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A child is automatically the dependent of the "close relative" where the child lives more than half the nights of the year (183 or more night), as long as the child does not provide it's own support.  A "close relative" is  a parent, stepparent, grandparent, aunt, uncle, or older sibling.  

 

If the child lives with you more than half the nights of the year but other family help support the child, it is still your qualifying child and you don't need form 2120.  You don't have to prove how much support you provide if the child lives in your home 183 or more nights of the year. 

 

If the child does not live more than half the nights of the year with any one particular close relative, then the only way to claim the child as a dependent is for all the people who provide more than 10% of the child's support to all agree on which person will claim the child as a dependent.

 

If you claim your grandchild as a dependent and include form 2120, what you are saying is 

  1. the child does not live with me more than half the year
  2. the child doesn't live with any other close relative more than half the year either
  3. every other relative who helps support the child agrees that I can claim the child as a dependent this year
  4. I have a signed statement from every other relative who supports the child that says I can claim the child and they will not claim the child for this tax year.

 

You don’t file the signed statement with your return. But you must keep it for your records and be prepared to furnish it and any other information necessary to show that you qualify to claim the person as your dependent.  If other relatives also claim the child as a dependent and you don't have the signed statements to back up your form 2120, you will lose the dependent tax credit and have to repay it with interest and penalties for filing a tax form you knew was inaccurate.