- quote -

How substantial could the social security be when compared
to the daughter who is earning $200,000??= I still can't
buy it 'n' I don't believe we've come to a resolution. If I
were faced with the situation, I would still conclude that
it would not be acceptable.

"Jack" - John H. Fisher - TaxService[at]aol.com
Philadelphia, Pa - Atlantic City, NJ - West Wildwood, NJ
My Newsgroups & Boards at: http://members.aol.com/TaxService/index.html

Where Ignorance is bliss, 'tis folly to be wise!=

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Arthur Kamlet wrote:

- quote -

I thought I remembered it there, but I can't find it.

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- quote -

I am not sure where you found the "permanently disabled"
exception to the gross income test?

Are you referring to "sheltered workshop" income being
exempt from certain tests?

Earned Income Credit allows an EIC qualifying child who is
permanently and totally disabled, but here you have asserted
such an exception for the Gross Income Test?

__
Art Kamlet ArtKamlet [at] AOL.com Columbus OH K2PZH

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"John H. Fisher" wrote:
- quote -

In the context of the thread, yes. In the context only of
the OP paying her mother to take care of her daughter,
that's allowed, and if the payment is reasonable and over
$3050 (for 2003), mother cannot be a dependent (unless
mother is permanently disabled), although OP would have to
pay employment taxes on 1040 Schedule H.

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"Arthur L. Rubin" <ronnirubin[at]sprintmail.com> writes:
- quote -

I don't know how it would be handled under audit.
Immediately, I would conclude that the mother IS a dependent
of the daughter, based on the original contribution to this
thread. That the daughter creates a scheme to obviate the
fact seems frivolous!!=

My main concern is that there are already too many schemes
to falsely make claims. Absent a ruling, I certainly
wouldn't want to be contributing to the creation of an
artful dodger!!!=

"Jack" - John H. Fisher - TaxService[at]aol.com
Philadelphia, Pa - Atlantic City, NJ - West Wildwood, NJ
My Newsgroups & Boards at: http://members.aol.com/TaxService/index.html

Where Ignorance is bliss, 'tis folly to be wise!=

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- quote -

I still don't understand why y'all are talking about SE tax,
when mother lives with daughter and takes care of kids in
daughter (and mother's) abode.

Cheer$,
harlan Lunsford, EA n LA

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Don Priebe wrote:

- quote -

Let me disagree with your disagreement with the two
responses that disagred with the original scenario. (I
think.) Grandma is taking care of kids in her own household,
well, actually the household of her daughter in which she
lives. Hence the payments are not subject to SE tax, but
rather to schedule H taxes on the daughter's 1040. And of
course mother get's the concomitant W-2 form.

- quote -

And if we're talking about 2002, then 600$ per kid is
correct; however....... !

Cheer$,
Harlan Lunsford, EA n LA

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Harlan Lunsford posted:
- quote -

In fact, it appears the current EIC rules would allow them
to draw straws or play rock, paper, scissors or just choose
which makes the best financial sense for them. Of course,
if there's a disagreement, the *parent* of the Qualified
Child can overrule (first choice, or "tie-breaker") ... but
otherwise, there's freedom of choice.

One example discussed in training by IRS instructors was a
grandparent, parent and 3 qualifying children living in the
grandparent's home. The parent and grandparent could decide
to split the three kids -- with either one taking two, based
on which yields the higher EIC (of course, assuming both
have "earned income").

Bill

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- quote -

But would not be a dependent since parent fails the gross
income test.

And where does related parties creep into EIC?

__
Art Kamlet ArtKamlet [at] AOL.com Columbus OH K2PZH

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Harlan Lunsford <hlunsford[at]bellsouth.net> wrote:
- quote -

Sure, if they want to.

If someone is an EIC qualifying child of more than one
taxpayer, and the taxpayers agree who will claim EIC, that's
that.

If they don't agree, there are tie-breaker rules.

__
Art Kamlet ArtKamlet [at] AOL.com Columbus OH K2PZH

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John H. Fisher wrote:

- quote -

Irrelevant. Unless a "child" (at least under 24) or
mentally incompetant, receiving taxable* income of more than
the exemption amount precludes their being claimed as a
dependent.

By "taxable", I mean gross income with some exclusions
of non-taxable income.

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- quote -

Absolutely!

--
Don EA in Upstate NY

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Harlan Lunsford <lunstax[at]bellsouth.net> writes:

- quote -

If they like. Before 2002 if a child was qualifying for
more than one person, only the higher AGI could use the
child for EITC. Now they're free to decide who uses the
child. If they can't agree, there are ordering rules, but
in the context of the OP they're moot.

Phil Marti
Topeka, KS

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- quote -

In this hypothetical, the parent could be collecting
substantial social security benefits and provide for more
than 1/2 of her own support, while having no taxable income.

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Phil Marti wrote:
- quote -

What, not since 2001? daughter can't pay mother wages? No
law against that .

or are you referring to who gets to claim for EIC purposes?
and if so, are you implying that they may draw straws for
the kids for EIC?

Cheer$,
Harlan Lunsford, EA n LA

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- quote -

No. FICA/SE tax on the $10,500..... I assume that any
expenses to offset the mother's income for the child care
activity have already been accounted for in arriving at the
$10,500 to get the EIC amount stated. There's also a little
income tax not wiped out by the standard deduction and
personal exemption.

I get $1,483.60 SE tax and about $275 income tax, for a net
of $3,645, but still an increase of net worth.... State
income tax may apply too.....

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- quote -

Aren't we missing something here???=

Absent the payment to the parent, the parent would be
dependent on the daughter. In my mind, the move creates a
conflict of interest, and is a transaction between closely
related parties. I don't know how this family lives on a
$200,000 income, or the expenses of each individual in the
family, but I doubt that, even if the mother is paid the
income shown, she would be able to provide more than 1/2 her
own support. If someone else can claim you as a dependent,
but does not, you still cannot claim the EIC. The rules
for hiring someone to give Child Care Credit are pretty
clear in stating that "The payments for care cannot be paid
to someone you can claim as your dependent, or to your child
who is under age 19 even if he or she is not your
dependent."

"Jack" - John H. Fisher - TaxService[at]aol.com
Philadelphia, Pa - Atlantic City, NJ - West Wildwood, NJ
My Newsgroups & Boards at: http://members.aol.com/TaxService/index.html

Where Ignorance is bliss, 'tis folly to be wise!=

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Phil Marti <philmarti[at]aol.com> wrote:
- quote -

Since grandmother is paid 10,500 there's a powerful force
acting against her being a dependent.

__
Art Kamlet ArtKamlet [at] AOL.com Columbus OH K2PZH

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I'm going to disagree with the two responses that disagreed
with the original scenario.

If mom pays grandma $10K to look after the kiddies, than
grandma has self employment income. She and mom both have
the grandkids as qualified children for EIC. They agree
that grandma will claim them. Grandma gets her $4,000 EIC.
It costs her $1,500 or so in SE tax, but she still comes out
ahead.

Mom get the child care credit. The comment about AGI
phase-out applies to the child tax credit, not the child
care credit. It's worth $600 for one kid; $1,200 for two
or more. Move to NY and you'll also get the NY version of
the child care credit, which is refundable!

--
Don EA in Upstate NY

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- quote -

Taxpayer's mother would qualify for EITC because she has:
Earned Income Qualifying Children (Under new rules, Taxpayer
and Mother can agree who will take EITC).

Taxpayer will get Credit for Child Care Expenses (6000 *
..20) since there is no income phase-out.

Jim Hayden EA - in cold and snowy Michigan

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