My 22 y.o. daughter's dependent status changed with TT Deluxe 2020, even though the qualifying questions are answered the same as for 2019. Did tax laws change for 2020?

[Hornswoggled]

These are MFJ returns for tax years 2019

[VolvoGirl]

Changed from what to what?  Is she still a full time student?  You must have answered a question differently.  Try deleting her and re enter her.  That may clear something out.  

[xmasbaby0]

No, the tax laws pertaining to dependents did not change--so you answered something differently.  Does she still meet the criteria to be a qualifying child or qualifying relative?   Was she a full-time student in 2020?  If she was not a student--did she have over $4300 of income in 2020?

IRS interview to help determine who can be claimed:

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

WHO CAN I CLAIM AS A DEPENDENT?

You can claim a child, relative, friend, fiance (etc.) as a dependent on your 2019 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?

[DJS]

• Do they meet the age requirement? Your child must be under age 19 or, if a full-time student, under age 24. There is no age limit if your child is permanently and totally disabled.
• Do they live with you? Your child must live with you for more than half the year, but several exceptions apply.
• Do you financially support them? Your child may have a job, but that job cannot provide more than half of her support.
• Are you the only person claiming them? This requirement commonly applies to children of divorced parents. Here you must use the “tie breaker rules,” which are found in IRS Publication 501. These rules establish income, parentage and residency requirements for claiming a child.

[Hornswoggled]

Thanks for the responses. I wish I could have described the situation more completely, but the forum software here limits the # of characters in a new question.

I used Turbotax Deluxe for my 2019 return, and I now have 2020 Deluxe for the 2020 tax year return. My daughter Patty is a live-at-home full time student, age 21 last year and currently 22; no job or income, stayed here 11 months in 2019 and 12 months in 2020.  She is actually my step-daughter; she came to the USA in 2019 with her mother (whom I married), and her father is not a US taxpayer and provides no support, so she cannot be claimed as a dependent by anyone else. Because of Patty's nearly adult age at the time she arrived in the USA, I never did any kind of legal adoption. She is a legal permanent resident here (along with her Mom.) She was classified as a "dependent" by TT 2019 Deluxe for our joint return.

When I started up TT 2020 Deluxe, I imported data from the 2019 return, so we had the same data as used last year. TT 2020 Deluxe was showing her as a "non-dependent" for the 2020 tax year. That got me curious as to what changed, so I started going through all the questions for her. 

What I've narrowed it down to is the answer for the question "Who are Patty's legal parents?" It gives three choices: 1) husband and wife 2) husband only 3) wife only. In 2019, I answered this question with the choice #3, wife only. Patty was then considered a dependent by TT Deluxe 2019. When I answer that same question the same way for 2020, Patty's status changes to "non-dependent".  However, if I change the answer to #1 husband and wife in TT 2020 Deluxe, her status changes to "dependent". 

Not sure what the relevance of this question is, especially in the context of an MFJ return where it's already been established that there is nobody else trying to claim her as a dependent. Could this be an error in the software for TT Deluxe 2020?

[NCperson]

it might be worth running your scenario through the IRS dependent tool - it'll help narrow down the issue.  Note you can run both 2019 and 2020 scenarios through this tool

https://www.irs.gov/help/ita/whom-may-i-claim-as-a-dependent
 

[Hornswoggled]

Thanks for the suggestion on the IRS tool. It was something I was unaware of, and I'll give it a try.

[Hornswoggled]

Followed up further, checking out the IRS website mentioned earlier to use the dependent tool. That tool yielded an answer that my step-daughter qualifies as a dependent.

So I decided to go back and create a brand-new tax return on TT Deluxe 2020 for testing purposes. I only went as far as entering personal info for our family. I got the same result as reported before. The question about who the legal parents are affects if she's classified as a dependent or a non-dependent. Answering that question with just her mother (my wife) makes her a non-dependent; answering that we are both her legal parents toggles the status to her being a dependent.

This question about legal parents did not appear in the IRS tool mentioned earlier; and in 2019 Turbotax either answer mentioned above classified her as a dependent. 

It would seem there's an error in Turbotax about this. It can definitely affect the results of a tax return, including separate dependent-triggered areas such as the Earned Income Tax Credit.

Is there a protocol for notifying Intuit to investigate this matter further?

[NCperson]

... I just created a dummy file in both the 2020 and 2019 desktop version of TurboTax. It works the same way both years.... if you choose the daughter is the legal child of both parents, she is a qualified child; if you choose she is only the legal child of one parent, she is not a qualified child. 

Are you sure you answered only your wife was the legal parent in 2019?????did you check your 2019 tax return to confirm your step daughter is listed as a child dependent (there should be the $500 tax credit on Line 13a)

do you have 2019 Desktop version and can open that and review the work? 

I just don't see the bug at the moment...without first eliminating the possibility that there was an unintentional error on your 2019 tax return. 

[Hornswoggled]

Thanks for running the comparison. Unfortunately, I'm still getting different results between 2019 and 2020, and how I answer the "Legal Parents" question.

I am running the desktop versions of Turbotax Deluxe on a Windows 10 machine; I have both the 2019 and 2020 versions installed. 

I just verified my previous results by also creating a dummy file in 2019 (I'd already done that earlier for the 2020 version.) Creating a dummy file with similar data for 2019, I get the same result ("she's a dependent")   whether I answer the "Legal Parents" question with "(my wife only)", or answer it as "(both of us)." Same result, she's a dependent. Note however, that I was saying she was a dependent based on the last page (which says so) at the end of the questions. However, even though it said there that she was a dependent, the boxes checked on the 1040 page 1 from 2019 tell a different story, as noted in the next paragraph below. This whole thing is getting murkier!

Yes, I did answer 2019's "Legal Parent" question with (my wife only). No, I did not get the $500 credit on line 13a. Honestly, I thought I had. So I went back to look at my 2019 1040 form. In the "Dependents" section on page 1 0f my 2019 1040, the "Child Tax Credit" box is not checked, but the "Credit for other dependents" box is checked.  

My head is starting to spin a bit on this. I'm going to read up a couple of IRS pubs about these topics tonight. I'll update on this thread tomorrow.

Thanks for the support!

[NCperson]

I ran 2019 with your scenario and got different answers when I check both parents (dependent) and only the wife (not a dependent). I then did the same two scenarios in 2020 and got consistent results with 2019. 

As you did not get the $500 credit, that leads me to believe (unless your income is over $400,000 and the credit begins to phase out), the issue is how you answered the questions in 2019, which were pulled over to 2020.  

[macuser_22]

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@Hornswoggled wrote:

"Who are Patty's legal parents?" It gives three choices: 1) husband and wife 2) husband only 3) wife only. In 2019, I answered this question with the choice #3, wife only. Patty was then considered a dependent by TT Deluxe 2019. When I answer that same question the same way for 2020, Patty's status changes to "non-dependent".  However, if I change the answer to #1 husband and wife in TT 2020 Deluxe, her status changes to "dependent". 

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Since you are marred to her mother, she is you stepchild, so for that purposed that is the same as a parent. so the answer that you are both the parents is the correct answer.

(Answering otherwise will lead to a different interview about separate parents and a custody agreement that do not apply to a stepchild.

[Hornswoggled]

Thanks for the continued support on this question. I agree that the line of questioning seemed to go off-track; in the printed instructions and worksheets for dependents and the earned income tax credit, I saw no reason to be asking about who the legal parent(s) were when it was already established that she is my step-daughter (and my wife's daughter.) As it was, I got sidetracked on this issue while looking at the effects of doing a Roth IRA conversion before year end.

At any rate, it's time now to step back and relax, maybe look at a good movie tonight, ring out 2020. 

Happy New Year everyone! 

[macuser_22]

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@Hornswoggled wrote:

I saw no reason to be asking about who the legal parent(s) were when it was already established that she is my step-daughter (and my wife's daughter.)

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That question is there because divorce agreements and custody agreements can permit the actual father to claim the child if released by the mother even if the mother has remarried.  Only if both tax payers are the child's actual parents will the question not be asked.     (This comes from the special IRS rules for children of divorced or separated parents that live apart.  That requires the parent that actually lived with the child to issue a 8332 form releasing the dependent to the other parent that did not live with the child.)

Even though for tax purposes a step child is the same as your own child, that does not override divorce or custody agreements that might allow the true father to claim the child.