Qualifying Child residence test

Posted by Alan on June 18, 2009, 4:02 pm

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Alan wrote:

> Arthur Kamlet wrote:

>>> Arthur Kamlet wrote:

>>>> I think it boils down to whether this was a temporary absence.

>>>>

>>>> If mother intended it to be, and intended to move back with

>>>> father as soon as child could travel and, in fact, did move back

>>>> with father soon after, I would think that is a temporary absence.

>>>>

>>>> But if mother stays for a long time, long enough to indicate she

>>>> did not intend the absence to be temporary, she and not he gets

>>>> to claim their child unless she releases dependency exemption to

>>>> him on an 8332.

>>> Thanx, using that form would certainly help document that no one else

>>> is claiming Child Tax Credit (CTC) or dependency.

>>>

>>> Since Mom is not "a taxpayer"[*], I think the child is already a

>>> dependent of Dad based on being a qualifying relative (Dad provides

>>> over half of support for them both in 2008). Child now has social

>>> security number available and Dad wants CTC and Head of Household, if

>>> available.

>> This is SSN and not ITIN, right? Is child a US Citizen?

>> Child must be a US Citizen or resident, or resident of Canada or Mexico.

>> Nothing you told us says child ever returned to the US and to dad's

>> house. If child did not live with dad, except for temporary

>> absense, more than half the child's year, there is no HoH.

>> CTC is pretty much linked to dependency exemption but with NRA

>> mom, could fail to meet dependency test yet still meet CTC test,

>> which would then call out Form 8901 to claim CTC.

>>> [*] non-resident alien, probably not required to file, but Mom's

>>> exact tax status is not known with certainty

> I think we need to have two columns. Column one says that the unmarried

> mother relocated overseas permanently. Column two says she traveled

> overseas to be with her parents for the birth. It was temporary. She did

> not change her US domicile.

> Column Two: This is no different than if the child was born in the US to

> unmarried parents. The baby is the QC of both parents. The parents can

> elect who claims the QC in 2008 with all of the other tax benefits that

> go with having a QC. Normal tie-breaking would apply if they could not

> agree.

> Column One: We have a child of never married parents who are not living

> together when the child is born. We look to the special rule that

> applies to divorced, separated or never married parents. The unmarried

> mother is the custodial parent. As such the child becomes her QC. If she

> has no tax filing requirement and does not file a tax return to obtain a

> tax benefit other than a refund of all withheld taxes, then the child

> will not be considered her QC. This means the noncustodial parent can

> treat the child as a QR if all the QR tests are met.

> For a QR under these circumstances, we must look at the special rule

> that exists for children of never married parents. This rule says that

> the noncustodial parent does not have to provide more than half the

> support. It says that both parents must have provided over half the

> support and it says that the custodial parent must provide the written

> release. So, as long as the child is a US citizen with a social security

> number and the mother provides the written release, the father can claim

> the dependency exemption and the CTC. The father can not claim any of

> the other tax benefits as the child is not a QC.

After I posted this reply, I realized there was a hidden
assumption for Column Two. I assumed that the child was a US
citizen even if born to a foreign parent in a foreign country.

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Posted by parrisbraeside@yahoo.ca on June 19, 2009, 6:46 am

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...

> He once again assured me the mother had no U.S. income during 2008 and

> did not file (not required to file) a U.S. tax return. Since she was

> not a taxpayer for 2008, I can't see anything preventing the child from

> being his QC (as I said, I think it was already a given that the child

> was a QR).

While the mother did not have US income, she was resident in the US at
the time of birth and probably qualifies under the Substantial
Presence Test as a resident. That is, unless her visa specifically
deems her as a non-resident (which some but not all do. Example,
students.) As such, she would be obligated to file a resident tax
return (1040 and its ilk) reporting her world-wide income, not just
her US income.

How familiar are you with resident/non-resident returns and tax
treaties?

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Posted by Mark Bole on June 19, 2009, 11:55 am

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parrisbraeside@yahoo.ca wrote:

> ....

>> He once again assured me the mother had no U.S. income during 2008 and

>> did not file (not required to file) a U.S. tax return. Since she was

>> not a taxpayer for 2008, I can't see anything preventing the child from

>> being his QC (as I said, I think it was already a given that the child

>> was a QR).

> While the mother did not have US income, she was resident in the US at

> the time of birth and probably qualifies under the Substantial

> Presence Test as a resident. That is, unless her visa specifically

> deems her as a non-resident (which some but not all do. Example,

> students.) As such, she would be obligated to file a resident tax

> return (1040 and its ilk) reporting her world-wide income, not just

> her US income.

> How familiar are you with resident/non-resident returns and tax

> treaties?

I'm not an expert, but I think I know the basics. But the mother is not
my client, I've never communicated with her. She was overseas when the
child was born. Even if she is a U.S. resident for 2008 tax purposes,
she may not have had enough income from any source to be required to
file in 2008.

This seems to be just one of several areas in the tax system where you
need to know something about someone else's situation (AGI, for example,
or any number of items about a spouse's MFS return), but there is no
independent way to obtain or verify the information. It seems all a
preparer can do is document what he's told and move forward.

-Mark Bole

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Posted by Mark Bole on June 19, 2009, 12:34 pm

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Alan wrote:

> If she departed the US with no intent of returning, it was not a

> temporary absence even if she later changes her mind. Therefore, I can

> only repeat what was in my original reply. If temporary.. then he has a

> QC and all the tax benefits (HOH, Dep, CTC, etc.) that go with a QC. If

> not temporary, then he has a QR that would allow him to file as single

> with a dependent and the CTC. As the noncustodial parent of a child of

> never married parents, he needs the release.

Yes, I think you've exactly nailed it down. Pub 501 says,

"Temporary absences. Your child is considered to have lived with you
during periods of time when one of you, or both, are temporarily absent
due to special circumstances such as:
* Illness,
* Education,
* Business,
* Vacation, or
* Military service."

No mention of duration or intent. The client tells me they were engaged
to be married in 2008, he has made multiple trips overseas to visit
mother and child (he showed me photos and birth announcement in the
overseas local newspaper), he actually got married in 2009, and he also
tells me she is returning in the next few weeks and they plan to buy a
house and she plans to get a green card.

A conservative approach would be to go the QR route and get a release
form 8332, although I'm still not sure about the mother's tax ID --
would she need to get an ITIN just to file this form, or could the
custodial parent tax ID be left blank (instructions are silent on this)?

But I'm thinking it's not unreasonable to go the QC/temporary absence
route, after all the HOH status carries significant additional tax
savings. I explained to the client that it might be questioned by tax
authorities, he had no qualms about that at all.

As a paid preparer, should I use form 8275 (probably overkill, since
"the IRS had not issued a definition for taking a position", according
to one tax research service on the use of this form). California has an
e-file only version of a HOH questionnaire, but since it will be an
amended return, I suppose I could generate a paper version of the form
and attach that. In retrospect, it probably would have been better to
file an extension and wait for the SSN for the child, so the original
returns could be e-filed, but too late now.

-Mark Bole

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<< that may be imposed upon the taxpayer. >>
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Posted by Alan on June 19, 2009, 3:19 pm

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Mark Bole wrote:

> Alan wrote:

>>>

>> If she departed the US with no intent of returning, it was not a

>> temporary absence even if she later changes her mind. Therefore, I can

>> only repeat what was in my original reply. If temporary.. then he has

>> a QC and all the tax benefits (HOH, Dep, CTC, etc.) that go with a QC.

>> If not temporary, then he has a QR that would allow him to file as

>> single with a dependent and the CTC. As the noncustodial parent of a

>> child of never married parents, he needs the release.

> Yes, I think you've exactly nailed it down. Pub 501 says,

> "Temporary absences. Your child is considered to have lived with you

> during periods of time when one of you, or both, are temporarily absent

> due to special circumstances such as:

> * Illness,

> * Education,

> * Business,

> * Vacation, or

> * Military service."

> No mention of duration or intent. The client tells me they were engaged

> to be married in 2008, he has made multiple trips overseas to visit

> mother and child (he showed me photos and birth announcement in the

> overseas local newspaper), he actually got married in 2009, and he also

> tells me she is returning in the next few weeks and they plan to buy a

> house and she plans to get a green card.

> A conservative approach would be to go the QR route and get a release

> form 8332, although I'm still not sure about the mother's tax ID --

> would she need to get an ITIN just to file this form, or could the

> custodial parent tax ID be left blank (instructions are silent on this)?

> But I'm thinking it's not unreasonable to go the QC/temporary absence

> route, after all the HOH status carries significant additional tax

> savings. I explained to the client that it might be questioned by tax

> authorities, he had no qualms about that at all.

> As a paid preparer, should I use form 8275 (probably overkill, since

> "the IRS had not issued a definition for taking a position", according

> to one tax research service on the use of this form). California has an

> e-file only version of a HOH questionnaire, but since it will be an

> amended return, I suppose I could generate a paper version of the form

> and attach that. In retrospect, it probably would have been better to

> file an extension and wait for the SSN for the child, so the original

> returns could be e-filed, but too late now.

> -Mark Bole

Posted below are the Regulations from Section 2 where temporary
absences are discussed. (c)(1) is the relevant section for your
situation. (c)(2) deals with parents. Please note the part that
says "Such absence will not prevent the taxpayer from being
considered as maintaining a household if (i) it is reasonable to
assume that the taxpayer or such other person will return to the
household, and (ii) the taxpayer continues to maintain such
household or a substantially equivalent household in anticipation
of such return."

The statement is quite clear that as long as the father held a
reasonable assumption that his child would return to his
household and he maintained that household in preparation of the
child's return, you have a QC.

I would file an amended return using HOH as the filing status
with the child as the QC if the father meets the above two rules.

=================================================================

(c) Household. (1) In order for a taxpayer to be considered as
maintaining a household by reason of any individual described in
paragraph (a)(1) or (b)(3) of this section, the household must
actually constitute the home of the taxpayer for his taxable
year. A physical change in the location of such home will not
prevent a taxpayer from qualifying as a head of a household. Such
home must also constitute the principal place of abode of at
least one of the persons specified in such paragraph (a)(1) or
(b)(3) of this section. It is not sufficient that the taxpayer
maintain the household without being its occupant. The taxpayer
and such other person must occupy the household for the entire
taxable year of the taxpayer. However, the fact that such other
person is born or dies within the taxable year will not prevent
the taxpayer from qualifying as a head of household if the
household constitutes the principal place of abode of such other
person for the remaining or preceding part of such taxable year.
The taxpayer and such other person will be considered as
occupying the household for such entire taxable year
notwithstanding temporary absences from the household due to
special circumstances. A nonpermanent failure to occupy the
common abode by reason of illness, education, business, vacation,
military service, or a custody agreement under which a child or
stepchild is absent for less than 6 months in the taxable year of
the taxpayer, shall be considered temporary absence due to
special circumstances. Such absence will not prevent the taxpayer
from being considered as maintaining a household if (i) it is
reasonable to assume that the taxpayer or such other person will
return to the household, and (ii) the taxpayer continues to
maintain such household or a substantially equivalent household
in anticipation of such return.

(2) In order for a taxpayer to be considered as maintaining a
household by reason of any individual described in paragraph
(b)(4) of this section, the household must actually constitute
the principal place of abode of the taxpayer's dependent father
or mother, or both of them. It is not, however, necessary for the
purposes of such subparagraph for the taxpayer also to reside in
such place of abode. A physical change in the location of such
home will not prevent a taxpayer from qualifying as a head of a
household. The father or mother of the taxpayer, however, must
occupy the household for the entire taxable year of the taxpayer.
They will be considered as occupying the household for such
entire year notwithstanding temporary absences from the household
due to special circumstances. For example, a nonpermanent failure
to occupy the household by reason of illness or vacation shall be
considered temporary absence due to special circumstances. Such
absence will not prevent the taxpayer from qualifying as the head
of a household if (i) it is reasonable to assume that such person
will return to the household, and (ii) the taxpayer continues to
maintain such household or a substantially equivalent household
in anticipation of such return. However, the fact that the father
or mother of the taxpayer dies within the year will not prevent
the taxpayer from qualifying as a head of a household if the
household constitutes the principal place of abode of the father
or mother for the preceding part of such taxable year.

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<< ------------------------------------------------------- >>
<< 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. >>
<< ------------------------------------------------------- >>

Qualifying Child residence test - born overseas?