Dependent Income - How to filing tax?

[kpuran99]

I claim my father-in-law as a dependent while filing tax year 2020. He's 71 years old. This year he earn around $3,500 (estimated by end of 2021).

My questions for filing tax year 2021:

1. Am I still eligible to claim my father-in-law as a dependent?
2. Do I need to include his income while filing tax year 2021?
3. Does my father-in-law need to file his own tax 2021?

[xmasbaby0]

You do NOT include your FIL's income on your own tax return.    If you are paying for over half his support and he had less than $4300 of income not including Social Security then you can claim him as your dependent.   You will get the $500 credit for other dependents and the $1400 3rd stimulus check for claiming him.   He will not receive a stimulus check since dependents cannot receive stimulus checks.

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  

You say he "earned" some income----he can file his own tax return if any tax was withheld from his paycheck so that he can get a refund.  If you claim him then he has to say on his own return that he can be claimed as someone else's dependent.

[VolvoGirl]

You don't include their income on your return. It would only go on their return if they are required to file one.  They don't have to file if they only have Social Security or W2 income under 12,400 but can file to get back any withholding taken out in boxes 2 or 17.  But you don't get boxes 4 or 6 back.

To file a separate return for a dependent in the Online version you need to set up a new account separate from yours.  Online is only good for one return per account.  You can use the same email address for 5 accounts.  You can probably use the Free Edition or the Free File website

Https://ttlc.intuit.com/questions/1894512-how-do-i-start-another-return-in-turbotax-online 

Be sure on the dependent return you check the box that says you can be claimed on someone else’s return.  If their only income is W2 and under 12,400 they do not have to file a return except to get back any withholding taken out.

Filing requirements for a dependent

https://ttlc.intuit.com/community/children-dependents/help/do-i-need-to-file-my-own-taxes-if-i-m-a-d...

[kpuran99]

Thank you @xmasbaby0  for responding. In tax year 2020, I claimed 3 dependents: my daughter, father-in-law and mother-in-law. On this point 

You will get the $500 credit for other dependents and the $1400 3rd stimulus check for claiming him.   He will not receive a stimulus check since dependents cannot receive stimulus checks.

Does this mean I can claim $500x2 credit + $1400x2 3rd stimulus check for tax year 2021?

[xmasbaby0]

If you already got the 3rd stimulus for claiming him in 2020 you do not get it again.  Nor do you get the $1400 again if you already got it for your daughter.   If you did not get the 3rd stimulus for your FIL then you can get it as a recovery credit for 2021 for dependents who can be claimed on your 2021 return.  For a qualifying relative you also get the non-refundable $500 credit for other dependents.   It reduces tax you owe--it is not a refund

https://ttlc.intuit.com/questions/4499708-what-is-the-500-credit-for-other-dependents-family-tax-cre...

There are two kinds of dependents---qualifying child and qualifying relative.  Your FIL can be a qualifying relative.  You have not provided details about your daughter so we do not know which kind she could be.

WHO CAN I CLAIM AS A DEPENDENT?

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

Qualifying child

•They are related to you.

•They cannot be claimed as a dependent by someone else.

•They are a U.S. citizen, resident alien, national, or a Canadian or   Mexican resident.

•They are not filing a joint return with their spouse.

•They are under the age of 19 (or 24 for full-time students).

• No age limit for permanently and totally disabled children

  •      They live with you for more than half the year (exceptions apply).

Qualifying relative

•They don't have to be related to you (despite the name).

•They cannot be claimed as a dependent by someone else.

•They are a U.S. citizen, resident alien, national, or a Canadian or Mexican resident.

•They are not filing a joint return with their spouse.

•They lived with you the entire year.

•They made less than $4300  (not counting Social Security)

•You provided more than half of their financial support. More info

When you add someone as a dependent, we'll ask a series of questions to make sure you can claim them.

Related Information:

•Does a dependent have to live with me?

•What does "financially support another person" mean?

•Can I claim a newborn baby?

[Mike9241]

as to whether he needs to file his own return depends in part on whether the $3500 is w-2 wages or earnings from self-employment. for self-employment, the filing threshold is $400 of net earnings because he'll owe self-employment tax even if there is no income tax.