Tax problems: bio parents claimed foster child as dependent
2007 was my first year with a placement by the county DSS, so I am new at doing taxes with a dependent. My foster child lived with me for 8 months last year (IRS requires "more than 6 months"). When I tried to electronically file my taxes, my return was refused because my foster child had already been claimed as a dependent on another person's tax return (his parents, I presume).

So, those of you more experienced that me: Are you claiming your foster children as dependents on your taxes? Have you ever run into this issue? How was it resolved.

Thanks in advance for your advice and support.
Well, if is going to be WORTH the trouble ($$), I would file via paperwork. I had the same problem with one of my foster kids years ago. The IRS sent me a questionnaire, and is a long and extensive list of things you have to have receipts for. They also requested a letter from DCFS stating when FC was placed in my home, of course CW and supervisor didn't want to do that, because they said he was not my dependent, (I wasn't calling them for tax consultation), anyways, I ended up faxing the IRS the initial placement agreement paperwork. I did finally get my full refund, as FC qualified me as head of household.
My kids' last FP had the same problem. She had to file through the mail and later prove she had them. She, too, got her refund. The parents didn't even get in trouble.
Believe me, they got in trouble. They will either get a bill for the refund they received, with penalties or Uncle Sam will get them next year when they file again. I'm not a foster parent, but this happened between me and my ex. He claimed my son knowing full well, I was his custodial parent and provided all financial support. I had to write a letter to the IRS proving that my son was in my physical care for at least 6 months and I received my full refund. It took about 8 weeks to get it all clear.
Ditto to everything above. I use a tax preparer so when the electronic filing bounced back, he asked me to get something to show when the girls arrived at my home. I asked the school where they enrolled to print out school records that showed date of enrollment. I also sent copies of the workers' reports that indicated date of placement. He then filed my return by mail. Interestingly, the state return went through electronically. It was the federal one that bounced back.

I got the refund, then a really puzzling mailing from the IRS in October. Basically it said that I could have filed inappropriately (ie. claiming the girls), and if I did, here was my opportunity to fix things. When I called the info number they said I could basically ignore it.

Good lucK!
I called my SW's supervisor today and she faxed me a letter stating the date the child was taken into DSS custody and the date he was placed in my custody. So, I had no problem at all documenting that.

Now, I don't have a "long and extensive" lists of receipts......that One Happy Mama mentioned above. I thought the dependent test for 2007 was cut and dry: Is the person in question under age 17, is this your birth child or approved foster chilld; and did this child live with you for at least 6 months and 1 day in 2007? Also the person has to be a US citizen and cannot have earned more than half of his own support (otherwise he could do his own taxes, I suppose).

I believe the tax law changed just a year or two ago to make it much easier for a foster parent to claim a foster child as a dependent. So maybe the person upthread who had to supply all the receipts was in an earlier tax year.

So, are most of you claiming foster children as dependents (if you had them at least 6 months in 2007)? I want to be sure this is the normal way to do things...As I said, I am new at this.
KT08 said...

I believe the tax law changed just a year or two ago to make it much easier for a foster parent to claim a foster child as a dependent. So maybe the person upthread who had to supply all the receipts was in an earlier tax year.

Yeah, this was a 3-4 years back!
this just happened to me - i simply sent in my return hardcopy with a copy of my reimbursements for the months I had my money in 30 days! no receipts sent.
This just happened to me - I simply sent in my return hardcopy with a copy of the stipend checks for the months I ahd my money 30 days later!
I'm a little envious! In Canada we CAN'T claim them. They are considered the dependants of the state -and the way it was explained to me was "we are already paying you for their care; for you to claim them would be "double dipping". Nice theory ...except of course, we all KNOW that we spend money out of our own pockets for these kids, and the stipend we get from the department does NOT fully support them!
Ya know....I was not sure how all that worked anyhow. I was under the assumption we could not claim them...Hmmmm....We do not have any placements yet, but will remember for further referance......Thanks...
I so appreciate everyone's replies. I talked to a CPA today and he said I had the right to claim the foster child as my dependent and that the birth parents had no right to do so since they could not meet the qualifying child "residency test" (child must live with you for at least 6 months of tax year 2007).

He told me to send in a paper return by mail with supporting documentation (ie letter from county DSS) and to put an asterick by the dependent's name on the paper return. Next to the asterick, I should write: please see supporting documentation attached to this return.

He said the IRS will process my return and refund, in the next 30-60 days, then will launch an investigation into why two taxpayers claim the same child. He said I may be asked again to supply documentation and that the birth parents will too. He said the birth parents will then have to amend their return, pay back the extra $$ they got for claiming the child, and pay penalities.

Apparently the tax laws changed in 2005 about claiming a dependent. Before tax year 2005, a dependent foster child had to live with you for ALL of the tax year to qualify as a dependent.

So, if any of you did not claim dependent foster child in tax years 2005, 2006 or 2007, you can go back and amend your returns and get extra $$.
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