Disabled dependent with gambling winnings and small w2

[cera smile]

Dependent (age 27, disabled) has always qualified as on father's return as dependent. He has a w-2 equaling $4,372 but also won at the casino amount on w-2g $1,820. I believe this puts him over the income limit even though he meets all other qualifications as a dependent on the return. This is my first time having a dependent who is disabled win money at the casino.  I want to make sure he cannot be claimed before I let the father know (total on all tax forms for dependent = $6,192)

Thank you. 

[Camp1040]

Permanently and totally disabled? gross income test won't apply, support test will.

[BobKamman]

Disabled dependent working at sheltered workshop.

For purposes of the gross income test, the gross income of an individual who is permanently and totally disabled at any time during the year doesn't include income for services the individual performs at a sheltered workshop. The availability of medical care at the workshop must be the main reason for the individual's presence there. Also, the income must come solely from activities at the workshop that are incident to this medical care.

A “sheltered workshop” is a school that:

• Provides special instruction or training designed to alleviate the disability of the individual; and

• Is operated by certain tax-exempt organizations or by a state, a U.S. possession, a political subdivision of a state or possession, the United States, or the District of Columbia.

Permanently and totally disabled has the same meaning  as for Qualifying Child.

[TaxGuyBill]

As Camp said, a permenantly disabled child still follows the "Qualifying Child" rules.  So if the 'child' lived with the father for over half of the year and did not provide over half of his own support, it seems like he DOES qualify as a dependent.

However, the Standard Deduction for dependents is different, so the dependent will have "taxable income" (after the Standard Deduction) and will need to file a tax return.

Although many people seem to improperly ignore this, it is quite possible that the 'child' had more than $1820 of gambling income.  He needs to report ALL gambling income, not just the ones that are large enough to be on a W-2G.

[Camp1040]

Gambling winnings memory gets very foggy without a W-2G form!

[BobKamman]

What's so improper about it?  There is the unwritten common law of taxation.  Since it's absurd to include all gambling winnings in income, when they were just led to losses anyway, IRS and taxpayers have agreed to ignore them.  (Unless, of course, you do something to really upset an IRS auditor.)  

[cera smile]

Yes, permanently and totally. 

[cera smile]

Thank you, and I agree. However, because of his disability he does not remember. He did not even remember the winnings that initiated the tax form he received. 

[cera smile]

I know about that law. But that is not the kind of job he did. It was some comic con or something like that. So I couldn't exclude with that premise. Thank you though!

[Camp1040]

You have your answer, the kid is a qualifying child, dad can get ODC and file HOH. Read taxguy bill response.

[BobKamman]

I don't see qualifying child or HoH if the kid was not in a sheltered workshop.  

[Camp1040]

If the person is permanently and totally disabled then gross income test doesn't play into being a qualifying child, but it does for qualifying relative. I understand the rule to be Workshop earnings exempt from gross income if you are qualifying relative. And then there's the gambling income to consider

[BobKamman]

So this person works at a comics convention, and knows how a slot machine is operated.  Does that mean he "can't engage in any substantial gainful activity because of a physical or mental condition"?  Maybe.  

[Camp1040]

I would have to assume that his doctor is attesting to his condition.