Full Time Student Dependency

[Terry D EA]

I have a new client who is a full time student under age 24 that has gross income of $24,732.00, pays his parents rent to live with them and his parents claimed an exemption for him and have been doing so for the last couple years. it is very clear to me his parents are not eligible to take this exemption due to the support test correct? His parents have already filed their return and he has no choice but to not claim himself. He doesn't want to get his parents in trouble for what they are doing and this cost him 700.00 that he would have been entitled to. What is the best way to handle this.

[Terry D EA]

This post should have read his "mother" and not his parents. I know these folks and forgot they are just living together. So, she may have filed HOH which in my opinion she is not entitled to either. Again, he doesn't want to cause his mother any problems but the IRS may do so if they either examine or audit her return.

[Jack from Ohio]

He is the dependent of his mother as long as he is a full time student, under the age of 24.

 

HOH by the mother is a different animal.

[MsTabbyKats]

Who is paying his tuition?

[Terry D EA]

Tuition is paid for by scholarships. Pell grant apparently. All receipts and 1098T show scholarships and financial aid. Jack I disagree. There is the one-half support test. I have looked at this several times to be sure. I would think that with his income level he is paying for more than half of his own support. Especially when his mother is requiring him to pay rent. How can she state she is providing more than half of his support when she is charging him to live with her????

[JohnH]

I'm dealing with a similar situation. My client has 3 dependents plus him and his wife living in the home, with a family income of about $50K. His 21-year-old daughter (4th dependent) is a full-time college student who works, having a w-2 showing about $20K , with most of her tuition paid by grants & scholarships. She lives in an aparment near her campus. I don't see how he can claim her as a dependent, but still thinking about it. Maybe this thread will help both of us figure it out.

Edited February 14, 2015 by JohnH

[Terry D EA]

You have to determine the support issue. In the Pub 501 there is a worksheet to determine the dependent's support. If I am thinking correctly, college tuition can be a factor if paid out of pocket. But.... grants and scholarships negate that part of it. Don't forget the possibility of the AOC.

 

Here is what totally baffles me. I had to pay for my education due to income limitations. Granted this was back when rocks were invented, but I was refused a grant once when I was unemployed, had to move back home, and my retired father made too much income on his pension. Now, Mr. #$@%^Obama wants to give everyone a free education at any community college. I attended community college once too and had to pay for that as well. Rant over

[Pacun]

As long as the child didn't provide more than 50%, the mother can claim the child even if he made a million dollars.

 

For HOH, the mother must provide more than 50% of support and maintain a house which was the main house for one of her children (not necessarily the student).

[Terry D EA]

Pacun I agree, there is another child involved but I don't know who she lives with her mother or father or who supports her. If the child in school made a million dollars then I am pretty sure his mother could not claim him and by all logical sense he would be out of the nest. I mean come on here we are using dependents to get a refund that otherwise she would not be entitled to..

[jklcpa]

Terry, you'd have to use the worksheets. It uses the amount the student spent on himself during the year for support, not how much he earned. He could have saved every penny except for the rent that he paid to mom. You didn't say how much the rent was. I know you've already looked at it, but by the time you add up the fair rental of the house, utilites, food and divide that by the # of people, that in itself can be a substantial number.  Anyway, it sounds like you don't prepare the mother's return.

[JohnH]

And as long as Terry doesn't prepare the mother's return, the issue is much less problematical for Terry and for the client. Terry has been told that mom has already filed, Terry knows what the student-/client's wishes are, and there is no way Terry can or should become involved in Mom's tax situation.

Edited February 14, 2015 by JohnH

[jklcpa]

Right on, John. I wasn't suggesting that Terry actually do that, only that the discussion had turned into a more general one on the mechanics of determining support

[Lion EA]

Provide your client the information needed to decide the correct way to file his return.  If necessary, file on paper.

[Terry D EA]

I've already done that. I agree I am not involved in the mother's return at all or in anyway and don't want to be and won't be unless she herself asks me to. I just merely made a statement that it seems odd for her to have the right to claim him based on his income and the fact he pays rent which amounts to 250.00 per month. I agree Judy that I would have to use the worksheets and would need a lot more information to actually determine the support issue. Again, and as John said, it is not my problem at this time. I have talked to this young man and have given him his options. Now, the choice is his.

[Lion EA]

You can help him fill out his info on the support worksheet.  He can take it to his mother or ignore it.

 

For my clients, the house, family vacations, the car the kid drives, the insurance and gasoline, the allowance,  skis, new clothes, etc., even if the parents aren't paying tuition (and they usually are paying tuition and rent the kid's apartment and...) almost always means the student is not paying over 50% of his own support.  But, when I'm in doubt or one of the parties is, we fill out the worksheet.

[jklcpa]

^ agree with Lion.  I ran out of "likes" earlier.

[kcjenkins]

And frankly, the $700, while it grates, is not worth getting his mom in trouble over, IMHO. It's like extra 'rent'.  He knows where he stands, and can now decide for himself.  

[Cathy]

Terry,

 

Proceed with caution.  If student is paying his Mom rent, it sounds like you need more information as to mother's income and expenses she pays for the student. If she has a low income, maybe she is just accustomed to getting the EIC, AOC (40% refundable), HOH, etc.....and doesn't want to give it up.

 

Is the reason the mother has her return prepared somewhere else is because of claiming her child when she shouldn't?  Under the circumstances with your particular client's situation, I would want to be very careful to make sure I wasn't helping mother to be able to file improperly by the student giving up his exemption (education credit - possibly also) unless I knew the whole financial situation of the mother...plus I would want to make positively sure my client is filing properly whether he gets a bigger refund by filing properly or not.

 

Your client has already told you something to the effect that "he doesn't want to get his parents in trouble".........Terry, you shouldn't put your neck on the line for your client's mother by not filing properly so his mother can get a larger refund than she is entitled to.....

 

If it was me, I would suggest that your client go to the preparer who prepared his mother's return as she would know her financial picture, by knowing her income versus the student's income....whether or not the mother claims the rent her son pays her, etc....   I wouldn't let the client get me involved in any wrong filing procedure.....send him down the road.....   Again, my opinion and suggestion is based on the fact that your client has told you he doesn't want to get his mother in trouble....what he has told you already is enough for you to know that something doesn't smell right!

 

Cathy

[MsTabbyKats]

I have a different take on this.

The "kid" already said he didn't want to cause a problem...and I assume because he told you his mother claimed him, had no expectations of claiming himself.  Most likely he told you his mother claimed him...so you would be aware to "not" give him the exemption.  This "kid" does not want to go into battle with his mother.

 

Just tell him what the difference would be if he claimed himself...and tell him to work it out with his mother (ie-she lowers his rent or gives him  lump sum) to cover that difference,

 

ETA...for all you know, he puts his money in the bank.  I doubt $250 is more than half of his monthly upkeep...assuming mom pays the rent, electricity bill and all the food.

Edited February 15, 2015 by MsTabbyKats

[kcjenkins]

Having raised 3 sons, I assure you if he eats at least two meals a day at home most days, no normal 'rent' would ever cover that 'perk' for a teenage boy.  

[Lion EA]

Around here, $250 would rent a room -- with no house privileges, no kitchen privileges, no food, no garage, no storage, no laundry, no dry cleaning, no shopping for the roomer, no anything at all except maybe a mattress.

[MsTabbyKats]

Around here, $250 would rent a room -- with no house privileges, no kitchen privileges, no food, no garage, no storage, no laundry, no dry cleaning, no shopping for the roomer, no anything at all except maybe a mattress.

Around here, you couldn't even get a parking spot....an outdoor parking spot at that.

[Pacun]

In a situation like this, I tell the child to go to the same place where the mom did her taxes and I offer them my services to the mother and the child for next year. I normally don't get involved in a sticky situation if I didn't prepare both returns. I guess my approach creates a conflict of interest but at least I apply the rules correctly and if they don't like my approach I ask them to go to H and R block and I suggest to take both cases to the same place.

[Terry D EA]

Wow, we are getting really too far into this situation. While I appreciate all of the cautions and advice, you all can rest assured that I have completed his return with him claiming no exemption for himself. I have already explained and shown him the refund differences between claiming the exemption and not claiming the exemption. He doesn't want his mother to claim him because of the amount his refund is reduced. When I suggested he could paper file and let the IRS investigate that is when he said he didn't want to cause his mother any problems and he just wished he could get all of the refund he can.  As Lion said, I gave him the exact same thing to do. Show his mother the difference and ask her if it benefits her much more than him if she would be willing to make up the difference to him. Totally his call. As I noted earlier, the education expenses are from financial aid neither he or his mother are paying anything for college.

 

KC I agree that 250.00 per month wouldn't feed him and my wife and I can't each that cheap per month. Whether it is true or not, this young man said he buys his own groceries. Again, I am not getting into her financial situation. She prepares her own return and does it very early and quick. We all can figure out why.