of any other taxpayer. 58

Start with Mary as QC of her Parents Is Mary a US citizen? Is Mary your son, Was Mary under age 19 daughter, stepchild, Was Mary younger than at Except the endfor of temporary the year? eligible foster child, you? Is Mary the qualifying absences, did Mary live brother, sister, halfchild of any other with you for more than brother, half-sister, taxpayer? half the year? stepbrother, stepsister, or a descendant of any of them? 59

Continue with Mary as QC of her Parents Is Mary filing a MFJ Include in Dependents/ Can. Mary you be claimed as tax return? Are Mary’s parents Nondependents section a dependent on of Main Did Mary provide Info Sheet with Code 1 divorced, legally anyone more else’s than ½return? her separated or lived own support? apart all last ½ of the year? NTTC – Qualifying Child Charts 2013 60

For this presentation. . . ● We’ll take it for granted that Lele is the qualifying child of Mary. TAX-AIDE NTTC – Qualifying Child Charts 2013 61

Check: Lele as QC of Mary Is Lele a US citizen? Is Lele your son, daughter, Was Lele under age 19 stepchild, foster Was Leleeligible younger than at Except the endfor of temporary the year? child, brother, sister, halfyou? Is Lele the qualifying Would you win the tieabsences, did Lele live Did you give someone brother, half-sister, child for any other Let’s see what happens breaker? withelse youin forthe more than household stepbrother, stepsister, or taxpayer? if we say “no” half the right year? to claim the a descendant of any of them? child as a qualifying child?

Continue with Lele as QC of Mary Is Lele filing a MFJ return? Can Mary be claimed as a dependent? Go to Page 2 Block B TAX-AIDE NTTC – Qualifying Child Charts 2013 63

Continue with Lele as QC of Mary Did Lele provide more than ½ her own support? • Ho. H—but Mary didn’t provide ½ the cost of the home • Dependent care credit (if Lele is incapable of self-care) • EIC—but Mary is a QC so no EIC • Medical expenses Mary will give her parents the right to claim Lele. TAX-AIDE NTTC – Qualifying Child Charts 2013 64

Check: Lele as QC of the Grandparents Is Lele a US citizen? Is Lele your son, daughter, Was Lele under age 19 stepchild, foster Was Leleeligible younger than at Except the endfor of temporary the year? child, sister, halfyou? Isbrother, Lele the qualifying Would you win the tieabsences, did Lele live Did give you the brother, half-sister, child of. Mary any other breaker? Are youclaim Lele’s withright you for more thanas Is your AGI Lele greater to stepbrother, stepsister, or taxpayer? parent, step-parent half athe year? than QC? a descendant of. Mary’s? any of or foster parent? them?

Continue with Lele as QC of Grandparents Is Lele filing a MFJ tax Include Can Lele youinbe. Dependents/ claimed as Nondependents section of Main return? Are Lele’s parents a dependent on 3 Are they filing Info Sheet with Code divorced, legally Was Lele in the anyone Didelse’s onereturns? orreturn? both separated or lived custody one or Did Lele of provide parents provide apart allparents last ½½of both more than of more than ½ of theher year? more than half own support? Lele’s support? the year? NTTC – Qualifying Child Charts 2013 66

Go to Chart 2 (Lele as QR of Sam) Was Lele a US citizen? Was Lele your qualifying child or the qualifying child or any other taxpayer? ● Not Sam’s qualifying child or qualifying relative Didn’t meet the support test for children of divorced or separated parents, so not a qualifying child. Lele was qualifying child of another taxpayer (grandparents), so didn’t meet the tests for qualifying relative. TAX-AIDE NTTC – Qualifying Child Charts 2013 67

Confirmed: ● Lele is not the qualifying child or qualifying relative of Sam ● Lele is qualifying child of her grandparents They would not win the tie-breaker with Mary But she agreed that they could claim Lele, and their AGI was higher than Mary’s TAX-AIDE NTTC – Qualifying Child Charts 2013 68

Main Info – Grandparent’s Return ● CTC for Mary also if she is under 17 TAX-AIDE NTTC – Qualifying Child Charts 2013 69

Example 5: ● Alex (age 28) and his wife, Sara (age 25), were in a bad car accident in February. ● When they got out of the hospital in April, they went to live with Alex’s parents while they recovered. ● Prior to the accident, Alex and Sara had earned $5, 000 each. TAX-AIDE NTTC – Qualifying Child Charts 2013 70

Start with Alex as QC of his parents Is Alex a US citizen? Is Alex your son? Was Alex under age 19 Alex under age at. Was the end of the year? Was Alex 24 Except at the end of the for temporary permanently and year and a full-time absences, did Alex totally disabled? student? live with you for more than half the year? The definition of permanently and totally disabled is unable to work for at least a year. It’s already been more than a year since Alex could work, so we’ll say, “yes. ” TAX-AIDE NTTC – Qualifying Child Charts 2013 71

Continue with Alex as QC of his parents Is. Alex qualifying child Alexthe filing a MFJ tax Can you be taxpayer? claimed as a for any other return [Answer “no” if they dependent on anyone are filing only to get a else’s return? refund of withholding or estimated tax paid. ] They have no filing requirement and are filing just to get a refund of withholding, so let’s say “no. ” TAX-AIDE NTTC – Qualifying Child Charts 2013 72

Continue with Alex as QC of his parents Are Alex’s parents divorced, Did Alex provideor more ½ legally separated livedthan apart Include Alex in Dependents/ his own support? all last. Nondependents ½ of the year? section of Main Info Sheet with Code 1 Let’s say his parents have provided more than half of his support. TAX-AIDE NTTC – Qualifying Child Charts 2013 73

Go on to Sara as QC of Alex’s parents Is Sara a US citizen? Is Sara your son, daughter, Sara is noteligible your qualifying child. stepchild, foster child, See Chart 2 to determine if she brother, sister, half-brother, half is yourstepbrother, qualifying relative. -sister, stepsister, or a descendant of any of them? Does not include daughter-in-law. TAX-AIDE NTTC – Qualifying Child Charts 2013 74

Go to Chart 2 (Sara as QR of Alex’s parents) Is Sara a US citizen? Is Sara your qualifying child or Was Sara your the qualifying child ofover any Didstepchild, you provide • Child, eligible fosterhalf other child orher a descendant oftaxpayer? support? of any of • • Does include daughter-in-law TAX-AIDE them? Your brother, sister, half sibling, or a son or daughter of any of them? Your step brother, stepsister, stepfather or stepmother? Your father, mother, or an ancestor or sibling of either of them? Your son-in-law, daughter-in-law, father-in-law, mother-in-law, brother-in-law or sister-in-law? NTTC – Qualifying Child Charts 2013 75

Continue on Chart 2 (Sara as QR of Alex’s parents) Include Sara in Dependents/ Did Sara have gross Nondependents section of Main Was Sara totally and Info Sheet with Code 0 and income more than the Ignoring sheltered permanently include her medical expenses on exemption amount? workshop income, disabled? Sch A was her gross income more than the exemption amount? TAX-AIDE NTTC – Qualifying Child Charts 2013 76

Conclusion: ● Alex is a qualifying child for his parents for all tax benefits. ● If Alex’s parents paid any medical expenses or in-home care for Sara while they worked, they could deduct the medical expenses and claim the dependent care credit. But Sara is not their dependent. TAX-AIDE NTTC – Qualifying Child Charts 2013 77

Parent’s Main Info ● Assume paid for dependent care for both Alex and Sara ● Possible EIC with Alex TAX-AIDE NTTC – Qualifying Child Charts 2013 78

Parent’s Sch A Detail ● Assume paid for medical expenses for both Alex and Sara TAX-AIDE NTTC – Qualifying Child Charts 2013 79

Other Requirements ● Now you know there is a qualifying person for a tax benefit ● Most tax benefits have other requirements that must be satisfied ● These are summarized on page 2 of tri-fold TAX-AIDE NTTC – Qualifying Child Charts 2013 80

Summary – See Pub 17 for details You cannot file MFS. Neither taxpayer can be treated as non-resident alien for tax purposes. Payments must be so you can work or look for work. You have not remarried. TAX-AIDE NTTC – Qualifying Child Charts 2013 81

Limitations ● You need to know the definitions ● Must not forget to check the other requirements ● Chart doesn’t cover student loan interest TAX-AIDE NTTC – Qualifying Child Charts 2013 82

Qualifying Child Charts Questions? Comments? TAX-AIDE NTTC – Qualifying Child Charts 2013 83