Dependents on 433-F for CNC


#1

This is my first CNC. Client has an estranged wife and 3 kids he supports. They file MFS and the kids are claimed on his wife’s return even though he financially supports them. In Canopy I included the kids and wife in the interview but marked that the kids are not claimed on his return. The 433-F that is generated includes the kids for the living expenses calculations. Is this correct that he can include them in the 433-F even if he does not claim them on his return?


#2

Hey Dustin,
That is a great question. I would argue that you should attempt to claim that expense, as the TP is providing support for the estranged spouse and children (others may disagree). I would refer to IRM 5.15.1.8.1:

" Allowable expenses include those expenses that meet the necessary expense test. The necessary expense test is defined as expenses that are necessary to provide for a taxpayer’s and his or her family’s health and welfare and/or production of income ."

Followed by IRM 5.15.1.8.7:

“Generally, the total number of persons allowed for national standard expenses should be the same as those allowed as exemptions on the taxpayer’s current year income tax return. Verify that exemptions claimed on the taxpayer’s income tax return meet the dependency requirements of the IRC. There may be reasonable exceptions. Fully document the reasons for any exceptions. For example, foster children or children for whom adoption is pending.”

Obviously, I would provide proof that payments are being made. As a reminder, you want to maximize the allowable expenses in relation to his income.

Again, others may disagree with my interpretation (that’s the beauty of the community concept), but I would consider all arguments for and against.

Hope this helps,
Jeff


#3

This is excellent information. Thank you!


#4

I agree 100% Jeff but would like to add that I would provide clear and convincing documentation with my submission of the OIC supporting the assertion that he is providing for whoever he is including on 433 even though he is not claiming as dependents.

I would not wait for the IRS to ask for it!!


#5

Good thought. What type of information would you suggest?


#6

Hey Dustin…

I apologize for not getting back with you earlier!

It has been a little hectic to say the least.

I am one who looks to the IRM for guidance on how to process when in doubt.

Each case is truly unique. I found the following information and would start by looking at this https://apps.irs.gov/app/vita/content/globalmedia/teacher/worksheet_for_determining_support_4012.pdf

I will follow up with more information when I can!

Thanks!

Keith


#7

This is excellent! Thanks so much!