Reporting social security

[Hal_Al]

@jyeh74  said "But when the elderly couple is claimed as a qualifying dependent, then that social security income does NOT count as income and is subject to income of $4,700 or under per person rule".

No. That's a misinterpretation, probably brought on by the  oversimplification statement "social security doesn't count for the income test". Only the non taxable portion of SS doesn't count for the $4700 income test.  If a couple meets the $32000 rule, then you have to look at the calculation of the taxable portion for the dependent income test. 

The oversimplification probably comes from the fact that people with taxable SS aren't usually being considered for dependency. 

[jyeh74]

@Hal_Al This is more complicated.  From the 1099-SSA how would one determine what counts as taxable toward the $4700?  @xmasbaby0 stated and also from the link, it says that social security benefits are excluded from the $4700 when they are qualified relatives for dependents.  It doesn’t state whether the social security benefits are spent on themselves or into savings or investments etc.

[Hal_Al]

Q. From the 1099-SSA how would one determine what counts as taxable toward the $4700?  

A. You don't get that from the SSA-1099. Social security  only becomes taxable when added to sufficient other income. If you are otherwise required to file a tax return, you do need to enter it in Turbotax (TT). TT will determine the taxable portion. See the worksheet at page16 at

https://www.irs.gov/pub/irs-pdf/p915.pdf

[DoninGA]

@jyeh74 Under the Qualifying Relative rules, to claim them as a dependent the person claiming them must provide over one-half of their support.

Go to this IRS website for the support worksheet - https://apps.irs.gov/app/vita/content/globalmedia/teacher/worksheet_for_determining_support_4012.pdf

To be a Qualifying Relative -

1. The person cannot be your qualifying child or the qualifying child of any other taxpayer. A child is not the qualifying child of any other taxpayer if the child's parent (or any other person for whom the child is defined as a qualifying child) is not required to file an income tax return or files an income tax return only to get a refund on income tax withheld.
2. The person either (a) must be related to you or (b) must live with you all year as a member of your household.
3. The person's gross income for the year must be less than $4,700 (social security does not count) in 2023
4. You must provide more than half of the person's total support for the year.
5. The person must be a U.S. citizen or a U.S., Canada, or Mexico resident for some part of the year.
6. The person must not file a joint return with their spouse.

[xmasbaby0]

You can use the support test to see if the adult children are providing over half the support to the parents if you are still not sure if the amount of SS the parent receives is paying more than half their own support.

https://ttlc.intuit.com/turbotax-support/en-us/help-article/taxation/financially-support-another-per...

[jyeh74]

@Hal_Al social security income only becomes taxable when you add it to other income.  The question is how much other income would then qualify social security as taxable income?  It appears that the total of the elderly couple’s social security income added up, and divided by 2, + all the other income like interest income or dividend income, has to be greater than $32,000 a year together.  It’s not that difficult to have social security greater than $32,000 a year for two people.  

So if an elderly couple makes more than $32,000 a year for both, from social security, then they can or cannot be claimed as a dependent?  Without going through the worksheet, I’d guess $32,000 in social security would be greater than $4700 gross income.  However, the income test is only for one dependent, not two people (as a couple).  But the $32,000 rule is looking at their income as two people (as a couple).  Not sure I follow the logic.

@xmasbaby0 it appears that your statement that social security doesn’t “count” when you’re being claimed as a qualifying relative dependent isn’t true.  You have to use that worksheet to see how much of that $10k social security money is taxable. @DoninGA Your post of $4700 excluding social security is incorrect based on what @Hal_Al is saying.

[Hal_Al]

This discussion has become mostly academic. Back to the original  situation: 

Elderly couple of husband and wife.  No income.  For years they have been claimed as dependents.  Daughter claims mom as her dependent.  Son claims dad as his dependent.  Elderly couple starts receiving social security money SSA-1099.   Somewhere around $10k each a year.  They don’t have any other income but could have 1099-INT from banks.  Maybe $10-15 annually.

Q. Do they have to report the $10k + $10k = $20k that they jointly receive from their social security?

A. No. Social security alone is not taxable (unless the total exceeds $64,000, not $32,000). 

Q. With the $10-15 interest income?

A. Still no. That's not sufficient income to make their SS taxable on the worksheet.* 

Q. Can they still be claimed as dependents?

A.  That now depends  on the support test.  There's now $20,000 more money (self support) available in that calculation. The IRS has a worksheet that can be used to help with the support calculation. See: http://apps.irs.gov/app/vita/content/globalmedia/teacher/worksheet_for_determining_support_4012.pdf

The support value of a home is the fair market rental value, divided by the number of occupants.

*How much  is "sufficient other income"? The simple answer is $13,850 (a single person's filing requirement). But the answer varies dependent on marital status, filing status, age, the amount of your Social security, and whether you are claimed as a dependent by someone else. The worksheet is the only way to be sure.