head of household status

[470pitt]

I have a client who wants to claim hoh his son lives with him and he provides all housing

He does not want to claim him as a dependent he is over 24 but lives with him

[Terry53029]

how much income does son have

[470pitt]

He started a small business with a profit this year of 995

[Terry53029]

As long as income is under (Was $4300 may be a little higher this year), and he provides more than 50% support, lived with him over 6 months, and can claim him as a dependent ( if he can claim him why would he not want to ?) Sounds like he can file as HH if he did not live with spouse in last 6 months of year. You should research pub 501 for yourself, as you are aware of all the details ( the devil is in the details 😁)

Here is link. https://www.irs.gov/publications/p501

[Jim-from-Ohio]

and the income test does not always equal net income.. there are a number of examples where gross income is defined as something well before net income is calcualated.. See publication 17

[TaxGuyBill]

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@470pitt wrote:

He does not want to claim him as a dependent he is over 24 but lives with him

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If the son qualifies as a dependent, why does your client not want to claim him?

As Jim mentioned, income for determining if the son is a dependent or not is based on "gross income", which means line 7 of Schedule C, not the profit of Schedule C.

You didn't actually ask a question, so I'm not sure what you are asking.  If you are asking if the son is a qualifying person to qualify the father for Head of Household, look at the chart on page 10 of Publication 501.

https://www.irs.gov/pub/irs-pdf/p501.pdf#page=10

[Jim-from-Ohio]

@TaxGuyBill Bill, on the gross vs net test on a Schedule C, Publication 17 talks about gross income (plus miscellaneous income) for manufacturing businsses.. it is silent on non-manufacturing businesses, say a service company.. do you think the gross income test applies the same way to a service business?  thanks.. here is part of Publication 17:

Gross income defined. Gross income is all income in the form of money, property, and services that isn't exempt from tax.  In a manufacturing, merchandising, or mining business, gross income is the total net sales minus the cost of goods sold, plus any miscellaneous income from the business.

Gross receipts from rental property are gross income. Don’t deduct taxes, repairs, or other expenses to determine the gross income from rental property Gross income includes a partner's share of the gross (not a share of the net) partnership income.

Pub  17 goes on from there discussing other sources of income but I have included the pertinent section above. 

[470pitt]

I am meaning on line 4 of the 1040 can he claim hoh but not use him as a dependent as he

provided all living expenses

[Jim-from-Ohio]

Child has to be a dependent to qualify taxpayer as HOH.

[TaxGuyBill]

Yes, I think it applies to a service business as well.

§61(a)(2) says "gross income derived from business", and the box on page six of Publication 17 (and page two of Publication 501) says "Gross income from a business means, for example, the amount on Schedule C, line 7; or Schedule F, line 9."

I think the mention of the manufacturing business was to clarify that COGS reduces "gross income", but not other expenses.

[Jim-from-Ohio]

Thanks Bill.  

[TaxGuyBill]

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@470pitt wrote:

I am meaning on line 4 of the 1040 can he claim hoh but not use him as a dependent as he

provided all living expenses

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You need to determine if he *CAN* claim the son as a dependent.

And if he CAN claim the son as a dependent, why does he not want to?

[ljr]

situations like this make me over think it. SO why doesn't he want to claim the 24 year old that he is "supporting", who lives with him, who he feeds while the kid "sells" stuff? Is he a student claiming independence on Fafsa for student loans or lower tuition? Is he getting money for some type of disability from the fed or state and claiming him would "mess it up"?

I know we could say the dependent only gets him a $500 credit but hey who needs that?