Can I claim a dependent on my taxes without legal custody?

February 04, 2021 by Jean Lee Scherkey, EA
Father and daughter holding hands

My daughter has been living with her grandmother for the last few years. The grandmother was granted guardianship by the court. Grandma has been claiming my daughter for the past few years, as was her right. However, 2020 was different. My daughter has been living with me since March. I have provided 100% of her care since then. Can I claim her since it was well over 6 months even though I don’t have legal custody? Also, what will happen if grandma disagrees and tries to claim her as well?

Ryan


Dear Ryan,

We’ve all heard the adage that there are two things certain in life. Well, I think there are not two, but three things in life that are certain. In addition to the certainty of death and taxes, I think we can all agree that family dynamics are complicated. In fact, one of the most complicated areas of the tax code is determining who is eligible to claim a child or relative as a dependent!

When considering the answer to your question, I am assuming that your daughter is your biological or adopted child who was under the age of 19 at the end of 2020. I am also assuming that Grandma is your daughter’s biological or adoptive grandparent and not a family friend or other person who acts like a grandmother to your daughter. You said that while your daughter’s Grandma was granted guardianship of your daughter a few years ago, your daughter has been living with you since March 2020, and you have been providing all of her care since.

For your daughter to be your dependent in 2020, she would have needed to live with you for more than half of the year, be under age 19 at the end of 2020 (or under age 24 and a full-time student for at least five months out of the year, or totally and permanently disabled). She must not have provided more than half of her own support, and she must be your descendent. Based on the information you provided and the assumptions made above, your daughter would be considered your qualifying child for tax purposes and could be claimed as your dependent on your 2020 individual tax return.

It is possible your daughter’s Grandma may also claim your daughter as a dependent on her 2020 return. Generally, when two people claim the same dependent on their separate returns, the IRS will automatically grant the dependency (by approving the return for efile) to the person who files their return first. The second person who tries to efile will have their return rejected for efiling. The person whose return was rejected for efiling will need to file a paper return if they choose to continue to claim the dependent on their return. Keep in mind, if your return is rejected, that does not mean you cannot claim your daughter; it just means that Grandma got there first. You can still claim her by mailing the return.

When more than one taxpayer claims a qualified child or relative as a dependent, the IRS will decide which taxpayer qualifies to claim the child. Even though your daughter’s Grandma has been awarded custody, the IRS will not automatically assign the dependency to her. The IRS will look to who can prove that the child lived with them the majority of the year to determine who can claim her as a dependent.

In your situation, the IRS will most likely require documentation that verifies your daughter lived with you most of the year. Examples of documentation include school, daycare, or medical records that show your daughter lived at your address. If your child’s records still display her grandma’s address, then proving your daughter did live with you the majority of the year may prove difficult. In some cases, the IRS will allow a letter on official letterhead from a school, daycare provider, medical provider, social service agency, or place of worship confirming where the child was living during the year. If your daycare provider is a relative, you must have another type of letter as well. It would also be beneficial to have a copy of her birth certificate, although this is normally only needed if your child is not your biological child or your adopted child.

To save yourself from future frustration, it may be worth reaching out to Grandma to discuss the situation and come to an agreement about who is claiming your daughter as a dependent for 2020. If Grandma is concerned that she may need to return the economic impact payment she received for your daughter, rest assured that there is no repayment requirement on these advances. No one likes having these awkward conversations, but you may be pleasantly surprised and find out you are both on the same page.

Wishing you many happy returns,
Jean

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Jean Lee Scherkey, EA
Learning Content Developer

 

Jean Lee Scherkey began her career at TaxAudit in 2015, and her current title is Learning Content Developer. She became an Enrolled Agent in 2005. For several years, Jean owned a successful tax practice that specialized in individual, California and trust taxation, and assisting those impacted by tax identity theft. With over fifteen years of varied experience in the field of taxation, Jean has worked at different private tax firms as a Staff Practitioner, Tax Analyst, and Researcher. Before coming to TaxAudit, she worked over two years for TurboTax as an “Ask the Tax Expert.” In addition to her work in TaxAudit’s Learning and Development Department, Jean is actively involved in the company’s ENGAGE Volunteer Program, which provides opportunities for employees to help and serve the local community.  


 

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