What to do if a Child is Claimed on Someone Else's Taxes

February, 25 2021 by Carolyn Richardson, EA, MBA

My grandson is in my custody and his mom allowed another person to carry him on taxes..my taxes were rejected. my social worker says she will email me the form to prove guardianship..What should I do next? 

-Christina


Hello Christina,

Thank you for submitting your question about your next steps. All you need to do is file your tax return and claim your grandchild – but instead of e-filing, you will need to mail your return to the IRS as well as to Louisiana if that return was also rejected. Make sure you sign and date the return(s) before mailing and we also recommend sending them via certified mail with a return receipt requested to confirm the returns arrive at the tax agency(s). We would also strongly suggest that you attach a copy of the form your social worker is providing to both returns and hold on to the original form. Make sure you also attach any Forms W-2 or 1099-R that you received to the returns, as forgetting to provide copies of those may delay the processing of your return.

Sounds simple, right? This may seem straightforward, but dependent situations can get quite complicated. Unfortunately, this is probably going to be the start of a drawn-out process in proving that your grandchild lived with you and is rightfully your dependent, and not the dependent of the other person who claimed the child. You don’t mention who that person might be but, if it is the child’s father, things could get complicated.

There are several tests that a dependent must meet to be a qualifying child. We are going to assume that your grandchild is under 18 years of age and does not file a joint return with a spouse, and that they are a U.S. citizen. These are the three basic tests for claiming someone as a dependent. For a minor child, there are four additional tests as well:

• Relationship: Given this is your grandchild by blood, your grandchild would meet the relationship test.
• Age: Your grandchild must be under the age of 19 at the end of the year, or under the age of 24 if they are a student (meaning they must be a full-time student at least 5 months of the year). If your grandchild is permanently and totally disabled, they can be any age.
• Residency: Your dependent must live with you more than half the year. Some absences from your home may be considered temporary. (More on that in a minute.)
• Support: Your grandchild cannot provide more than half of their own support.

The residency test is the one that trips up most taxpayers, especially when a child is shuttling between two or more homes during the year, such as in joint custody arrangements. When two or more people qualify to claim a dependent, the IRS will use the “tie breaker rules” to determine who can claim the child. Generally, the person who is entitled to claim the child for their taxes is the person with whom the child spends more than half of their nights during the year. Since 2020 was a leap year (366 days), it is possible the child spent exactly half their nights with two people. In most years, however, this isn’t an issue. Proving where the child spends the most number of nights can be complicated, though, especially when the other person claiming the child (besides yourself) is the child’s other parent. Under tax rules, a parent will normally have priority for claiming a child as a dependent.

To make matters more complicated, the IRS may consider the taxpayer with the higher income to be the person who can claim the child. You may not know this information when you file. If the other person who claimed the child also lives with you, the child may be their qualifying child as well.

The rules are very tricky, and simply being awarded custody of your grandchild may not be enough to satisfy the IRS that you are entitled to claim the grandchild as a dependent. It is likely that once the IRS receives your tax return, they will ask for additional information. We recommend that you be prepared to provide them with additional documents such as school or medical records showing you are the child’s guardian and that the child resided at your home.

You may want to talk to your daughter about this situation and see if the other party would agree to file an amended return to remove the child from their own return. While that would make things much easier for you, it is generally unlikely to happen. So just be prepared to provide more information if the IRS requests it. If you are using TurboTax to prepare your return, you may want to consider purchasing our Audit Defense so that we can respond for you if this happens.

Best Wishes,
Carolyn Richardson, EA, MBA