January 11, 2007

Disturbing Tax Fact of the Day

by PG

[On second thought.]

The IRS had to work out whether you could claim a kidnapped child as a dependent. Luckily for those who see paying tax as the worst thing that ever could happen to them, you can! until the kid is declared dead. The existence of the "child born alive" rule for getting an exemption is only slightly less creepy -- a woman has gone through nine months of pregnancy and delivery only to have the baby die shortly thereafter, but at least we got that exemption, honey.

Child born alive. You may be able to claim an exemption for a child who was born alive during the year, even if the child lived only for a moment. State or local law must treat the child as having been born alive. There must be proof of a live birth shown by an official document, such as a birth certificate. The child must be your qualifying child or qualifying relative, and all the other tests to claim an exemption for a dependent must be met.

Stillborn child. You cannot claim an exemption for a stillborn child.

Kidnapped child. You can treat your child as meeting the residency test even if the child has been kidnapped, but both of the following statements must be true.
1. The child is presumed by law enforcement authorities to have been kidnapped by someone who is not a member of your family or the child's family.
2. In the year the kidnapping occurred, the child lived with you for more than half of the part of the year before the date of the kidnapping.

This treatment applies for all years until the child is returned. However, the last year this treatment can apply is the earlier of:
1. The year there is a determination that the child is dead, or
2. The year the child would have reached age 18.

If my spouse asked me whether we still could claim a dead or kidnapped child for that year, he would be filing as single the next year.

January 11, 2007 02:58 PM | TrackBack
Comments

I guess I understand your reaction, but if anything, it seems to me that a rule requiring the parent to leave the child off the tax return could be attacked as denying the child. The IRS could be accused of saying, in effect, that now that he's kidnapped, he no longer counts as my son, or because she lived for only a moment, she was never really my daughter.

Of course, one is personally free to pass up any deductions any deductions one wishes. However, if one's child earned taxable income that year before being kidnapped, one would presumably be required to report the kidnapped child's income.

Posted by: Tom T. at January 11, 2007 08:35 PM

Arizona recently changed the law so stillborn babies are considred born alive.

PS I totally agree, you would have to claim your kidnapped child's income.

Posted by: Anon at January 11, 2007 10:26 PM

Anon,
Oh good, in Arizona I can be consoled for having delivered a dead body by knowing I get a tax credit for it. Actually, I assume that the federal law ignores the state determinations on such an issue if there already are federal regs that would preempt it.

Obviously if you have the income the child earned, you should report that income. What strikes me as weird is demanding the exemptions and deductions associated with a child whom one is not currently supporting. That's not denying the child's existence, just admitting the child is not present in the household. And while the IRS are supposed to be a heartless pack of bastards, I didn't think the normal reaction of a grieving parent was to insist on every dollar off tax liability for which one could be eligible.

Posted by: PG at January 11, 2007 11:37 PM

PG - IRS Pub 501 says: "State or local law must treat the child as having been born alive."

Therefore, I doubt federal law ignores the state determinations.

I guess my point was that some states, in this example Arizona, are actively conforming to the IRS rules. I was not suggesting that a tax credit is a great consolation for someone who, as you say, "delivered a dead body".

Posted by: Anon at January 12, 2007 04:06 PM

First, the bit of 501 you quote is a *necessary* but not sufficient condition for the IRS to grant the exemption; a state could say that having supported the child in one's womb, a pregnancy that results in miscarriage before viability still ought to be counted for an exemption, and the IRS can say "You crazy" and refuse the exemption.

Second, if the IRS reg says you cannot claim an exemption for a stillborn child, then to say a stillborn child actually was born alive is both bad science and bad federalism. Stillbirth is in most cases when the baby dies in utero and occasionally when it dies during delivery, i.e. before it has fully exited the mother's body. At most you could say if the baby was alive when it began to exit the mother's body, then it is considered to have been born alive even if something terrible happens during the course of the delivery. But lumping all stillbirths into the "born alive" category makes no sense at all.

Are you sure Arizona is categorizing stillborns as "born alive"? I know they grant a "Certificate of Birth Resulting in Stillbirth," but that's something very different -- it validates that a woman went through labor and delivered a stillborn baby, as opposed to the prior regime in which she just got a "Certificate of Fetal Death." Such a certificate plainly is not proving a live birth, but a stillbirth.

Posted by: PG at January 12, 2007 05:03 PM

You win. Now go have a beer.

Posted by: Anon at January 12, 2007 08:39 PM

heartless people, my child (NOT BODY THAT I DELIVERED) my child died minutes after birth.......its devestating, i acknowledge him whenever possible appropriate/ i talk about him, keep photos of him and am beginning to work through the grieving process (happened less than 2 months ago) if i claim him on my taxes, its appropriate, if i don't its also appropriate...it does nothing to help the painful situation of the loss of a desperately wanted and loved child that my family has found itself in -- it might help a financial situation (maybe even offset a tiny portion of the cost of a funeral and burial and hospital bills) but it will do nothing to ease the pain of our loss. and i guarantee if it happened to you, you would stop referring it as "BODY I DELIVERED" ugly person

Posted by: sue at January 20, 2007 09:35 PM

Sue,

I'm sorry about your loss. I don't want to argue with you about terminology, but I will point out that under the IRS definitions, you did not suffer a stillbirth. You delivered a living baby who died shortly afterwards, i.e. "child born alive." Therefore the phrase I used, "delivered a dead body," isn't actually relevant to your situation.

Posted by: PG at January 22, 2007 01:56 AM

Do you even know how much it costs to have a stillborn?

Not only do I have to pay for my medical expenses for a child that died, there are funeral arrangements such as; burial plot, funeral flowers, funeral service, $3,000 headstone, etc...

My son who was born still at 41 weeks due to hospital negligence two years ago, still carries a $200 balance on his headstone.

It would have been great help to receive some type of credit to go towards those final expenses, not to mention, the baby furniture, dresser and closet full of baby clothing, diapers, breast pump that had no baby to be used for. We also could have used a tax credit to take a much needed get away from it all vacation. Or I could have used the credit for my doctor's appointments and anti-depressant perscriptions, therapy, etc...

As you can see, when your baby is stillborn, you don't just throw it away and say, oh well, maybe next time. There was nine months of preperation, buying, expecting, hoping, wishing, praying. After your baby is stillborn, it's a lifetime of regret, guilt, lonliness, resentment, depression.

And your telling me that a stillborn tax credit is completely "disturbing."

Posted by: Jessica at January 30, 2007 05:15 PM

No, I am saying that I found the IRS regulations to be disturbing. If you think you should receive a dependent exemption or a Child Tax Credit for a stillbirth, take it up with the Service or Congress, as they make the rules (and a bill has been introduced in Congress that would give the Child Tax Credit for a year in which the child was in vitro, see Expecting Parents Relief Act of 2005). Some states do provide a tax credit for state income taxes in order to offset the cost of a stillbirth.

Posted by: PG at January 31, 2007 12:48 AM
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