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Subject Author Date
New IRS Guidance On Who Is A Qualifying Relative Redux Alan 01-28-2008
Posted by Alan on January 28, 2008, 4:02 pm
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 On 12/18/07 I started a thread on the new guidance that was in
IRS Notice 2008-05. Basically, this notice redefined the term
taxpayer to exclude someone who has no filing requirement and
does not file in order to receive a tax benefit, e.g. filing for
the EITC. As such, that person's child would no longer be a
qualifying child of that person and could then be a qualifying
relative of another taxpayer.

All the examples in the notice, as well as discussion of this
issue have addressed how this relates to unrelated children of
the taxpayer. In fact, this change in the rules also may affect
children of divorced, separated or never married parents. Any
parent who is the custodial parent (parent who has physical
custody of the child for the greater part of the year) and does
not have a filing requirement and does not file a tax return to
obtain a tax benefit is no longer a taxpayer and does not have a
qualifying child. Therefore, the noncustodial parent would not
require the custodial parent to release the dependency exemption
if the child meets the definition of being a qualifying relative
of the noncustodial parent.

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Posted by Harlan Lunsford on January 28, 2008, 5:53 pm
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 Alan wrote:
> On 12/18/07 I started a thread on the new guidance that was in IRS
> Notice 2008-05. Basically, this notice redefined the term taxpayer to
> exclude someone who has no filing requirement and does not file in order
> to receive a tax benefit, e.g. filing for the EITC. As such, that
> person's child would no longer be a qualifying child of that person and
> could then be a qualifying relative of another taxpayer.
>
> All the examples in the notice, as well as discussion of this issue have
> addressed how this relates to unrelated children of the taxpayer. In
> fact, this change in the rules also may affect children of divorced,
> separated or never married parents. Any parent who is the custodial
> parent (parent who has physical custody of the child for the greater
> part of the year) and does not have a filing requirement and does not
> file a tax return to obtain a tax benefit is no longer a taxpayer and
> does not have a qualifying child. Therefore, the noncustodial parent
> would not require the custodial parent to release the dependency
> exemption if the child meets the definition of being a qualifying
> relative of the noncustodial parent.
>
So the parent makes less than 3400$ and doesn't have to file a return.
However he/she makes 3100$ and decides to file a tax return, namely in
order to qualify for the free 600$ rebate upcoming in May, June, whenever.

Suddenly we do have a taxpayer!
Oh boy, this is going to be FUN!

ChEAr$,
Harlan Lunsford, EA n LA

--
<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2007) - All rights reserved. >>
<< ------------------------------------------------------- >>

Posted by Alan on January 28, 2008, 9:06 pm
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Harlan Lunsford wrote:
> Alan wrote:
>> On 12/18/07 I started a thread on the new guidance that was in IRS
>> Notice 2008-05. Basically, this notice redefined the term taxpayer to
>> exclude someone who has no filing requirement and does not file in
>> order to receive a tax benefit, e.g. filing for the EITC. As such,
>> that person's child would no longer be a qualifying child of that
>> person and could then be a qualifying relative of another taxpayer.
>>
>> All the examples in the notice, as well as discussion of this issue
>> have addressed how this relates to unrelated children of the taxpayer.
>> In fact, this change in the rules also may affect children of
>> divorced, separated or never married parents. Any parent who is the
>> custodial parent (parent who has physical custody of the child for the
>> greater part of the year) and does not have a filing requirement and
>> does not file a tax return to obtain a tax benefit is no longer a
>> taxpayer and does not have a qualifying child. Therefore, the
>> noncustodial parent would not require the custodial parent to release
>> the dependency exemption if the child meets the definition of being a
>> qualifying relative of the noncustodial parent.
>>
> So the parent makes less than 3400$ and doesn't have to file a return.
> However he/she makes 3100$ and decides to file a tax return, namely in
> order to qualify for the free 600$ rebate upcoming in May, June, whenever.
>
> Suddenly we do have a taxpayer!
> Oh boy, this is going to be FUN!
>
> ChEAr$,
> Harlan Lunsford, EA n LA
>
The current agreement by our pals on the Potomac have the rebate
going to taxpayers who don't file but have earnings in excess of
$3000 and paid social security and medicare taxes. No mention as
to how those folks are going to get their rebates.
However, your point is well taken.

--
<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2007) - All rights reserved. >>
<< ------------------------------------------------------- >>

Posted by Arthur Kamlet on January 29, 2008, 1:20 am
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>Alan wrote:
>> On 12/18/07 I started a thread on the new guidance that was in IRS
>> Notice 2008-05. Basically, this notice redefined the term taxpayer to
>> exclude someone who has no filing requirement and does not file in order
>> to receive a tax benefit, e.g. filing for the EITC. As such, that
>> person's child would no longer be a qualifying child of that person and
>> could then be a qualifying relative of another taxpayer.
>>
>> All the examples in the notice, as well as discussion of this issue have
>> addressed how this relates to unrelated children of the taxpayer. In
>> fact, this change in the rules also may affect children of divorced,
>> separated or never married parents. Any parent who is the custodial
>> parent (parent who has physical custody of the child for the greater
>> part of the year) and does not have a filing requirement and does not
>> file a tax return to obtain a tax benefit is no longer a taxpayer and
>> does not have a qualifying child. Therefore, the noncustodial parent
>> would not require the custodial parent to release the dependency
>> exemption if the child meets the definition of being a qualifying
>> relative of the noncustodial parent.
>>
>So the parent makes less than 3400$ and doesn't have to file a return.
>However he/she makes 3100$ and decides to file a tax return, namely in
>order to qualify for the free 600$ rebate upcoming in May, June, whenever.
>
>Suddenly we do have a taxpayer!
>Oh boy, this is going to be FUN!


Or almost three years later the custodial parent files to claim EIC
and suddenly the noncustodial parent, having never received an 8332,
is in a very bad way.
--


ArtKamlet at a o l dot c o m Columbus OH K2PZH

--
<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2007) - All rights reserved. >>
<< ------------------------------------------------------- >>

Posted by Condor on January 28, 2008, 7:59 pm
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> In fact, this change in the rules also may affect
children of divorced, separated or never married parents. Any
parent who is the custodial parent (parent who has physical
custody of the child for the greater part of the year) and does
not have a filing requirement and does not file a tax return to
obtain a tax benefit is no longer a taxpayer and does not have a
qualifying child.

I agree that Notice 2008-05 leaves important questions unanswered but I
don't think the law supports your conclusions.

The thrust of Not. 2008-05 is solely to clarify that an individual will not
fail to meet the definition of a qualifying relative because of an overly
inclusive interpretation of the language in IRC § 152(d)(1)(D) which reads
in relevant part "is not a qualifying child...of any other taxpayer." In
fact, this is precisly what Not. 2008-05 says on pages 3 - 4:

"The Service, therefore, concludes that a taxpayer otherwise eligible to
claim a dependency exemption deduction for an unrelated child is not
prohibited by section 152(d)(1)(D)
from claiming the deduction if the child's parent (or other person with
respect to whom the child is defined as a qualifying child) is not required
by section 6012 to file an income tax return and (i) does not file an income
tax return, or (ii) files an income tax return solely to obtain a refund of
withheld income taxes."

Nothing in Not. 2008-05 alters the statutory requirement that a qualifying
relative must satisfy all 4 conditions listed in §§ 152(d)(1)(A) - (D). The
notice makes it clear that the construction of subsection (D) is the only
issue being addressed.

The special rule for divorced/separated parents is covered in § 152(e),
which starts out with "Notwithstanding subsection (c)(1)(B), (c)(4), or
(d)(1)(C), if."

Subsection (d)(1)(C) reads:

"(C) with respect to whom the taxpayer provides over one-half of the
individual's support for the calendar year in which such taxable year
begins, and"

A child cannot meet the definition of a qualifying relative, which includes
meeting all 4 conditions listed under § 152(d)(1), when subsection (C) is
trumped by § 152(e), as the language of that section plainly makes clear.
Thus if a child fails to meet the qualifying relative tests, § 152(d)
doesn't apply, making subsection (d)(1)(D) necessarily moot. Nothing in
Not. 2008-05 supports the fast and loose interpretation that the
non-custodial parent is eligible to claim his or her child's dependency
exemption without a signed Form 8332 from the custodial parent because that
parent does not file (and is not required to file) a tax return.


Condor

--
<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2007) - All rights reserved. >>
<< ------------------------------------------------------- >>

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