Disabled Child - Can she be a dependent?

[tilt]

Client (single mom) has a 21 year old daughter and a doctor's letter stating that she is permanently and totally disabled. Daughter worked for part of the year and earned about $5000. Please correct me if I'm wrong.

From what I'm reading in the general instructions and Pub. 501 - unless the daughter worked at a "sheltered workshop" (which she didn't) the mom cannot claim her as a dependent (because of income), but she still qualifies the mom for HOH.

Is this correct? Thank you.

[JerryH]

The disablilty qualifies the child (any age) as a qualifing child. The income limitation doesn't apply to a qwalifing child.

[tilt]

The disablilty qualifies the child (any age) as a qualifing child. The income limitation doesn't apply to a qwalifing child.

Thank you, Jerry. But Pub 501 says, "For purposes of this test (the gross income test), the gross income of an individual who is permanently and totally disabled at any time during the year does not include income for services the individual performs at a sheltered workshop. The availability of medical care must be the main reason for the individual's presence there."

She did not work at a sheltered workshop. Would that change your answer?

[JerryH]

No, If their was substantial gainful activity the disability would be in question. If it were passive income no problem. It still has to do with definition of "qualifing Child" which doesn't have the income limitation.

[tilt]

Got it. I got hung up on "sheltered workshop." Thank you.

[jainen]

>>If their was substantial gainful activity the disability would be in question<<

I wouldn't accept "a doctor's letter stating that she is permanently and totally disabled," especially since she is pulling in several hundred a month at a part time job. She's showing that letter because the one she got from Social Security said she was NOT permanently and totally disabled. She's too old to be a qualifying child and too rich to be a qualifying relative. She is not a dependent for tax purposes, and therefore she can not qualify the mother for Head of Household.

[Alpha]

I agree with Jainen, to be classified as disabled they would be collecting SSI and it can take several years to get that classification. A doctors note is not enough

[tilt]

Thank you jainen and Alpha. I guess the mom has to apply for SSI. So if I'm understanding you correctly, until that time, the daughter is neither a dependent nor qualifies mom for HOH.

Gotta love this board.

[mgmea]

Where's Bob Kamman when you need him........lol

The gross income test is not applicable to a qualifying child who is permanently and totally disabled at any time during the year.

Per IRC 152©(3)( Special rule for disabled.--In the case of an

individual who is permanently and totally disabled (as

defined in section 22(e)(3)) at any time during such

calendar year, the requirements of subparagraph (A)

shall be treated as met with respect to such individual.

Heres IRC 22(e)(3):

Permanent and total disability defined

An individual is permanently and totally disabled if he is

unable to engage in any substantial gainful activity by reason of

any medically determinable physical or mental impairment which

can be expected to result in death or which has lasted or can be

expected to last for a continuous period of not less than 12

months. An individual shall not be considered to be permanently

and totally disabled unless he furnishes proof of the existence

thereof in such form and manner, and at such times, as the

Secretary may require.

So far no mention of any requirement that the child must be receiving SSI to qualify.

IRS Publication 524 appears to be the only easily available guide as to what the Secretary requires for proof of permanent and total disability.

If this were my client I would study Publication 524 for the definition of permanently and totally disabled and the examples given therein for what contitutes substantial gainful activity. I'd also ask the client if any of the child's income was earned before the child became disabled, how long has the child been disabled, has the child ever applied for SSI or SS disabilty and been turned down before. I feel there are too many unasked questions in the OP's post to to state categorically that the child is not permanently and totally disabled.

[jainen]

>>no mention of any requirement that the child must be receiving SSI<<

SSI is not required; it's just very good evidence. You would expect a disabled person to apply for potential benefits and should document the result. A denial could be based on income or resources rather than medical reasons.

You've quoted the basic definition at 22(e)(3). Substantial gainful employment by itself is not the last word, but it certainly calls for more investigation into how much you can rely on the doctor's "letter."

[tilt]

But Pub 524 address the issue of the "mom" being able to take a credit. That's not the question, the daughter is. So I still go back to the original question.

For qualifying child, she meets all the rules. Rule 2 states, "The child must be (a) under age 19 at the end of the year, ( under age 24 at the end of the year and a full-time student, or © any age if permanently and totally disabled." © would indicate that to be the case based on the doctor's letter.

Even though she made $5000 that still only works out to 13 hours a week - certainly not enough to provide her own support. I don't see anything that says that she must have a letter from Social Security. I agree that the mom should look into SSI, however.

[BulldogTom]

I would fall on the side of the letter from the doctor. I would take the position that the IRS is not a medical expert and make them prove that the doctor is falsifying documents to help a mother get a small benefit from dependency and HOH.

Of course, the phrasing of the requirement that the proof be in "such form and manner" suitable to the Secretary is not to be taken lightly. But a medical professional is pretty good evidence to take with you to tax court (assuming the letter passes the "smell" test).

If it is my client, the daughter is at home and will be for the forseeable future because of the disability, I take the exemption and HOH.

Tom

Lodi, CA

[mgmea]

If the child is permanently and totally disabled, the child could be any age and have unlimited income and still be a qualifying child and a dependent, as long as the child didn't provide over half of their own support.

The definition of "permanently and totally disabled" for dependent purposes is the same definition used for purposes of the disability credit on Schedule R, per IRC Sec 22(e)(3).

"Unable to engage in any substantial gainful activity" is not a basic definition by any means, it is the only definition available in the code and regs. If you are "unable to engage in any substantial gainful activity" and meet the other requirements of 22(e)(3), you are permanently and totally disabled for purposes of Sec 152©(3)(. It appears that the Secretary is only requiring completion of the disabilty statement from the doctor found in the instructions to Schedule R to meet the requirement of 22(e)(3)?

Now the problem comes up when a doctor certifies that a person is "Unable to engage in any substantial gainful activity" and meets the other requirements of Sec 22(e)(3), and then the person goes out and works. Then it becomes a facts and circumstances test of whether the person is engaging in a "substantial gainful activity". If this were my client I'd have to dig up some court cases to determine what the courts think "substantial gainful activity" is. Good summer reading.

[jainen]

>>the person goes out and works<<

A disabled person is allowed to try to work. For Social Security Disability, the try can be up to nine months.

[mgmea]

>>the person goes out and works<<

A disabled person is allowed to try to work. For Social Security Disability, the try can be up to nine months.

True, but isn't that because the tax code and Social Security have different definitions and requirements for "permanent and total disability"?

If a "disabled" person worked full time for 9 months at a meaningful job, while on Social Security disability, I think the IRS would not consider them "permanently and totally disabled" for purposes of 152©(3)( and 22(e)(3)?

This still leaves the OP to determine whether the doctor's disabilty statement meets the requirements of 22(e)(3) and whether working 13 hours a week constitutes "engaging in any substantial gainful activity". The former is relatively simple, the latter is why we get the big bucks.

PS: For some reason I'm getting a smiley face in my post where it should be a B

[Julie]

A B followed by a ) =

PS: For some reason I'm getting a smiley face in my post where it should be a B