Can I claim my daughter and grandchildren?

[FedUpParent]

My daughter and two grandchildren lived in my home for these 9 months of 2021. She worked off and on starting Mid-January. I even paid for her attorney and divorce last year only for her to go back to the deadbeat recently. I am not certain of how much income she made from January to October while living here. She did contribute exactly $1200.00 in these last 9 months to help with bills but my bills just for the house alone are over $2800.00 monthly. Can I legally claim them as dependents for 2021? I have claimed them the last 2 years because it has been the same circumstance only then she did not work, and I paid for her to go to school providing transportation and so forth. However, I am learning that the deadbeat and her want to file their taxes together he has never provided any type of support the times she has left him and moved home. In fact, he has gone 10 months before without seeing the children. I am appalled is it even legal if neither one of them supplied 50% of her and the children's living expenses for the last 9 months of 2021. Can I still legally claim them as dependants as  I have done for the last 2 years? Because I in fact and truthfully DID provide childcare and over 50% of their living expenses for 2021.

[xmasbaby0]

If your daughter and the "deadbeat" are not legally married it would be tax fraud for them to file a joint tax return.   A joint tax return can only be filed by a legally married couple.

As for claiming them for 2021----it's tricky---you do not seem to know how much (if anything) your daughter earned in 2021, and the year is not over yet.  She may have earned too much for you to claim her.   And if she files her own tax return, as a parent she has the first right to claim her own children.   You have not mentioned your daughter's age or whether she was a full-time student in 2021---and those two things are very important.

Get more information and post back when 2021 is actually over and you can find out how much your daughter earned in 2021.

IRS interview to help determine who can be claimed:

https://www.irs.gov/help/ita/who-can-i-claim-as-a-dependent

https://ttlc.intuit.com/questions/3113432-who-can-i-claim-as-my-dependent  

WHO CAN I CLAIM AS A DEPENDENT?

You can claim a child, relative, friend, or fiancé (etc.) as a dependent on your 2020 taxes as long as they meet the following requirements:

Qualifying child

• They're related to you.
• They aren't claimed as a dependent by someone else.
• They're a U.S. citizen, resident alien, national, or a Canadian or Mexican resident.
• They aren’t filing a joint return with their spouse.
• They're under the age of 19 (or 24 for full-time students).
• No age limit for permanently and totally disabled children.
• They lived with you for more than half the year (exceptions apply).
• They didn't provide more than half of their own support for the year.

Qualifying relative

• They don't have to be related to you (despite the name).
• They aren't claimed as a dependent by someone else.
• They're a U.S. citizen, resident alien, national, or a Canadian or Mexican resident.
• They aren’t filing a joint return with their spouse.
• They lived with you the entire year (exceptions apply).
• They made less than $4,300 in 2020.
• You provided more than half of their financial support.

When you add someone as a dependent, we'll ask a series of questions to make sure you can claim them. There may be other tax benefits you can get when you claim a dependent.

Related Information:

• What does "financially support another person" mean?
• What is a "qualifying person" for Head of Household?
• Does a dependent for 2020 have to live with me?
• Do I qualify for Head of Household in 2020?
• Can I claim myself or my spouse as a dependent?

[FedUpParent]

My apologies she is twenty-three and she did apply for FAFSA using my income she enrolled in college classes in July and is taking her classes online.

[Critter-3]

Then her income is immaterial as you can see from the rules listed in the other post so they can all be your dependent as long as there are no other people where they qualify as dependents. If your income is higher than any other non parents then you will win the tie breaker rule if 2 people try to claim the same dependents. 

[Opus 17]

@FedUpParent 

If your daughter files a tax return, she has the absolute first right to claim her children as dependents and she can’t be claimed as a dependent by you in that situation.

If your daughter does not file a tax return, or if she files a tax return but does not claim her children as dependents, then you can claim your grandchildren as dependents as long as your taxable income is higher than the taxable income of their mother (your daughter).  This is based on the fact that they lived with you more than half the night of the year.  

As long as your daughter is age 23 on December 31, and is attending college full-time as defined by the college, then you can claim her as a dependent as well, she would have to check the box on her tax return that says “I can be claimed as a dependent by someone else” and she can’t claim any dependents.

However, be aware that even though the rules would allow you to claim both your daughter and grandchildren as dependents, if your daughter does file a tax return and claims her children as dependents, it will be very hard to get the IRS to overturn that, and it will involve a fight between you and your daughter over providing adequate documentation of your living situation to the IRS.

The boyfriend or ex-spouse or other parent, whatever he is, has absolutely no legal standing to claim the children as dependents on his tax return unless the two of them get married before December 31.  And they can’t legally file a joint return unless they get married. But again, if you wanted to force the issue and claim the children as dependents but they also file and claim the children, your claim will force an IRS investigation that could go very negative for your daughter and her family.  You should be aware of the ramifications of your choices.

[Hal_Al]

@Opus 17  said "If your daughter files a tax return, she has the ABSOLUTE first right to claim her children as        dependents and she can’t be claimed as a dependent by you in that situation". 

From a practical standpoint, that's correct.  Technically it's not correct.  If your daughter qualifies as your "Qualifying Child" (QC) dependent (and she probably does: full time student, did not provide more than half her own support, lived with you more than half the year, under age 24 on 12-31-21), she may NOT claim herself or any dependents. Your can claim her and her kids.  It may come down to whether her  online  school classifies her as a full time student.  If she is not your QC, she might qualify as your qualifying relative dependent, if her income was less than $4300.

If competing returns are filed, there will be a mess*. 

As others have said, the father cannot legally claim the children** (they are the qualifying children of another taxpayer) and the parents cannot file a joint return to claim the children (they are not legally married)

*If someone else claimed your dependents inappropriately, and if they file first, your return will be rejected if e-filed. You would then need to file a return on paper, claiming the dependents as  appropriate. The IRS will process your return and send you your refund, in the normal time. Shortly (up to a year) thereafter, you'll receive a letter from the IRS, stating that your dependents was claimed on another return. It will tell you that if you made a mistake to file an amended return and if you didn't make a mistake to do nothing. The other party will get the same letter you did. If one of you doesn't file an amended return, unclaiming the child, the next letter, from the IRS, will require you to provide proof. Be sure to reply in a timely manner.

Winner gets the tax benefits; loser gets to pay the IRS back with penalties and interest.  

References:

https://www.thebalance.com/claiming-same-dependent-audit-risk-3193030 (audit discussion)

http://taxes.about.com/od/dependents/qt/Dependents-Audits.htm

www.eitc.irs.gov/EITCCentral/f886-h-dep.pdf (full dependent discussion including audit section)

https://turbotax.intuit.com/tax-tips/family/what-happens-when-both-parents-claim-a-child-on-a-tax-re...

**If your daughter does not qualify as your  dependent, she, as custodial parent, could release the children to the father.  He could claim the child tax credit, but, he would not be able to claim the Earned income credit or Head of Household filing status. 

[FedUpParent]

What does immaterial income mean? I am certain she's earned over $4300.00 while she was living here. I am just floored that I took care of all the bills and supported anything she and the kids needed while living in my home. I provided about 80% of the living expenses for her and my grandchildren. I even received a letter from the IRS regarding the child tax payments which I opted out of receiving in monthly payments. I just don't understand how you can financially support a person and because they earned a minimum of 4300.00, they can receive a refund that's insane to me. Especially when anyone knows it requires much more than that to support two children and an adult for a year. However, I do hugely appreciate your response and information. I just hate to risk getting into any kind of scandal although I am legally and morally correct.

[Opus 17]

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@Hal_Al wrote:

@Opus 17  said "If your daughter files a tax return, she has the ABSOLUTE first right to claim her children as        dependents and she can’t be claimed as a dependent by you in that situation". 

From a practical standpoint, that's correct.  Technically it's not correct.

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I included that in my discussion above.  If the daughter can be claimed, then she is supposed to check the box that says "I can be claimed as a dependent" even if she doesn't want to, and checking that box means she can't claim any dependents herself, so you would be free to claim all three persons as dependents on your tax return.  

The problem is that if she does file a tax return and claim her children, and you also claim your daughter and grandchildren, the IRS will have to investigate both claims and ask both taxpayers to send proof.  That puts you in the situation of fighting your child over money.  True, it could be as much as $10,000 (once you add in the child tax credit and stimulus payments for 2 children age 5 or less), but the bad feelings from the fight might cost you for the rest of your life, more than mere money.

Good luck. 

[FedUpParent]

I appreciate your response. I absolutely can't stand the thought of having to deal with the IRS in such a negative manner as far as documentation I am certain I earned more than she did for 2021, I also am certain I have documentation of all support provided. I just don't want to deal with the headache. It's bad enough I can't even see my grandchildren because she's moved back in with the EX. And he forbids them from having any contact with me. It is simply hard knowing I have contributed so much to them all to be treated this way. The financial situations she places me in are just reprehensible. 

[Opus 17]

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@FedUpParent wrote:

What does immaterial income mean? I am certain she's earned over $4300.00 while she was living here. I am just floored that I took care of all the bills and supported anything she and the kids needed while living in my home. I provided about 80% of the living expenses for her and my grandchildren. I even received a letter from the IRS regarding the child tax payments which I opted out of receiving in monthly payments. I just don't understand how you can financially support a person and because they earned a minimum of 4300.00, they can receive a refund that's insane to me. Especially when anyone knows it requires much more than that to support two children and an adult for a year. However, I do hugely appreciate your response and information. I just hate to risk getting into any kind of scandal although I am legally and morally correct.

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Being a tax dependent has to follow the law, which does not always recognize "support."

For a child who is age 23 or less and also a full time student, the support test is "did not provide more than half their own support".  So it doesn't matter how much your daughter earned as long as she did not provide more than half her own support.  It isn't even necessary for you to be the person who provided support, only that she live in your home more than half the nights of the year and provide less than half her own support.

However, if your child is age 24 or older, or age 19 or older and not a full time student, the law uses different rules.  In that case, the child can't be claimed as a dependent if they have more than $4300 of taxable income, and you specifically must provide more than half their support.  That's just how the tax law was written (in the 1950s, last overhauled in 1986).

Of course, each person is evaluated separately, so you may be able to claim the grandchildren even if you can't claim your daughter.  But there, we have to consider what happens to the family if you file conflicting claims.