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More advice for correctly claiming tax dependents

Taxes are no joke. There’s a reason why they are included in a popular joke about the only constants in life. Whenever you go to fill out and file tax-related paperwork, you must do so with caution. The IRS doesn’t consider mistakes to be accidental. As such, any perceived infractions could result in harsh fines, claims denials, and even refusal of tax refunds. With that in mind, we have created this list of tips for properly claiming tax dependents when the time comes. 

Caveats Regarding Qualifying Relatives 

Last time, we discussed the process for claiming your children as dependents. This week, we turn our attention to the other relevant category: your qualifying relatives. These people do not have to be adults; any age is fine. However, they cannot be listed as someone else’s qualifying child. You must share a relationship bond with the person in question, and they have to be a member of your household. That’s also one of the big reasons why you could theoretically add elderly parents to your papers. They might need your support, but otherwise, they’re capable of living on their own. 

the gross income test 

Gross income is capped for the purposes of this procedure. It is also part of what is known as the gross income test. The ceiling associated with this test is $4,300 in the tax years for both 2020 and 2021. People with disabilities and those who receive their income from a sheltered workshop are considered exceptions. Where does this money come from? Revenue streams include rental properties, business income, unemployment benefits (the ones which are not tax-exempt), and related Social Security benefits.    

the financial support test 

Likewise, there are a few conditions that fall under the umbrella of the financial support test. You need to provide a majority of the person’s financial support within that given year. The support manifests as rent, groceries, utilities, clothes, and medical expenses that were not reimbursed. Additional support examples come from travel costs and recreation expenses.  

Who is Not Considered a Dependent?  

It is also good to know – indeed, great – to know whom you cannot name as a dependent on your taxes. When you are someone else’s dependent, then you cannot claim others as your tax dependents. Spouses who join you in filing a tax return are likewise disqualified. Anyone who is not an official American citizen or a resident alien and so on cannot be dependents either. Moreover, you can’t cite someone from Canada or Mexico.   

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Unlike other accounting firms, The Harding Group, located in Annapolis, MD, will never charge you for consultations and strive for open communication with our clients. 

Are you interested in business advising, tax preparation, bookkeeping and accounting, payroll services, training + support for QuickBooks, or retirement planning?  We have the necessary expertise and years of proven results to help. 

2 Responses

  1. A dependant is defined as someone who can be claimed on a tax return by someone “other than the taxpayer or spouse” for tax reasons. In a broader sense, a dependant is someone who is financially dependent on another else for things like shelter, food, clothes, essentials, and more. This often refers to your children or other family members, but it may also refer to someone who are not biologically connected to you, such as a domestic partner.

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