My niece has been staying with me since June last year (so I think she meets the substantial presence test to be classified as resident alien for tax purpose) to prepare for her USMLE exam. I’ve been providing more than half of her support in 2008. I was just playing with tax preparation software and seems like if I claim her as my dependent I get roughly $3000 more in my tax return. So my question is, can I claim her as my dependent?  If so, can I file W-7 with my tax return to get ITIN as she doesn’t have SSN? Has anybody been in similar situation? Thank you guys for your suggestion.

Nepthug420, can you elaborate why you are so confidant? I am not trying to question if you are right or wrong, I am just curious.

Taxman, Do you have any thoughts on whether she can be classified as US resident alien for tax purpose or not?

Rekha Ji,

The research I quoted above was for a real client of mine, they were resident alien trying to claim his brother as a dependent.  Brother had a valid SS#, was a full time student under 24 years, pursuing undergraduate degree (more than 2 years college education required), and was there dependent.  They claimed him as a dependent, I even claimed "Hope" credit for them.    It has been 4 years, no questions asked, doesn't mean my position won't be challenged.  I haven't researched your situation but my gut feeling is you can't
claim your nice as a dependent because of no SS# and her status, but I can be wrong. That's why I ask you to consult a CPA.

Sincerely,

Taxman

give me till Monday, i will ask my boss (CPA) and tell you more on this!!!  For the time being please go thru wot i found on IRS 501 publication.

You cannot claim a person as a dependent unless that person is a U.S. citizen, U.S. resident alien, U.S. national, or a resident of Canada or Mexico, for some part of the year. However, there is an exception for certain adopted children, as explained next.

 

Nepthug420,

 

Yes I saw that. In the same publication (IRS 501) it says “The rules to determine if you are a resident or nonresident alien are discussed in chapter 1 of Publication 519, U.S. Tax Guide for Aliens.” Then I looked at IRS 519 which talks about the substantial presence test that I posted above. So I think the real question is whether she can be classified as US resident alien for tax purpose – unless there are some catches, looking at substantial presence test, for me it looks like she is considered US resident for tax purpose. I would really really appreciate if you can get answer from your boss.

From what i read on IRS publication 519 and reading the description you have given about your neice above i feel that she does qualify as a resident. Please read the following example posted on irs website :

Lola Bovary is a citizen of Malta. She came to the United States for the first time on March 1, 2007, and resided here until August 25, 2007. On December 12, 2007, Lola came to the United States for vacation and stayed here until December 16, 2007, when she returned to Malta. She is able to establish a closer connection to Malta for the period December 12-16. Lola is not a U.S. resident for tax purposes during 2007 and can establish a closer connection to Malta for the rest of calendar year 2007. Lola is a U.S. resident under the substantial presence test for 2007 because she was present in the United States for 183 days (178 days for the period March 1 to August 25 plus 5 days in December). Lola's residency termination date is August 25, 2007.

nepthug420, I also think she does qualify to be classified as US resident for tax purpose. But I am confused as she is in B1/B2 visa. Anyway, I would appreciate if you can confirm with your boss on Monday. Thanks for your help.

 

Any other opinions sajhatis?

Yes, first thing monday morning i will try and ask my boss and find a solution. Since this is a CPA firm in small town , i am not sure if she has had cases like these. Anyways i will try and see if she has a solution to this. But according to the information, i too believe that she is eligible resident for tax purposes.

 

Thanks

Hi Rekha2064,
First of all I'm not a CPA, just a tax student right now and this is a good research question for me. Thank you for providing the opportunity.

Lets talk about the Dependent child test.
To claim for a dependent child, the dependent must meet all of the following five criteria.

1. Relationship test
Niece qualifies as a dependent child, no problem for you

2. Age
a. The child must be under age of 19 (i suspect not as she is preparing USMLE)
b. A full time student under age of 24.
I doubt your niece will pass this test. Only preparing for USMLE may not be considered as a fulltime student. Before just looking at residency test i would suggest you to consider in this point.
c. permanently or totally disabled.

3. Residency test.

for Residency test pls check page 11 of 519, it specifically says, you cannot claim as a dependent unless that person is a U.S. citizen, residential alien, U.S. national or a resident of Canada or Mexico, for some part of the year.
further on page 12 it talks about the foreign national students under citizen or resident test. "Foreign students bought to this country under a qualified international education exchange program .......do not meet this test."

4. Support test
Which you meet as you support more than 1/2 of her expenses

5. Special test for qualifying child of more than one person.
Since you are only claiming as a dependent, you will meet this test.

So my point is, I doubt she will pass age test as well as residency test.

Mr. OCDC and all,

Thanks for your research, but it seems incomplete. To your points…

 

- I know she doesn’t qualify as a dependent child; question is whether she qualifies as dependent relative.

 

- From my understanding, to claim as dependent relative, she must meet following criteria

1. The person is:

a. A relative, or

b. A full-time member of your household.

2. He or she is a citizen or resident of the U.S. or a resident of Canada or Mexico.

3. He or she did not file a joint income tax return with anyone else.

4. You provided over half of his or her support.

5. The person in question has less than $3,500 of income for the entire year.

 

- Now the real question is whether she in considered US resident for US tax purpose, IRS Pub 519 states -- You will be considered a U.S. resident for tax purposes if you meet the substantial presence test for calendar year 2007. To meet this test, you must be physically present in the United States on at least:

1. 31 days during 2007, and

2. 183 days during the 3-year period that includes 2007, 2006, and 2005, counting:

a. All the days you were present in 2007,and

b. 1/3of the days you were present in 2006, and

c. 1/6 of the days you were present in 2005.

 

- So it seems that she may be considered an US resident for tax purpose, but I am not clear whether substantial present test applies to a person in B1/B2.

 

- IRS Pub 519 -- Exempt individual - Do not count days for which you are an exempt individual. The term “exempt individual” does not refer to someone exempt from U.S. tax, but to anyone in the following categories.

1. An individual temporarily present in the United States as a foreign government-related individual.

2. A teacher or trainee temporarily present in the United States under a “J” or “Q” visa, who substantially 3. complies with the requirements of the visa.

4. A student temporarily present in the United States under an “F,” “J,” “M,” or “Q” visa, who substantially complies with the requirements of the visa.

A professional athlete temporarily in the United States to compete in a charitable sports event.

 

- IRS Pub 519 doesn’t say anything about B1/B2, so I am not sure whether she is an exempt individual or not.

 

- IRS Pub 519 also says -- Closer Connection to a Foreign Country - Even if you meet the substantial presence test, you can be treated as a nonresident alien if you:

1. Are present in the United States for less than 183 days during the year,

2. Maintain a tax home in a foreign country during the year, and

3. Have a closer connection during the year to one foreign country in which you have a tax home than to the United States (unless you have a closer connection to two foreign countries, discussed next).

 

- So the conclusion, I’m confused and looking for some expert opinions.

 

Thanks all for your inputs.

rekjha  ji,

answer is  simple!

You  can  not  claim her as dependent as per law, period.

i  do  not  think so  we  need  more  discussion .

You can claim her as your dependent:

1. She meets the qualifying relative test as she is your niece.

2. She meets substantive presence test (residency test) as she has been here in the US for 183 days in the consecutive three years including the tax year (per your calculation)

3. You support her more than 50% (the burden of proof is yours in case of audit)

4. She has gross income less than $3,500 (for 2008)

5. She does not owe any tax to the IRS and she does not file the tax return on her own (even if she does it is only for tax refund purpose). 

I don't see any problem on your claiming her as your dependent. Again, in case of audit, the burden of proof (evidence) lies on you.

Nepthug420, any updates? Thanks.

Yes, I was also expecting Nepthug420's response on this.

The situaiton can be compared if our parents had been to the US in the B1/B2 visa. We would have definately claimed them as dependent without hesitation provided they meet all the tests as discussed above.

Here the case is of niece (not the parents). I still believe that it is technically ok to claim the niece as dependent. But in the event the IRS raises its eyebrows, you have to provide adequate evidence that you actually supported her. Again the burden is to collect the evidence. 

 

Visit to  nearest H& R Block. You do not have to pay a dime and you will know in the right answer then and there. You can walk out without filing but you will get the answer.

Nepthug420, have you asked your boss yet?

Rekha2064:

Your excerpts is very clear in itself to tell you that you can not claim her as a dependent. When pub 519 considers even students who are here for 2-4 years as a temporary person, how come you can assume that a perosn in B1/B2 who are here for just 3-12 months considered as a resident?

Isn't it insane? Please don't pretend to be ignorant. You know it. It has proven in your writing and excerpts. You are in desperate attempt to save some bucks. Sorry to be harse on you but your whole attempt here justifies that you are just trying to impose your belief that you should be able to claim her as your dependent. Sorry, you can not do it legally.

Please do not think Nepthug420 will give you any good news to quench your desperate thirst of saving money. This is the tax season. He definitely has better thing to do in life rather than to try to wake somebody up who is pretending to be asleep. Sorry to be harse on you again.

Purush

Purush,

It is just a discussion. You said as if you were the final authority. Even IRS decisions are challenged in the court and falsified but we are either simply students or practisioners. Many a time, one court's decision is reversed by another court. There are certain cases where even the CPA's who have practised for decades and PhD's can not respond for sure. 

Rekha has valid point. We may have different points of view.  To me, it is OK to claim as dependent (and file W-7) provided we have enough evidence of support in black and white (like proof of living together, paying bills for her, etc.). Rekha already proved from her calculation that her niece is a resident-alien for tax purpose (B visa is different from F visa!).

Can you please explicitly quote the statement that Rekha presented above is clear enough that prevets her from claiming her niece as a dependent?

Simsim,

I am sorry I am going to be harse on you too. I know you are more disoriented than Rekha, at least she has done research and looking at the right section of the code and publication. She is more certain (51%) that she can not claim her niece as dependent.

 Read my comments on her excerpts in RED.

 

"I know she doesn’t qualify as a dependent child; question is whether she qualifies as dependent relative. 

From my understanding, to claim as dependent relative, she must meet following criteria

1. The person is:

a. A relative, or

b. A full-time member of your household.

2. He or she is a citizen or resident of the U.S. or a resident of Canada or Mexico. SHE DOES NOT QUALIFY FOR THIS TEST.

3. He or she did not file a joint income tax return with anyone else.

4. You provided over half of his or her support.

5. The person in question has less than $3,500 of income for the entire year.

- Now the real question is whether she in considered US resident for US tax purpose, IRS Pub 519 states -- You will be considered a U.S. resident for tax purposes if you meet the substantial presence test for calendar year 2007. To meet this test, you must be physically present in the United States on at least:

 

1. 31 days during 2007, and

 

2. 183 days during the 3-year period that includes 2007, 2006, and 2005, counting:

 

a. All the days you were present in 2007,and

 

b. 1/3of the days you were present in 2006, and

 

c. 1/6 of the days you were present in 2005. 

 

- So it seems that she may be considered an US resident for tax purpose, but I am not clear whether substantial present test applies to a person in B1/B2. IT DOES NOT APPLY TO ANYBODY WHO IS IN TEMPORARY VISA. I WAS A STUDENT IN 2005 AND WAS PRESENT IN THE US FOR 365 DAYS BUT FOR TAX RESIDENCY TEST I WAS NOT PRESENT HERE A SINGLE DAY. WHY ? I WAS IN A TEMPORARY (EXEMPT) VISA FOR THE WHOLE YEAR.

THIS SUBSTENTIAL PRESENCE TEST DOES NOT KICK IN UNLESS SOMEBODY IS IN PERMANENT VISA SUCH AS H1/GREEN CARD or others)

 

- IRS Pub 519 -- Exempt individual - Do not count days for which you are an exempt individual. The term “exempt individual” does not refer to someone exempt from U.S. tax, but to anyone in the following categories.

1. An individual temporarily present in the United States as a foreign government-related individual.

2. A teacher or trainee temporarily present in the United States under a “J” or “Q” visa, who substantially 3. complies with the requirements of the visa.

4. A student temporarily present in the United States under an “F,” “J,” “M,” or “Q” visa, who substantially complies with the requirements of the visa.

A professional athlete temporarily in the United States to compete in a charitable sports event.

- IRS Pub 519 doesn’t say anything about B1/B2, so I am not sure whether she is an exempt individual or not.

- IRS Pub 519 also says -- Closer Connection to a Foreign Country - Even if you meet the substantial presence test, you can be treated as a nonresident alien if you:

1. Are present in the United States for less than 183 days during the year,

2. Maintain a tax home in a foreign country during the year, and (SHE MAINTAINS A TAX HOME IN NEPAL AS SHE IS JUST A VISITOR IN THE US. SHE DOES NOT INTEND TO WORK OR PAY TAX IN THE US, AT LEAST HER VISA STATUS SAYS.)

3. Have a closer connection during the year to one foreign country in which you have a tax home than to the United States (unless you have a closer connection to two foreign countries, discussed next).

- So the conclusion, I’m confused and looking for some expert opinions. I KNOW THE TAX CODE IS NOT FAIR. FROM A FAIRNESS POINT OF VIEW I ALSO THINK SHE SHOULD BE ABLE TO CLAIM HER AS A DEPENDENT. BUT FROM TAX CODE POINT OF VIEW, SHE CAN NOT CLAIM HER AS DEPENDENT.

LET ME SHARE MY OWN EXPERIENCE. BEING ALREADY IN THE US FOR THE LAST 3 YEARS IN 2006, I WAS NOT ABLE TO CLAIM MY WIFE AS MY DEPENDENT WHO WAS IN F2. I HAD TO PAY TAX AS A SINGLE PERSON WITHOUT ANY STANDARD DEDUCTION. WASN'T MY CASE MORE VALID THAN REKHA'S TO CLAIM MY WIFE AS MY DEPENDENT?

THE TAX CODE IS NOT FAIR ESPECIALLY FOR THE PEOPLE IN F1/J1. 

If she had a social security number, you could claim her as a dependent illegally and reduce tax liability because the chances of getting caught is very slim (less than 1%) for tax audit. However, I don't think IRS will issue an ITIN number for a person who is in B1/B2 visa. If you don't have an ITIN number or social security number, you can not claim anybody in your tax return.

Anyway, I do not intend to offense both of you Simsim and Rekha.

I am hoping you got your answers, if not I have some.

You need to have your niece ss number or ITIN number to be your dependent for 2008 tax filing. 

You did not mention about her age, because she is under 19 or under 24 and full time student, living with you 6 month and over and support over 50%.

Lack of SS number or ITIN number, she cannot be your dependent for 2008 tax filing purpose. Therefore you have to file yours as single or whatever filing status you do. Once you get your niece either ss number or the ITIN number, then you have to amend your 2008 tax filing. On this amend you claim you niece as your dependent and you will get the difference.

Again, instead of bugling mind, I would have visited nearby Tax Preparer’s office and would have got right answer for peace of mind. As I said, you do not have to pay a dime. Everyone is in March Madness, they are napping lack of customers.

 

 

 

Thanks purush, simsim, syanjali for you comments.

 

Purush, as I mentioned earlier, IRS Pub519 specifically lists person in F visa as “exempt individual”, but doesn’t mention anything specific about B1/B2, that why I was asking. Anyway, thanks for your opinion.