John R. Bullis: No exemptions granted if return is filed incorrectly

Grisel Smyth is a grandmother that supported her son, his wife and Grisel’s grandchildren. She should have been able to claim the grandchildren as dependents, but her son messed up again.

The son said he and his wife were not going to even file an income tax return. But he later admitted they did file a return and they claimed the children (Grisel’s grandchildren she supported) as his dependents so he could get a refund and he could buy drugs with it.

He later had an amended return prepared where the dependent exemptions for the grandchildren were not claimed but it “was never filed.” If he had just mailed the amended return to the IRS service center or if he had just carried it in and given it to the IRS person that was to receive hand-carried returns, it would have been OK. However, he and his wife had their tax preparer deliver it to the IRS attorney that was handling his tax case. The Tax Court ruled that was not the same as filing the amended return, it was not properly filed.

So the Tax Court determined the amended return was not filed and he and his wife did not give up the dependency exemptions for their children.

Grandmother Grisel was then found to not be able to claim the exemptions, even though she supported the son and his family.

The court felt badly about the entire matter, but found the grandchildren were not qualified as her tax dependents, even though she supported them. A “qualifying child” is defined as:

Has a certain relationship to the taxpayer (like being child or grandchild)

Lived in the household of the taxpayer for more than 50 percent of the tax year

Is less than 19 years old

Did not provide more than 50 percent of his or her own support

Did not file a Joint Income Tax Return

If two (or more) taxpayers can claim the exemption, the “tie-breaker” rules are used:

The parent can claim the exemption for the child OR if that doesn’t apply,

The taxpayer with the greatest adjusted gross income for that year gets the exemption.

Because the son and his wife did file a return that claimed the children, and did not “file” an amended return giving up the exemptions for the children, grandmother Grisel was not able to claim the exemptions. And, Grisel was also not able to claim head of household filing status.

A sad result of not doing things correctly.

Did you hear? “The heart of all problems, whether economic, political or social, is a human heart,” by L.M. Charles-Edwards, cleric.

John Bullis is a certified public accountant, personal financial specialist and certified senior adviser who has served Carson City for 45 years. He is founder emeritus of Bullis and Company CPAs.