Can/should I claim my girlfriend and her daughter on my return? Both lived with me for the whole year of 2020. My girlfriend is 1099 income, less than 1000 earned.

[arms1089]

Would it be better to claim them on my taxes or should my girlfriend file separate and claim her child?

[DawnC]

Your girlfriend has a reporting requirement because of her self-employment earnings.  She is required to file a 2020 return with the IRS if she had:

• $400 or more in self-employment net earnings (gross income minus expenses); or
• Marketplace health insurance and you received advanced payments for the premium tax credit.

If she is required to file a tax return, her daughter is her qualifying child which makes you ineligible to claim her daughter as a qualifying relative dependent since her daughter would be a qualifying child of another taxpayer - your girlfriend. 

If it were a W-2 job (as opposed to her 1099) and she were to file a tax return only to get a refund of her withholdings, they both would still qualify to be your dependents (given her income was less than $4300, the both lived with you all year and you provided over half of their support, etc.)

But since she has a 1099 for self-employment, she has to file the return to pay Self-Employment tax if her gross income minus expenses is more than $400. 

Child of person not required to file a return.

A child isn't the qualifying child of any other taxpayer and so may qualify as your qualifying relative if the child's parent (or other person for whom the child is defined as a qualifying child) isn't required to file an income tax return and either:

• Doesn't file an income tax return, or
• Files a return only to get a refund of income tax withheld or estimated tax paid.

You would only be able to claim her daughter if your girlfriend is NOT required to file a return and does not file a tax return or does so only to get a refund of income tax withheld or estimated tax paid. 

So, you can claim your girlfriend as a qualifying relative if you meet the qualifications, but if you do, she has to indicate that she can be claimed on someone else's return.  If she doesn't mark that, the second return filed will be rejected.  And if you claim her on your return, she can't claim her daughter since your girlfriend would be a dependent on another tax return - yours.   If you can't or don't claim her, then she will mark the option that says she can't be claimed on another return and claim her daughter on her tax return. 

Even if she does not file because her gross profit is less than $400, since you are not married, both her and her child would be listed as 'Other Dependents' on your tax return.   As other dependents, they won't qualify you for the Head of Household status (unless you have other qualifying dependents), Earned Income Credit or the Child Tax Credit.   

[Edited 02/1/2021 1:35 PM PST]

[Opus 17]

This is a weird case where you could claim your girlfriend but you may not claim her daughter. Since you cannot qualify for head of household or earned income credit for the child, it is probably best for the mother to claim her child.

You can’t claim a person as a qualifying relative dependent if they could be claimed as a qualifying child dependent by another taxpayer. Your girlfriend is a taxpayer this year because even though her income is low, the fact that it is self-employment income means that she must file and pay self-employment tax.  Since your girlfriend’s daughter meets all the tests to be a qualifying child dependent of her mother, and because her mother must file a tax return for 2020, then you can’t claim the child as a dependent.  Then, if you claimed the mother as a dependent, she could not claim her daughter either, because someone who is a dependent can’t have dependents, and that would mean that no one could claim the daughter.

So in this situation, I think the mother needs to claim the child as a dependent and you don’t claim either of them.

[arms1089]

Thank you for the information! It is very much appreciated!