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Addressing Difficult Tax Preparation Questions About A Deceased Child

An unrestrained ability to politely ask many nosey tax preparation questions is a characteristic for conducting tax preparer duties. Individuals must openly reveal details about their living arrangements during the tax year. This information impacts determinations for dependent exemption claims, qualifying children for tax credits, and even filing status.

A simple method applied from registered tax return preparer training is inquiring about persons a taxpayer financially supports and persons who lived with the taxpayer during the year. Many individuals are surprised to learn that tax benefits are attached to the parent with whom a child lived for most of the year. Financial support for a child dependent is irrelevant, except that the child must not have provided more than half of his or her own support.

One of the essential details from an RTRP study course is that children not claimed as dependents still qualify a taxpayer for the Earned Income Tax Credit. The only requirement is for the child to have lived in the United States for more than half the year with the taxpayer.

Using Head of Household filing status is reserved to unmarried individuals with children. Again, the facts discussed in tax preparer continuing education convey that a child not claimed as a dependent still qualifies a taxpayer as Head of Household. The child must live for at least half the year with the taxpayer. The financial detail that tax return preparers must uncover is whether the taxpayer paid for at least half the cost of maintaining the home.

Measures to uncover critical information about living arrangements begins with the RTRP study guide definition of a child. Firstly, children born during the second half of a year can still qualify as living for half the year with a parent. For example, tax benefits accrue for children born on December 31 to the parents with whom the children lived that day. Secondly, children who die during the tax year are still eligible for parents to claim as a dependent and qualify for tax credits.

Cases of children born and dieing during the same year are also possible. The key factor for a tax return preparer to uncover is that the child was born alive. Therefore, a document must reflect this situation. In fact, a child who dies shortly after birth may not have even had a Social Security number issued. When that happens, the document substantiating the birth of the child is submitted to the IRS with the tax return on which the child is claimed. The document is usually a birth or death certificate. In the place on a tax return for the child’s Social Security number, the word “DIED” is placed.

The key ingredient for tax matters related to the birth and death of a child in the same year is that documentation must exist showing the child was born alive. Stillborn children do not qualify for any of the tax advantages available for parents.

IRS Circular 230 Disclosure

Pursuant to the requirements of the Internal Revenue Service Circular 230, we inform you that, to the extent any advice relating to a Federal tax issue is contained in this communication, including in any attachments, it was not written or intended to be used, and cannot be used, for the purpose of (a) avoiding any tax related penalties that may be imposed on you or any other person under the Internal Revenue Code, or (b) promoting, marketing or recommending to another person any transaction or matter addressed in this communication.

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