IRS question

baseballmom09

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I never thought of this before, and someone at work asked me the other day. Can my husband and I still claim my sons as dependents even though they will be at USNA starting on July 1? It seems as though we still provide support/financial etc., so it never crossed my mind. Thanks for any info.
 
I think this year you can still claim them as they were with you over 6 months.. but next year I dont think so as they will be away at college with an income...
 
Two of the criteria for being able to claim a child as a dependent are: they have to live with you for more than half of the year and you have to provide more than half their support. (IRS Publication 17) Son is a plebe at USMA and we could not claim him.
 
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tndad is spot on...unless you are very well to do, chance are you can not legally claim your cadet/mid. The time they live with you is only part of the equation...you have to be able to prove that you provided over half of the financial support for that 1/2 year...the number USMA gave us was around $37K. There is no way I provided $37K worth of support to my cadet last year. If I had sent him to a very expensive private school that cost me a bundle, maybe...but otherwise, how can you prove that? However, many people are not forthright on their taxes. A dad at our parents' club was a private practice CPA for years before going to work for the IRS. He explained it like this: It's YOUR tax return. YOU can put whatever YOU want on it. HOWEVER if you are audited, you better be able to prove that it's correct. Although we would have saved $$$$$ on what we had to pay this year if we had claimed our cadet, we could not...first, it's illegal (I know, people in Washington do it all the time...), and second, we did not want to put ourselves at risk for an audit. USMA provided a tax info letter to parents...USNA probably does the same. My friend's accountant took one look at the letter and removed his son's info from the file. He said, "I don't see how anyone, unless they are a Rockefeller, can get away with claiming a cadet." So, sorry for the long answer to your short question...as Jiminy Cricket says, "Let your conscience be your guide."
 
....The time they live with you is only part of the equation...you have to be able to prove that you provided over half of the financial support for that 1/2 year...

Different accounting experts give different advice.

A very high-priced K-Street accounting firm told me "All of his support, for half of the year" is considered by the IRS to meet the "half of his support" test and therefore they can be claimed.

They told me "it's not a contest where you add up what the Academy provided for the second half of the year and try to match it."

He said as long as he lived in your home for half of the year and you were his sole means of support during those 6 months, you can claim him.

Your mileage may vary.

:cool:
 
Thanks all

Great info...good thing we're paying a bundle and 1/2 for my daughter's college education, so we'll still have her as a dependent, right through medical school! Thanks for the info.
 
That is why I went with what the IRS accountant told me.

This is why I use an accountant instead of relying on the IRS for my tax advice. :wink:

Can you turn to the IRS for tax help?

"The IRS has over 400 offices nationwide where you can walk in and get help. They're called Taxpayer Assistance Centers, and you can find the one closest to you by calling (800) 829-1040.

Here again, you're dealing with people who are supposed to know the law. Unfortunately, you may have a better shot at finding the right answer in the MSN Money Tax Corner community.

In a 2005 test of the system by the Treasury Inspector General, 35% of answers were incorrect. The Treasury Inspector General tested the system again to measure the quality of the taxpayer assistance during the 2005 filing season."

---MSN Moneycentral

:cool:
 
Again, it's YOUR return. Do whatever YOU want. Heck, Washington is full of people (on either side of the aisle) who don't bothering with silly things like tax returns!

:scratch: :scratch: :scratch:
 
The other side to look at is how you claiming your cadet/midshipman affects their tax return. Our son had work income of his own, plus investment income, plus his cadet pay. If we would have claimed him as a dependent, he would have not been able to claim himself, and would have paid more in taxes. We felt that we could do without the deduction in order to have him get more back.

Of course, as Luigi pointed out, your situation may vary. Check out how it works for your financial picture, since all are different.

Stealth_81
 
on your taxes it asks if your child has lived with you for over 6 months...

I know that why my DD goes off to CGAS it will be a few days short of the 8the month... I am pretty sure that I have supplied her with over 50% of her care for the year..

but it will be more interesting with the CGA Scholars stuff about her deductions from her salary.....
 
Again, it's YOUR return. Do whatever YOU want. Heck, Washington is full of people (on either side of the aisle) who don't bothering with silly things like tax returns!

Perhaps if I'm audited and they disallow my claim, I can ask President Obama to simply allow me a "do-over" and forgive any penalties or prosecution.

After all, it worked for most of his cabinet appointees.

:cool:
 
Luigi, I was so angry after doing taxes the other night to read about another cabinet appointee who "forgot" to pay. However, getting these Washington big-wigs to pay is creating an influx of revenue into our sour economy. :thumb: Before this becomes a "I cannot believe mom is bashing the president" thread, I am not...I know of people on both sides in Washington have been accused of tax evasion. After all, taxes are something the "little people" deal with. Heck, I had a chiropractor years ago who refused to pay taxes; he thought they were against all he believed. However, to appease the IRS, he made a contribution toward the running of the government each year.
 
Seriously folks - this forum really is not the place to go for tax advice but the rules for dependency appear to be clear:
http://www.irs.gov/newsroom/article/0,,id=133298,00.html

The Working Families Tax Relief Act of 2004 set a uniform definition of a qualifying child, beginning for Tax Year 2005. This standard definition applies to all five of the tax benefits noted above, with each benefit having some additional rules.
In general, to be a taxpayer’s qualifying child, a person must satisfy four tests:

  • Relationship — the taxpayer’s child or stepchild (whether by blood or adoption), foster child, sibling or stepsibling, or a descendant of one of these.
  • Residence — has the same principal residence as the taxpayer for more than half the tax year. Exceptions apply, in certain cases, for children of divorced or separated parents, kidnapped children, temporary absences, and for children who were born or died during the year.
  • Age — must be under the age of 19 at the end of the tax year, or under the age of 24 if a full-time student for at least five months of the year, or be permanently and totally disabled at any time during the year.
  • Support — did not provide more than one-half of his/her own support for the year.

ALL four tests must be satisfied. The confusion comes in the "support" question. The "More than one-half of support" refers to monetary support of that child.
For most college students the parents are providing more that one half the support - except for a few heavy scholarship winners.

For kids at academies - the monetary value of support includes the cadets/mids pay, loan advance, tuition, room and board.
Your child's academy should be able to provide you with these figures.
If all of that adds up to LESS than what you spent to support them - their share of housing, board, clothing, any tuition etc. Then you have a case.
With the case of USMA the Cadet who entered on or about 1 July incurred over $50,000 of expenses and pay that accounted for their portion of "support" for the year.

To be fair to your accountant you should request those figures and present them when asking for advice about the "support" question.
 
Just_A_Mom said:
For kids at academies - the monetary value of support includes the cadets/mids pay, loan advance, tuition, room and board.
Your child's academy should be able to provide you with these figures.
If all of that adds up to LESS than what you spent to support them - their share of housing, board, clothing, any tuition etc. Then you have a case.
With the case of USMA the Cadet who entered on or about 1 July incurred over $50,000 of expenses and pay that accounted for their portion of "support" for the year.

Different accounting experts give different advice.

A very high-priced K-Street accounting firm told me "All of his support, for half of the year" is considered by the IRS to meet the "half of his support" test and therefore they can be claimed.

They told me "it's not a contest where you add up what the Academy provided for the second half of the year and try to match it."

Just_A_Mom said:
..but the rules for dependency appear to be clear:

:scratch:

Far from it.
 
More fuel for the fire...

I have watched this question bubble for many years now... especially the dependency status during the half year. When USNA's I-day falls on 1 July, it's a split right down the middle of that first year. It's much clearer once the midshipmen and cadets have spent a full year as an independent military member.

These links might be helpful. I believe it would apply to all SA's except USMMA, whose midshipmen do not receive DFAS pay.

http://www.usafa.af.mil/superintendent/cma/newsletters/2009/09 Mar.pdf
Good walk-thru of various things, but USAFA cannily offers a caveat that it's informative only and not an official IRS position.

http://www.drsm.org/WPPC/WP_TaxInfo2004.pdf
There's probably an updated version of this, but essentially the same story.

I'm not sure this helps... but the AFA link gives some pointers on how to calculate the support.

Wish we had a former military JAG with a service academy background, active duty time and who now specializes in federal tax law and IRS interpretations...:confused::confused::confused:
 
Taxes

Is it possible that a plebe ends up owing money if they only have a standard deduction?
 
Seriously folks - this forum really is not the place to go for tax advice but the rules for dependency appear to be clear:
http://www.irs.gov/newsroom/article/0,,id=133298,00.html

And JAM I would have to disagree with you.... this is the perfect place to start to ask about tax information...

IF they make 900 a month, and have left over 100 a month, what is that 800 called? college expenses? Work related requirements? just another question, as the kids will have to have their taxes done.. and obviously if that 1srt year you claim them as a dep. ... curious how some in the past did it...

My dd is starting at CGAS, and will have an actual income (since she enlists for prep) but she has to pay for everything.. as the CGA only covers tuition... so I will have to find out if and of her costs will be tax deductable somehow.....

TPG... thanks..... just what I was thinking.....
 
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JCollins, not sure if CGA offers this service, but USMA offers tax services to cadets who have never done their own taxes before. The walk them through the steps and make sure everything is filled out correcty. Of course, some cadets would prefer to send it home for parents to do, or for parents' accountants to do. You will find out about whether or not CGA offers help once your DD is there.
 
And JAM I would have to disagree with you.... this is the perfect place to start to ask about tax information...

Go ahead but I would be wary of any tax advice found on an anonymous internet forum. Just remember it's worth what you paid for it.

Why would monetary support not matter? If the child lived with Mom for 6 months and 1 day, went to public school, had no medical bills etc. then moved in with Dad for 5 months and 29 days yet dad paid $15,000 for private school tuition, braces etc..... then Dad would meed the test. (except of course where dependency is court ordered)

Anyway - it's not worth arguing about here, you can claim your cat if you like. It only matters if you are audited. Then you argue your case to the IRS - not some high priced accounting firm.
You just have to do what you think you can explain until the IRS comes out with an official explanation.

Here is the current memo:
MEMORANDUM FOR FOURTH CLASS CADETS

SUBJECT: Income Tax Information


1. Many of you as fourth class cadets have questions concerning the income tax consequences of cadet pay and allowances. This memo provides information from the standpoint of both your tax return and your parents’ return for 2008. It is very important that you share this data with your parents.

2. This memo is based on the tax laws and current rulings of treasury officials. It is, however, informative only and does not necessarily reflect the official position of the Internal Revenue Service or the Department of the Army.

3. All cadets at the Academy must file their own income tax returns. Each fourth class cadet who entered the Academy on 30 June 2008, and remained through 31 December 2008, has received or had credited to their account during 2008 base pay of $5,395.61. Cadets must report this amount as income from the Army. In addition, each cadet received a $5,400.00 pay advance to assist with the payments of uniforms, textbooks, computer, software and various school fees.

4. Your parent(s)/guardian(s) must have contributed more than half of your support for the year in order to claim you as an income tax exemption “More than half the support” refers to dollar value, and not to the length of time support was furnished. Your parent or guardian may properly include the cost of board, clothing, lodging, medical and dental care, education, property and furniture, insurance, etc., they furnished you when they calculated their level of support. If you lived at home during the first six months of 2008, your parent or guardian may include a proportionate amount of the family food bill, utilities, rent or house payments, interest, taxes, etc., as part of your support. If you attended college, prep school, or high school prior to entering the Military Academy, your parents may also include the amount they paid for tuition, books, school supplies, and transportation to and from school as parental support.

5. In determining the value of support furnished from sources other than your parents, you must include both taxed and untaxed support amounts. This simply means that the portion of your taxable pay spent on your own support must be included, and in addition, the support provided by the Army in the form of food, lodging, education and other services must also be included. Even though the value of Army support is not taxed as income, the value must be considered when determining who provided more than half of your support. The following chart indicates values of support furnished by yourself and by the Army.

MARM-FO-MA-T (1)
SUBJECT: Income Tax Information


Cadet Pay earned from 30 June through 31 December $5,395.61
Government Pay Advance 5,400.00
Subsistence (food) (92 days x $6.95 per day)
30 June through 30 September 639.40
(92 days x $9.80 per day)
1 October through 31 December 901.60
Room and Board (Half year per USMA’s FY08
Cost of Education Report) 1,714.50
Education (the actual 2008 tuition cost per semester
at the U.S Military Academy) 25,786.00

TOTAL SUPPORT BY THE CADET AND BY THE ARMY $39,837.11

6. In our opinion, if your parent has not provided at least $39,837.11 in support, then your parent may not be able to claim you as an exemption. If your parent has provided more than this amount in support, then your parent is entitled to claim you as an exemption. Under IRS regulations, if your parent can claim you, you cannot claim a personal exemption for yourself, and you will have to complete a worksheet to compute your standard deduction.

7. The question may arise whether an appointment to the Military Academy can be considered a “scholarship award” within the meaning of the income tax laws. The Internal Revenue Service has ruled that such an appointment is not a scholarship award and that the education provided by the Military Academy must, therefore, be included as an item of support furnished by the Army.

8. I trust that the information provided, although necessarily general in nature, will be of assistance to you and your family. The above information is provided to ensure that you and your parent(s)/guardian(s) have sufficient data to calculate income tax returns.

9. Any questions by your parent(s)/guardian(s) concerning the proper methods of calculating dependency should be resolved through independent legal counsel, Publication 17, and/or contact the Internal Revenue Service.




THOMAS M. REMO
Treasurer, USMA
 
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