I am confused. My widowed daughter and her 8 yr old daughter (from that marriage) are living with her fiance for the last two years. They both receive $7700 each year for survivor benefits. I do their taxes and list him as head of household. Daughter does not work. I did not include my daughter as his dependent last year because I thought the survivor benefits were not taxable. Her 8 yr old is included as his dependent (along with two other children in the home) but I also did not list her (8 yr old) $7700, again I was not thinking it was taxable. If I include my daughter on his taxes as a dependent she has to pay taxes on the SSA. If I do her own individual taxes she will not have to pay anything. I am not certain what to do with the SSA 1099's for them. Last year I ignored them. Maybe that wasn't the right thing to do.
