Dependent filing

[ygodoy]

My mother in-law has never filed taxes. Her youngest son receives SSI. I wanted to know if it was possible for my sister in-law to place her mom as a dependent in her taxes. From my understanding, she can’t place her little brother as a dependent because he receives SSI, but what about her mom? Please help! 

[Hal_Al]

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, a relationship test and residence test. Only a QC qualifies a taxpayer for the Earned Income Credit and the Child Tax Credit. They are interrelated but the rules are different for each.

You don't say where everybody lives. If your MIL and her son live with your SIL, even in the MIL's home,  then she can probably claim both of them.  Receiving SSI is not a disqualifier.  

.A child closely related to a taxpayer can be a “Qualifying Child (QC)” dependent, regardless of the child's income, if:

1. He is under age 19, or under 24 if a full time student for at least 5 months of the year, or is totally & permanently disabled
2. He did not provide more than 1/2 his own support. Welfare, including SSI (supplemental security income) counts as third party support and not support provided by the child. Social Security Disability Income (SSDI) is considered self support
3. He lived with the relative (including temporary absences) for more than half the year
4. He is younger than the relative (not applicable for a disabled child)
5. If the child meets the rules to be a qualifying child of more than one person, you must be the person entitled to claim the child as a qualifying child (this essentially means that you have the parent’s permission to claim the child, if the child also lived with the parent more than half the year)
6. If the parents of a child can claim the child as a qualifying child but no parent so claims the child, no one else can claim the child as a qualifying child unless that person's adjusted gross income (AGI) is higher than the highest AGI of any of the child's parents who can claim the child.

A person can still be a Qualifying relative dependent, if not a Qualifying Child, if he meets the 6 tests for claiming a dependent:

1. Closely Related OR live with the taxpayer ALL year (not even one night at the non-custodial parent’s home).
2. His/her gross taxable income for the year must be less than $4200 ($4150 in 2018)
3. The taxpayer must have provided more than 1/2 his support

In either case:

4. He must be a US citizen or resident of the US, Canada or Mexico
5. He must not file a joint return with his spouse or be claiming a dependent of his own
6. He must not be the qualifying child of another taxpayer

Nontaxable Social security doesn't count as income, for the income test, but social security money he/she spends on her self does count as support not provided by the taxpayer, for the support test. Money she puts into savings & investment does not count as support she spent on herself. Note that a parent is closely related so there is no requirement that she live with you at any time, during the year. But if you provided a home it helps your support case, unless they own the home you live in. If no one person (or married couple) provides 50% of the support (for example your siblings are also sending support), then a "multiple support agreement” (IRS Form 2120) can be used, to allow you to claim the dependent. https://www.irs.gov/pub/irs-pdf/f2120.pdf

The IRS has a worksheet that can be used to help with the support calculation. See: http://apps.irs.gov/app/vita/content/globalmedia/teacher/worksheet_for_determining_support_4012.pdf The support value of a home is the fair market rental value, divided by the number of occupants.

Reference: https://turbotax.intuit.com/tax-tools/tax-tips/Family/Rules-for-Claiming-a-Dependent-on-Your-Tax-Ret...

[ygodoy]

My mother in-law and the little brother live with my sister in-law. Nobody claims either of them on anyone’s else’s taxes. They have lived with my sister in-law for more than a year and she provides with food and half for the rent and whatever the child needs. Would she still need her mom to have an ITIN number since she is an illegal alien? Nobody has claimed either of them, ever. 

[ygodoy]

My mother in-law is 54 years old and the child is 15. My sister in-law is 21. 

[Hal_Al]

It sounds like she can claim both of them. Both dependents will need SS# or ITIN and pass the "substantial presence" test*.

*The non-citizen has a "green card," which is authorization from the federal government to live and work in the United States permanently. The IRS refers to this as the "green card test.

"The non-citizen was in the United States for at least 31 days of the year, and at least 183 days during the three-year period that includes the current year and the two years immediately before that. The IRS calls this the "substantial presence test." Learn more about how to properly count those 183 days with TurboTax's Tax Tips for Resident and Non-Resident Aliens.