joelgilb Posted April 4, 2008 Report Share Posted April 4, 2008 I have a client whose children both go to college. Parents can't take the credit due to their income levels. Parents also lose the dependency exemption due to their income level (nice problem btw). Parents due support their kids. Can I take the credit on the kids returns and not claim the kids on parents returns? In the past I would not claim the kids (no dependency exemption for anyone) on either parent or kids and was able to efile the kids with the credit. Now ATX gives me an error message in red (blue in past year) and won't let me efile it. I thought as long as mom and dad don't claim kid the kid could take their own education credit. One more thing, kids are paying for college with a portion of their own money from investments (funded initially by mom and dad). Joel Quote Link to comment Share on other sites More sharing options...
joelgilb Posted April 4, 2008 Author Report Share Posted April 4, 2008 Found 3 sites with articles that support what I have been doing, but ATX is RED FLAGGING it. http://www.foxnews.com/story/0,2933,168067,00.html http://articles.moneycentral.msn.com/Taxes...dATaxBreak.aspx http://www.smartmoney.com/tax/tips/index.cfm?story=taxtip-3 Also the MTG (Master Tax Guide, Kleinrock Ed) Par 1303, 5th paragraph in suggests it is ok) 2 local CPA friends of mine think the kid can not do it though and agree with ATX RED FLAGS. Joel Quote Link to comment Share on other sites More sharing options...
Janitor Bob Posted April 4, 2008 Report Share Posted April 4, 2008 I have a client whose children both go to college. Parents can't take the credit due to their income levels. Parents also lose the dependency exemption due to their income level (nice problem btw). Parents due support their kids. Can I take the credit on the kids returns and not claim the kids on parents returns? In the past I would not claim the kids (no dependency exemption for anyone) on either parent or kids and was able to efile the kids with the credit. Now ATX gives me an error message in red (blue in past year) and won't let me efile it. I thought as long as mom and dad don't claim kid the kid could take their own education credit. One more thing, kids are paying for college with a portion of their own money from investments (funded initially by mom and dad). Joel From IRS Pub 970 (pages 13 and 22), it appears that Yes...If the parents do NOT claim the children (even if they are entitled), the the kids are the ONLY ones who can claim the hope or Lifetime learing credit. On the 1040, make sure the box is checked to claim their individual exemption (since not being claimed on parents)...and make sure their birth date is entered correctly. Quote Link to comment Share on other sites More sharing options...
joelgilb Posted April 4, 2008 Author Report Share Posted April 4, 2008 From IRS Pub 970 (pages 13 and 22), it appears that Yes...If the parents do NOT claim the children (even if they are entitled), the the kids are the ONLY ones who can claim the hope or Lifetime learing credit. On the 1040, make sure the box is checked to claim their individual exemption (since not being claimed on parents)...and make sure their birth date is entered correctly. JB: I thought that the kids were not allowed to take their dependency exemption if parents had the right even if the parents do not take the exemption. And since parents did not take kids, kids but they could get education credit but not exemption. This is what the MTG suggests also. Joel Quote Link to comment Share on other sites More sharing options...
Janitor Bob Posted April 4, 2008 Report Share Posted April 4, 2008 JB: I thought that the kids were not allowed to take their dependency exemption if parents had the right even if the parents do not take the exemption. And since parents did not take kids, kids but they could get education credit but not exemption. This is what the MTG suggests also. Joel This is what I thought as well...and I almost posted as such....But publication 970 seems to point clearly in the other direction! Quote Link to comment Share on other sites More sharing options...
joelgilb Posted April 4, 2008 Author Report Share Posted April 4, 2008 This is what I thought as well...and I almost posted as such....But publication 970 seems to point clearly in the other direction! Thanks for the Publication reference. The reference as I read it on page 22 does indicate that the parents can not take the exemption and then the child will get the credit. Rules for dependents would still not allow the child to claim himself as an exemption because "Someone else could have claimed him", they just CHOSE not to. So, JB, thanks for the reference, it does answer the question and ATX is not dealing with it correctly this year. As I write this I am informing tech support of the error and asking how to deal with it. Joel Quote Link to comment Share on other sites More sharing options...
joelgilb Posted April 4, 2008 Author Report Share Posted April 4, 2008 I GOT IT! Ok for anyone else that has this (rare) issue. There is a new input on the info sheet of the 1040 that needs to be checked indicating that mom and dad did not claim kid. Buried to make it easy to find it. Joel Quote Link to comment Share on other sites More sharing options...
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