Now that tax season is over, I can talk about some of the interesting situations that obtained in previous years.

I have clients who claimed their parents as dependents, others that claimed their grandchildren. One client even wanted to claim his girlfriend.

I won’t go into whether or not all those claims were valid. But, there were fewer such claims this year, since there no longer is that $ 4000+ deduction against one’s income per dependent. Now, regardless of the number of dependents, we are afforded a deduction of $12K, $ 18K, or $ 24K for the combined standard deduction; the difference between the three numbers is whether one is single, head of household, or married (respectively).

But, the difference between being single and being head of household is reason enough to claim a dependent. One that legally IS your dependent. Which means that the taxpayer covers 50.01% of the living expenses for said “dependent”.

Now, the IRS has a series of requirements for folks like me- which means I have a ton of requirements for taxpayers like you. Because I am unwilling to go to jail or pay a fine for failing to follow the IRS protocol. Which demands me to ascertain why you feel you can declare someone other than your direct progeny as a dependent.

After all, tax law defines (the IRS would say indirectly) family taxation via dependents. Different rules obtain when someone can be declared as a dependent. Because the tax law is based upon individuals- unless two individuals (who are married) elect to file a joint return. Which makes them- and their dependents- an economic unit known as a family, but it’s the individual who reports income, takes gains, gets benefits, and pays taxes. And, other than Section 267(c)(4) covering loss deductions, there is no overarching definition of a family.

(Yes, I know politicians always refer to how the tax law harms or benefits families. But, really, the tax law provides subsidies to the individual for the costs of maintaining a family. And, much of that is based upon Section 152. The rewritten section now covers two sorts of dependents: Qualifying Child and Qualifying Relative. And, since you are sitting down, I will confide to you that a Qualifying Child need not be one’s biological progeny and a Qualifying Relative need not be any relative of yours to be so declared.)

To declare someone other than your child as a dependent, you (the taxpayer making this claim) needs to have a signed Form 8332, “Release/Revocation of Release of Claim to Exemption for Child by Custodial Parent” (or equivalent- NOTE: equivalent is NOT a court order or a separation agreement!) from the custodial parent. Yes, it has to be in writing if you want the IRS to allow you to declare someone else’s child as your dependent. Oh, that also applies to divorced parents- the 8332 defines who gets the child as a dependent. (The law allows dependency to alternate every other year, as well.)

According to the IRS, the definition of the “custodial parent” has NOTHING to do with state law or a state court judgement as to which parent has custody. States have no jurisdiction as to how the Federal government should act or hold. (That’s the Federal position on the matter.)  A custodial parent [Regulation 1.152-4(d)] is simply the parent with whom the child resides for the great number of nights during the calendar year. (This gets terribly complicated during leap years, since it is possible for both parents to have the child for 183 days!) The noncustodial parent is the one who has the child for fewer days.

Which also explains what happens when a child resides with a grandparent. Because a Qualifying Child must have “the same principal place of abode as the taxpayer for more than one-half of such taxable year.” Oh- and a Qualifying Relative cannot be claimed if the dependent is a Qualifying Child of another.

You don’t have to take my word for it. You can see how the Tax Court ruled (7 May 2019) in Jason Aaron Cook v. Commissioner, disallowing Jason’s deduction for his child who resided more often with mom but whose financial and medical needs were covered completely by Jason. Who neglected to get a signed 8332 and relied on a verbal agreement with his ex.

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