Quick tax question...

[lucky]

OSS turned 18 on 11/9/06.  From 1/1/06 to 10/31/06 he did not live with pbfh although she had custody.  He was not allowed to move in with her because she was renting her boyfriend's parent's basement and they said she couldn't have him live there.  He refused to live with us and chose to stay at a variety of friends' homes -- 4 or 5 different ones regularly.  

He had a part time job and purchased his own food, clothes, etc. during those 10 months.

On 11/1/06, pbfh obtained a different place to live and oss moved in with her.  He pays $75 a month to pbfh for rent and still purchases his own food, clothes, etc.

I believe (based on the TaxCut program's questions) that pbfh cannot legally claim oss as a dependent on her tax return.  Oss wants to file himself and doesn't feel that pbfh should benefit from having custody of him since she did not support him at all for 10 months of the year and then only partially supported him the last 2 months.

She is po'd because she says "I deserve that money, it's mine because I had custody of" oss.  Among other things -- like saying oss doesn't deserve a refund of what he paid in, she deserves it for giving him a place to live.  My tongue really hurts I've bitten it to keep my mouth shut so much.

Anyway....  Can anyone tell me if I'm right or she is right?  If she can claim oss as a dependent, she will qualify for head of household and get a whole lot more back than she will otherwise, because without oss, she has to file single.

One other question:  She won $2000+ in Bingo over the last two months of the year.  She says she doesn't have to claim it (smallest prize was about $250) because she won it so it's tax-free.   I believe she does because of the amount she won.  So who is right with this question?

[em]Lucky

Lead your life so you wouldn't be ashamed to sell the family parrot to the town gossip.
- Will Rogers[em]

[4honor]

1. Unless OSS is a full time student or considered a dependent and receiving CS still, OSS can claim himself since he is 18. She can only claim him if HE chooses not file himself.

2.  BINGO - well they have to keep records of who wins for their tax records. So she is wrong. It is likely that they will 1099-misc her... in which case the IRS will match up the $ paid vs. the lack of $ claimed. If you win the lottery, you HAVE to pay taxes on the $$. If you win a car on the Price is Right, you have to pay taxes on the value. Taxes are required.

3. Don't let her get you going in circles. HER failure to behave honestly will not harm your finances. It will not help you and your family to "turn her in" and it will only feed an ulcer... yours.

[Ref]

The IRS has 5 tests for a person to be claimed as a qualifying child. One of the tests is that the child must not have provided more than half of their own support for the year. Another test is that the child must live with the person for over half the year. She failed on two of the five tests. That is good enough for him to claim himself.

http://www.irs.gov/publications/p501/ar02.html#d0e3591

The problem is proof. Has BM admitted that he hasn't lived with her in writing? Chances are his car is registered to her address and his mail went there, so she has some "proof" that he lived there. He needs conflicting evidence.  I would call the IRS to see what would be significant evidence.

People tend to be nervous talking to the IRS, but I deal with their service center a lot and they are usually very helpful and surprisingly human. Call 1-800-829-1040.

As far as the gambling winnings go, she does have to claim her winnings. She can, however, offset any losses she might have had if she itemizes. Noone takes record of their losings, so she can say she lost $2001 gambling and she would have every right to offset.

Good Luck
Ref

[lucky]

Actually, nothing went to her address.  Once she lost her apartment in Aug. of 2005, he changed his address to ours just to be sure he got all his mail.  Even his W-2s came here.  He just didn't want to live here because we have rules.

And, unfortunately for him, since his money had to go for paying his way in the world, he wasn't able to save any to get a DL or a car.  

She believes she doesn't have to file for the winnings so she won't even bother to try to offset it.

I'm going to tell oss to go ahead and file claiming himself.  Thanks for your help!

[lucky]

You're right, I shouldn't let her get me going, but I do it everytime.

Oss has quit school, and there's been no CS paid either way because of the way the custody order is written so I'm going to go ahead and tell him to file and claim himself.  He's worked hard and matured so much HE deserves it.

Hopefully the twit doesn't try to claim ysd as well since dh does have custody of her.  But, we already filed so she'll just bury herself.

I'll try not to stress over it, but I know she'll treat oss like crap and that ALWAYS gets me going.  I wish he'd move out on his own, but that can't happen yet.

Thanks, 4H for the info and for the counsel.

[em]Lucky

Lead your life so you wouldn't be ashamed to sell the family parrot to the town gossip.
- Will Rogers[em]

[Ref]

They are only required to keep track and file a W-2G with the IRS if she won $1,200 in one sitting. If she won $200 her and $200 there, they are not required, and probably wont file one. When it comes down to it, the IRS expects you to be honest about accumulated winnings over the year, so chances are, unless she won the $ in a big chunk, she will get away with it.

I agree, she is wrong to think she shouldn't pay taxes, but you should let this one go. It isn't worth the drama.

Ref

[Kitty C.]

Lucky,

Sometimes it's not a matter of 'if' but 'when' you file.  I strongly recommend (if he has all the appropriate forms) that he file IMMEDIATELY.  You may remember a few years back that both DH and BM claimed SS on their taxes, after BM disputed whether DH was current on CS the year before, which he was.  If he's delinquent as of 12/31, he can't claim SS.  Long story why she even thought that.

Well, I've been filing our taxes on line with TurboTax for about 7 years now....works like a charm, too.  And usually I can get it filed before the end of Jan.  BM didn't come to DH complaining until late Feb., and it wasn't totally resolved until May.  I told DH she must have filed and claimed him and by the end of that year, we received notification from the IRS that SS's SSN had been used on two different returns.

Now, we don't know what the outcome was for BM....of course, she would never tell us if she was penalized, but I'm sure something happened.  So when we went to file the next year, I called the IRS (actually got a human being) and asked what we should do.  Their recommendation?  File as soon as you can.  The first who files gets the deduction...they'll work out the rest later.

Your OSS has a legitimate claim and he needs to file it quickly.  If and when his BM files hers and claims him, the IRS will certainly be questioning her and asking her for proof, which you know she can't provide.  Your only concern should be helping OSS get his taxes filed.  The rest is the quagmire that the BM has sunk herself in.  Don't let her pull you in with her.