Tax Question and Claiming In Laws

[Zero Sum 305]

A tax pro- an accountant- told me it was LEGAL (by IRS standards) to claim my in-laws as dependents if my wife and I cover at least 51% of their expenses, even though they do not live here nor have they ever visited the US. He claims I can use their passport information to claim an ITIN for each of them and use the evidence we have (money transfers, mostly) to justify the claim on our joint tax form.

I'm not asking for actual tax advice here, but more of a verbal poll about how many of you have either done this or have pondered doing so to get back tax money.

[Anh map 2,098]

Will this same tax professional defend you (at no charge) if an audit comes your way?

To answer the question: no, I have not considered this. And not sure that I would.

[Zero Sum 305]

I know, I'm certainly concerned that an audit is a possibility. I need to verify what I was told directly from the source. Hopefully I can find that information without much of a hassle. If I find out that it is, indeed, permissible (and we do have plenty of receipts duly organized in case we do this and get flagged for an audit, including the in-laws' total expenses back home), I'll try to come back with the whole story.

Thanks for your input. I cringed when my wife asked about this. But if people do it here for USC parents whom they take charge of financially, then perhaps it can also be the case for foreign in-laws as long as its not done to circumvent paying taxes.

[Anh map 2,098]

I would think that it would raise an audit flag.

[Jojo92122 1,924]

A tax pro- an accountant- told me it was LEGAL (by IRS standards) to claim my in-laws as dependents if my wife and I cover at least 51% of their expenses, even though they do not live here nor have they ever visited the US. He claims I can use their passport information to claim an ITIN for each of them and use the evidence we have (money transfers, mostly) to justify the claim on our joint tax form.

I'm not asking for actual tax advice here, but more of a verbal poll about how many of you have either done this or have pondered doing so to get back tax money.

As a tax professional, I can tell you that you cannot claim your in-laws as dependents.

A dependent must either be a US citizen, US resident alien, US national, or a resident of Canada or Mexico.

In addition, a dependent who is a qualifying relative cannot have earned more than $3,650 in 2010. It is your burden to prove that the dependent did not make more than $3,650. Unless you can prove this, you cannot claim this person as a dependent.

http://www.irs.gov/publications/p17/ch03.html#en_US_2010_publink1000170933

Read this part in particular;

"You cannot claim any dependents if you, or your spouse if filing jointly, could be claimed as a dependent by another taxpayer.

You cannot claim a married person who files a joint return as a dependent unless that joint return is only a claim for refund and there would be no tax liability for either spouse on separate returns.

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.

You cannot claim a person as a dependent unless that person is your qualifying child or qualifying relative."

Edited February 17, 2011 by Jojo92122

[Zero Sum 305]

Awesome, Jojo92122, thank you SO much for the verifiable advice! I wasn't even asking for details and you pretty much clarified things. Now I can show the wife WHY we can't claim the in-laws.

Her parents are both retired, and quite self-sufficient on the farm they have had for generations. But being Spain, retirees do quite well on their version of Social Security.

Thanks

So much for that tax professional! Guess who WON'T be doing our taxes this year?

[Zero Sum 305]

I actually read through that publication... they pass the relationship test but the flag would come up due to their being outside of the residency requirements. This sucks! Money out the window, unless I remind myself its my wife's salary that is supporting her folks, and I adore these good folks.

[Jojo92122 1,924]

Awesome, Jojo92122, thank you SO much for the verifiable advice! I wasn't even asking for details and you pretty much clarified things. Now I can show the wife WHY we can't claim the in-laws.

Her parents are both retired, and quite self-sufficient on the farm they have had for generations. But being Spain, retirees do quite well on their version of Social Security.

Thanks

So much for that tax professional! Guess who WON'T be doing our taxes this year?

Glad I could help. If you need a referral for a tax professional, let me know where you are.