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…

[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.

[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.