"I claimed my step kids (not married) together for 8 years lived together for 5 years i was audited & not allowed to claim them". Why?
For the three years that you did not live with the kids, you were not allowed to claim them at all. You did not meet the relationship test (you must be closely related or live with them ALL year).
For the other years you can claim them as dependents (if you met the full rules below), but you were not allowed to claim the child tax credit or the Earned income credit. For years before 2018, this meant you were allowed the $4000 (+/-) (it went up each year) dependent exemption (income deduction). For 2018 and beyond, you get the $500 other dependent credit.
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The full rules are that a person can still be an other dependent (Qualifying relative in IRS parlance, even though they do not have to actually be related), if not a Qualifying Child*, if he meets the 6 tests for claiming a dependent:
- Closely Related OR live with you ALL year
- His/her gross taxable income for the year must be less than $4200 (2019)
- You must have provided more than 1/2 his support
- He must be a US citizen or resident of the US, Canada or Mexico
- He must not file a joint return with his spouse or be claiming a dependent of his own
- He must not be the qualifying child of another taxpayer
In addition to the above requirements, to claim your girlfriend children, they must meet all of the above requirements and:
--- your girlfriend must not be required to file a return,
--- she does not file a return claiming the children
*There are two types of dependents, "Qualifying Children"(QC) and standard ("Qualifying Relative" in IRS parlance even though they don't have to actually be related). There is no income limit for a QC but there is an age limit and student status test, a relationship test and a residence test. Only a QC qualifies a taxpayer for the Earned Income Credit and the Child Tax Credit. The Other dependent (qualifying relative) credit is worth (up to) $500 per dependent and is non-refundable. That is, it can only be used to reduce an actual tax liability.
