2020 Stimulus Tax Credit

[Ephesians3-14]

During this upcoming tax season, I'm anticipating a scenario where my client decides he doesn't want to claim his 18 year old son as a dependent because the son is working (earns $4,800 in 2020). By not claiming him as a dependent, the son can claim a $1,200 stimulus tax credit on his own 2020 tax return. (My client made too much in 2018 and 2019 and did not receive a stimulus check in Apr 2020.)

If the son clearly qualifies as a dependent on my client's return, can my client just decide to not claim him as a dependent thereby enabling his son to claim the $1,200 stimulus tax credit? 

Seems like this will be a very common scenario for 2020

[qbteachmt]

"If the son clearly qualifies as a dependent on my client's return, can my client just decide to not claim him as a dependent thereby enabling his son to claim the $1,200 stimulus tax credit?"

Isn't it your job to file their taxes according to the status that applies, and not what the customer thinks they can leverage to their own interests? Sure, your Client can just decide to do whatever they want, but your professional responsibility is to do what applies per the regulations.

By the way:

You asked once under Lacerte and once under ProSeries. You seem not to be asking a program question, but a Tax discussion. You didn't need to post Twice, if you had posted in the Tax Talk section. It's all one community, so you asked the same volunteers to do twice the work.

[Ephesians3-14]

It turns out that my job is to follow the law. It’s also my job to make the most of the tax code and claim the highest refund possible. Both things can be true at the same time.

And now back to my question…

[TaxGuyBill · Accepted solution]

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@Ephesians3-14 wrote:

If the son clearly qualifies as a dependent on my client's return, can my client just decide to not claim him as a dependent thereby enabling his son to claim the $1,200 stimulus tax credit? 

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Your client can decide not to claim the dependent, but that does NOT mean the son is eligible for the $1200 credit.  The credit is not allowed for the kid if the kid is ELIGIBLE to be claimed as a dependent.

[IRonMaN]

Time for Sunday’s musical selection - The Rolling Stones’ “You can’t Always Get What You Want”

”Both things can be true at the same time”

But it isn’t this time.

[Ephesians3-14]

So my client can’t choose to not claim an exemption for his son so that the son can claim the stimulus credit on his own tax return?

[rbynaker]

You're connecting two things that are not connected.

Your client can choose to claim or not claim a dependent.

Your client's child cannot claim himself if he is a dependent of someone else.  You're a dependent based on the facts, not based on whether or not you're claimed as such.  There's a checkbox in the Standard Deduction section of the 1040 that indicates the taxpayer (child) CAN BE CLAIMED as a dependent.

https://www.irs.gov/pub/irs-dft/f1040--dft.pdf

Rick

[BobKamman]

The kid still has eleven weeks left to marry someone with enough income that they are required to file a joint return.  If Dad likes scheming for tax loopholes so much, put that bee in his bonnet.  

[qbteachmt]

"And now back to my question"

And now we fall back to "not enough info." Your client's original concept was incorrect and you would explain why.

"My client made too much in 2018 and 2019 and did not receive a stimulus check in Apr 2020."

Your client still could make less money in 2020 (stop working now?), because everyone has yet to file 2020 to reconcile the Stimulus as an Advance against Actual. This parent would not get any money for the son that is this old, of course, no matter how he intends to play the game.

There's still time for your client to attempt to manipulate the system.

[itonewbie]

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@Ephesians3-14 wrote:

It turns out that my job is to follow the law. It’s also my job to make the most of the tax code and claim the highest refund possible. Both things can be true at the same time.

And now back to my question…

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If certain code section, regulations, or case law allow alternative interpretation, maybe.  Even then, there has to be substantial authority for that position not to be disclosed.  Otherwise, you need to have at least a reasonable basis and that requires disclosure in order to avoid various penalties.  When the law is clear as in this case, taking a contrary position could land yourself and your client in some pretty hot water.  This is all codified under the IRC - see §6662 and the related regs.

[itonewbie]

My friends have explained how the law operates but here's the citation from §6428(d) in case it helps [emphasis added]:

Eligible individual For purposes of this section, the term “eligible individual” means any individual other than -
(1) any nonresident alien individual,
(2) any individual with respect to whom a deduction under section 151 is allowable to another taxpayer for a taxable year beginning in the calendar year in which the individual’s taxable year begins, and
(3) an estate or trust.

[Russ_dba_Taxes_R_uss]

Similar situation, but involves an adult that is 37, has been 100% social security disabled all his life, on Medicare, who has never filed a tax return (his SSA-1099 is under threshold and has zero tax liability), and he has been claimed as a dependent on his father's return all his life.

Because he is claimed as a dependent, he is not eligible for the stimulus payments, but because he is over 17, his parents don't get the $500 and $600 stimulus payments for dependents either.

Why does this man get left out? The stimulus program leaves him out as if he did not exist.  He has voted for the last 20 years, he is a US citizen.

If a parent is claimed as a dependent on a child's return (e.g., lives in nursing home and child has Power of Attorney), how is that person treated regarding stimulus payments, either as himself or as a dependent.  These preople should count, but how?

The only way it seems for my client to not be able to be claimed as a dependent is if he got married, too late for 2020, but possible, however unlikely, in 2021 for the impending stimulus check just approved by President Biden.

Is there a way for my client to receive stimulus payments, or alternatively, have his parents be able to claim a dependent stimulus payment for him because he is 100% disabled, in spite of being over 17?

[qbteachmt]

"Why does this man get left out?"

In general, I would point out his living situation hasn't been significantly impacted. He didn't lose a job, he didn't have children in a daycare that closed, he isn't having to homeschool them, he isn't at risk of losing his health coverage. I could go on. The problem is when the phrasing is "stimulus" or "recovery" or whatever someone believes needs to apply to them, specifically, even if it doesn't.

There is nothing in the 2020 regulation for this: "Is there a way for my client to receive stimulus payments, or alternatively, have his parents be able to claim a dependent stimulus payment for him because he is 100% disabled, in spite of being over 17?"

Not everything applies to everybody. I am sure we all can think of something that excludes each of us. Example: "President Biden's stimulus package temporarily increases the child tax credit to $3,000 or $3,600 per child for most families. Half of it will be paid in advance later this year."

Is your client going to continue to whine when all these people with kids get money, and he won't get money? There's still time to have a kid in 2021; he should hurry.

[TaxGuyBill]

The parents will receive the $1400 stimulus credit for him for the new payment that is going out now. 

The law for the 2020 credits specifically exclude him.  If you don't like how Congress wrote the law, free free to contact you Congressional representatives about it.

[Russ_dba_Taxes_R_uss]

Just read article on American Rescue Plan that showed that although adult dependents were excluded from the 2020 stimulus payments, they are included for the person claiming them, at $1,400  each, for the person claiming them.  My client will not receive a stimulus payment in 2021; however, his parents will receive the same amount, $1,400, that he would have received had he been eligible.

So my question has been answered timely, without actually filing his return, thus saving me a charge from Intuit of $48.87 for a return that did not need to be authorized. Thank you.

[Russ_dba_Taxes_R_uss]

My client isn't whining; he just asked a simple yes or no question on whether he was eligible.  A stimulus payment not only helps the situation for a recipient, whether impacted by the pandemic or not, but it also helps the economy when spent, particularly when spent at local small businesses.

I appreciate the information given in your response, but not your slurs to a disabled person, totally unnecessary and inappropriate.

[qbteachmt]

"My client isn't whining; he just asked a simple yes or no question on whether he was eligible."

I just reread what you put, so it isn't clear if that is your remarks or his: "Why does this man get left out? The stimulus program leaves him out as if he did not exist. He has voted for the last 20 years, he is a US citizen."

Perhaps you can see why it appears to be whining: Voting has nothing to do with this and being a Citizen doesn't change the facts for eligibility. Neither of these is in the code for 2020 or 2021. That's a bunch of stuff brought into the discussion only for what, sympathy? Ire?

And this is exactly what I stated; everyone wants to call it something convenient to their condition: "A stimulus payment not only helps the situation for a recipient,"

Because the IRS and Treasure called the first round Economic Impacts and Recovery. But "stimulus" carries more sympathy.

"whether impacted by the pandemic or not, but it also helps the economy when spent, particularly when spent at local small businesses."

Sure, that's another argument for handing out money to everyone. Just ask Andrew Yang; I still have one of his $1,000 bills on the fridge.

"I appreciate the information given in your response, but not your slurs to a disabled person, totally unnecessary and inappropriate."

Which is not any part of what I stated.

[qbteachmt]

"I appreciate the information given in your response, but not your slurs to a disabled person, totally unnecessary and inappropriate."

Which is not any part of what I stated.

[Russ_dba_Taxes_R_uss]

Whining is what I took offense to, as my friend had nothing to do with this thread; he just asked if he was eligible or not for a stimulus payment.  If I had needed to do a return for him, it would have been pro bono.  I am the one who asked why he was left out.  Not because I was whining, but because I didn't know why and wanted to understand. The software did not say why he was not eligible, and I did not want to wait until regular business hours tomorrow to call my software provider (obviously Intuit, since this is an Intuit Community forum) to find out.

You have obviously read quite a bit about the three stimulus plans approved by congress, whereas I have read little more than the information associated with the software, so you are more informed than I am, and I apologize that I did not know whereof I spoke.

I read some of your earlier posts, and in some of them, you seemed rather snide; having read them prior to stating my question, I took offense where none was intended.  Yes, you are quite knowledgeable,  After all you are Level 15 (I agree, that is kind of a stupid distinction, since this is not a game).

I would suggest that for this forum, be kind.  Just because someone knows less than you on a topic is no reason to put them down.  This is a community of tax professionals for the purpose of helping each other.  We ask questions about things we lack knowledge on, in hopes that there is somebody, somewhere, that has faced those issues before.  I got the answer I needed, through responses from you and others, as well as a pop up on FAQ on the American Rescue Plan.  My friend was disappointed about 2020, but was relieved that he is counted for 2021, even though the stimulus payment goes to his parents. I was relieved that filing a tax return for him was unnecessary,

I also agree about handing out money (whoever Andrew Yang is, I'll have to look him up); I fear the legacy we are leaving our grandchildren, a tax burden they will never be able to pay off.

As a reminder, this is not a competition nor a place to show off; it is an opportunity to teach and share experience.

As my Dad used to say quite frequently while my sister and I were growing up, the Bible says to be kind to each other, so let's do that.