Discussion:2 Head of Households - distinct economic units?

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Discussion Forum Index --> Advanced Tax Questions --> 2 Head of Households - distinct economic units?


Discussion Forum Index --> Tax Questions --> 2 Head of Households - distinct economic units?

EZTAX (talk|edits) said:

25 January 2009
Before begining this question lets review some of our previous discussions.

Discussion:Head_of_Household_2_families see especially Solomon's great link.

Discussion:HEAD_OF_HOUSEHOLD_CLAIMED_BY_TWO_UNMARRIED_PARENTS_IN_THE_SAME_HOUSE

Client lives with her two daughters and her sister. Client earns 18 k per year, sister earns 45k per year. The split all the housing bills and sister helps with other support for the kids. They do not have a joint checking account, they give seperate gifts at the holidays. Can we consider them to be two distinct economic units and split the kids and have both claim HH assuming all support tests are met? Quite the grey area. I know I can split the kids but not so sure about the filing status.

My rule of thumb in the past has been if the adults are sleeping together they cannot both be HH but that two "roomates" each with their own children can both be HH (assuming all other rules are met).

I am not so sure in this case. Thoughts?

Taxestaxes (talk|edits) said:

25 January 2009
I have had this situation many times too.....only one time was it truly the case of 2 sep. households under one roof. I think the other posts answer your question. And really, how can people say they provide same support if one makes poverty level and another over $50K?

EZTAX (talk|edits) said:

25 January 2009
They don't have to provide the same support - just over 1/2 of the costs of the housing (for HH). For dependency, under new rules, it is only that the child cannot provide over 1/2 of their own support. Also notice, in the alice in wonderland rules of the IRS that the according to the IRS the niece is can actually be considered the sisters child.

If we have a 4 room home and each person has a room, and each sister pays for 1/2 the rent and other housing expenses, we meet the HH rules.

Makes the head spin eh?

Ddoshan (talk|edits) said:

26 January 2009
In my opinion this would be impossible to sort out to the extent that you would have two distict HH situations. In one case this was allowed but the court noted that each party had distinct areas that were their living areas with very little as far as any common areas. And each paid for their particular families food, etc.

Death&Taxes (talk|edits) said:

26 January 2009
I agree with Dan, and see a possible mess on audit trying to prove what is nearly impossible.

RoyDaleOne (talk|edits) said:

26 January 2009
My son, age 22, a full time student, who, also works and earns $3,000, lives with me.

Also, a step-child of my son lives with my son.

Can I claim HOH, if I provide over 50% of my son's housing?

Can my son claim HOH, if my son pays me $3,000 for his step-child's room and board, which is over half of the support cost for the step-child?

Taxestaxes (talk|edits) said:

26 January 2009
Is this a trick question? LOL

AEM CPA (talk|edits) said:

26 January 2009
Support payments don't have to be made out of current earnings. Someone could have worked for years and stashed away thousands of dollars due to her living with her parents and never having any bills, then moved out on her own, and could live comfortably for several years eating into the nest egg.

EZTAX (talk|edits) said:

27 January 2009
I don't really think that proving the support/payments would be that great a hurdle. Remember we are talking about paying for the housing - in this case mainly rent, utilities and food eaten in the home. The rent and utilites are split 50/50 each month. The food would be more problematic.

Since they changed the requirements for qualifying child we don't have to prove that one pays over 1/2 of the total support - just that the kids don't pay over 1/2 their own support.

My main concern was the fact that the sister helps my client out. This is different than if two unrelated adults were living together as "roommates", and I worry that we are crossing the line regarding "distinct economic units".

Turns out my worry is for naught since the HH does not save my client any money so the sister can be the HH, and my client will file as single.

Ddoshan (talk|edits) said:

27 January 2009
What happens if you check it both ways. It seems that your client might save more money overall by claiming both her kids over sister claiming one in order to get the exemption and HH filing status.

Higher EIC and additional child tax credit. Might overcome benefit sister would get. Just curious.

EZTAX (talk|edits) said:

27 January 2009
Client acutally has 3 kids, I ran the numbers both ways and it optimized at client single, two kids, sister HH with one kid.

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