Question

Which Earned Income Tax Credit (EITC) due diligence question should be asked and have the answer documented if the taxpayer wishes to claim a dependent who is not their son or daughter?

a.	Are the dependent's parents still living?
b.	If the dependent's parents are living, why isn't the dependent living with the parents?
c.	Do you have any records to document that the child lived with you, such as school or doctor records?
d.	Why are the parents not claiming the child?

Answer 1

Solution:-

a. Are the dependent's parents still living?

Explanation:-

If a client claims a qualifying child that is not the client’s son or daughter, it is important to determine if the relationship test is met; in other words, whether is the child a stepchild or foster child, a brother or sister, or a half brother or half sister. Also, the tie-breaker rules can come into play under which the client may be ineligible to claim the credit if it is also being claimed by the child’s parents. Thus, the tax return preparer should ask –

• Where are the child’s parents?
• Does the child’s parent live in the client’s household?
• Does any other relative of the child live in the household?
• Can anyone else claim the child for purposes of the earned income credit?

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