2 Qs on dependency status for income tax?

Question

1) Are you able to use someone as a dependent if they have stayed in your house, basically rent free a whole year BUT they receive their mail at another address? I know there are other things they must qualify but lets say they pass all other qualifications for a dependent and you are wondering about this one.

2) Are you legally bound to notify someone if you are claiming them as a dependent? I know that sounds shady but theres a person who fits all the qualifications of a dependent BUT I believe they would try to bribe me if I told them I was going to list them as a dependent. I know this person, they would say the only way I let you use me is if you give me x percent of the return you get.

Answer 1

1) Yes you could as long as they meet ALL of the requirements for you to claim them as a qualifying relative. But if you are questioned, you'd have to be able to prove to the IRS's satisfaction that the person really did live with you the entire year.

2) There's no law that you have to notify them that you are claiming them. But if they file also and claim themselves, or if anyone else claims them, you and they will both be involved in a lot of IRS paperwork and investigation which could be a real pain. And of course if they make enough to be worth them filing, you couldn't claim them anyway, since one of the rules for claiming someone as a qualifying relative is that their gross income was under $3400.

3) and yes, I know you didn't have a 3) in your question. But if you think this person would react that way, and demand a cut of any tax savings (which would probably be around $500 total savings if that) why are you providing them a home and supporting them? I'm not trying to be mean to you or anything, but do you have S.U.C.K.E.R stamped across your forehead? I'm sure you are just trying to be generous to them and nice, but really, how far are you willing to go? Seems to me like they should be a little grateful to you by now, and doesn't sound like they are. And by the way, from a purely legal point of view - they don't "let you use" them - they either meet the requirements for you to claim them, in which case you don't need their permission, or they don't meet the requirements, in which case they can't "let" you claim them even if they wanted to.

Answer 2

1. Where they receive mail is not a qualification. Where they physically live is (except, in some cases, if the dependent is a parent of the taxpayer).
2. You are not required to notify them, but it is a good idea, so that they know not to claim themselves. If they are legally your dependent, you are entitled to claim them, no matter what they say, and whether or not they "let" you. It is not their option.

Answer 3

You would have to show that they lived with you. If questioned by the IRS, you are going to be lacking documents, but could get affadavits from neighbors, landlords, doctors, etc.

Do you have to ask? Well, effectively yes. You have to be able to show that you met all of the dependency tests and how the heck are you going to be able to prove their income is less than $3400 if you don't ask them and how would you proof that you paid more than half of their total expenses if you don't know what they spent on themselves?