TT doesn't accept noncitizen grandchild to qualify for HoH

[Anonymous]

IRS Publication 17 says that an (8-year old) grandchild who lives with me full time and whom I support, "a qualifying person, whether or not the child meets the Citizen or Resident Test in chapter 3." The child is not a U.S. citizen or resident: we both live abroad, and so doesn't qualify as a "dependent". But TurboTax won't allow me to file as head of household. Am I doing something wrong?

[DoninGA]

IRS Publication 501Dependents, Standard Deduction, and Filing Information - https://www.irs.gov/pub/irs-pdf/p501.pdf

You can't claim a person as a dependent unless that person is a U.S. citizen, U.S. resident alien, U.S. national, or a resident of Canada or Mexico.

You can't claim a person as a dependent if the they do not have a Social Security number or an ITIN issued by the IRS.

[Critter-3]

You are looking at the chart on page 10 of the pub 501 but did you click on the blue words to get to the allowed exception to that rule ?  

Citizen or Resident Test

You generally can't claim a person as a dependent unless that person is a U.S. citizen, U.S. resident alien, U.S. national, or a resident of Canada or Mexico. However, there is an exception for certain adopted children, as explained next.

Exception for adopted child.

If you are a U.S. citizen or U.S. national who has legally adopted a child who isn't a U.S. citizen, U.S. resident alien, or U.S. national, this test is met if the child lived with you as a member of your household all year. This exception also applies if the child was lawfully placed with you for legal adoption and the child lived with you for the rest of the year after placement.

Child's place of residence.

Children usually are citizens or residents of the country of their parents. If you were a U.S. citizen when your child was born, the child may be a U.S. citizen and meet this test even if the other parent was a nonresident alien and the child was born in a foreign country.

Foreign students' place of residence.

Foreign students brought to this country under a qualified international education exchange program and placed in American homes for a temporary period generally aren't U.S. residents and don't meet this test. You can't claim them as dependents. However, if you provided a home for a foreign student, you may be able to take a charitable contribution deduction. See Expenses Paid for Student Living With You in Pub. 526. U.S. national. A U.S. national is an individual who, although not a U.S. citizen, owes his or her allegiance to the United States. U.S. nationals include American Samoans and Northern Mariana Islanders who chose to become U.S. nationals instead of U.S. citizens.

[Anonymous]

Not claiming as a dependent but rather as qualifying (grand)child for Head of Household. The difference in tax to me is $4,000: I know this because I went into TurboTax's forms and forced the issue on 1040SR worksheet, whereupon TT listed the child as a non-dependent, accepted my writing "none (NRA)" instead of a SSN or ITN, and refigured the tax. It shouldn't be necessary to use such a workaround: Pub. 17 (and the law) clearly says that qualification for HoH is not related to qualification as a "dependent". Both my daughter (who isn't a "qualifying person") and my grandchild are nonresident aliens. There's almost nothing written on the subject, and many of those who do comment are confused, as you were, between a dependent (as in "exemptions") and a qualifying person for HoH. That TT won't accept my data as EasyStep but only when I force the issue on the forms is disquieting and makes me think I must be doing something wrong.

[Critter-3]

You are doing something wrong and by overriding the program not only are you voiding the accuracy guarantee but you will not be able to efile the return.  But let us see if any of the other tax pros agree with you ...  @Hal_Al   @DoninGA   @xmasbaby0  

I have taught this tax course for 8 years where day one the #1 rule taught  is that ALL people listed on the return MUST have a proper valid tax ID number to get any tax benefits on the return.    I have been a tax preparer & enrolled agent  for 30 years so I can tell you that you are singularly focused on one phrase without considering the rest of the text in that section of pub 501 (which sometime reads like stereo instructions). 

Many years ago the need to have a qualifying dependent to use the HOH filing status was narrowed so what you are trying to do is not legal ... your qualifying dependent must have a SS# or TIN or ATIN on the return.  NRA is not a valid item on the return if you want a tax benefit from it like HOH.   If you actually send it that way the HOH filing status will almost certainly be rejected and the return either sent back for a correction OR recomputed without it.   Clicking on the blue hyperlink in the chart will take you to the info I already posted ...

Head of Household Rules: 

You may be able to file as head of household if you meet all the following requirements.

1.You are unmarried or considered unmarried on the last day of the year. See Marital Status, earlier, and Considered Unmarried, later.

2.You paid more than half the cost of keeping up a home for the year.

3.A qualifying person lived with you in the home for more than half the year (except for temporary absences, such as school). However, if the qualifying person is your dependent parent, he or she doesn't have to live with you. See Special rule for parent, later, under Qualifying Person.

[DoninGA · Accepted solution]

@Anonymous I see where you are going with this.

If the qualifying person is your child or grandchild then you are eligible for Head of Household even if they do not meet the Citizen or Resident Test.

IRS Publication 501 Table 4 page 10 - https://www.irs.gov/pub/irs-pdf/p501.pdf#page=10

Then your workaround for the person being a non-dependent and enter NRA in the box for the Social Security number will work.

TurboTax does not allow a tax return to be e-filed if the SS field is not entered with a number.  The IRS will not accept an e-filed tax return without a number in the SS field.

The tax return can only be printed and mailed.

[DoninGA]

@Critter-3 Take another look at table 4 for Head of Household.  It specifically states The Person is a qualifying person, whether or not the child meets the Citizen or Resident Test. 

That threw me also.  What do you think?

[Anonymous]

I greatly appreciate Critter-3's comments, but with all due respect:

1) I used to be a tax lawyer, now long retired. The law has changed since.

2) The blue link takes one to the requirements for "dependent" which what comes before the link clearly states is irrelevant to whether the child (or other person) is a qualifying person.

As it happens I have PhD in nationality law. I am convinced that the child could indeed qualify as a U.S. citizen (the issues are complex and relate to proof of prior presence of the mother 50 years ago in the USA, and the relevant points are dealt with in an article entitled "Citizenship and Unwed Border Moms" in the Foreign Service Journal, and in a 2017 judgment drafted by Ruth Bader Ginsbug in the Morales-Santana case. But for lots of reasons, particularly the child's disability living allowance and disability trust (i.e. special needs trust) in our home country, and PFIC taxes (you don't want to know, unless you do already, about IRS form 8621).

The only case I tried in U.S. Tax Court I won. This matter won't get that far. Either a noncitizen, nonresident grandchild totally supported by a U.S. citizen grandparent is a "qualifying person" for Head of Household, or he/she is not. From what I can tell the return can indeed be e-filed, although in recent years I haven't because I only now found out how to reverse the entry into AGI of Social Security and Canada Pension Plan income (Write the taxable total SS & CPP amount as a negative figure on Sch. 1 line 22b and Form 1040 line 8z). In the past I used pen-and-ink and sent in paper returns.

As a final note, IRS won't receive the working papers and it is more than likely they won't ask for supporting documents. They certainly won't ask me for a legal brief or to explain a TurboTax anomaly (of which there are many). If I were using Intuit's Lacerte (the professional version of TurboTax, overriding the software would be easy.

I invite more comment, especially if somebody can prove me wrong.

[Anonymous]

DoninGA

I think you're probably right, even though the chilld's SSN/ITN wouldn't show up in the e-filed or mailed return, TurboTax probably won't efile it. I have that issue every year with another daughter's 1040 because she's married to a NRA (and her three children are definitely NRAs). Her husband wants nothing to do with the IRS. She pays no tax and gets no refund so she's only out the postage. FBARs are more of an pain: I told her to put all the kids' bank accounts with her NRA husband as custodian but she didn't listen. (FWIW: The US and Britain are two of very few countries that allow offspring of their citizens, born abroad, to be stateless: it's just good fortune if those kids get a nationality jus soli, or like mine have several. The daughter mentioned above has four citizenships but has hardly ever been to the USA: only on vacation sometimes. Happily the IRS doesn't go around looking for potential citizens who don't file: the IRS closed all its overseas offices anyway.

[Critter-3]

Well then I stand corrected  however yours is a most unusual situation that I have never run across in the past ... a reason I still haunt this forum since I learn something everyday that I would probably never normally  ever see in my career.   The TT program is written for the majority of the DIY taxpayers and doesn't cover all the unusual situations like yours.