EIC and Your Family Tree: What Counts as a Qualifying Child?

May 22, 2012 by Jan Roberg
Filed under: Earned Income Credit 
Babbitt Family Tree

Photo by Jeff Babbitt, 2009.

Some people honestly don’t know who does and who does not count as a qualifying child for EIC and they mess it up.  But one of the most common types of EIC fraud is someone claiming a child that does not belong on his income tax return.  If you make an honest mistake, the IRS agent is probably  going to assume you’re committing fraud anyway.  So I’m here to keep you out of trouble.

I come from one of those families where we use phrases like, “first cousin once removed.”  When I was a child I remember going to a wedding reception and playing all evening with my “cousin”, only to be told later that she wasn’t a cousin, she was my “father’s half-brother’s step daughter.”  (Yeah, do the calculation, in any normal family your uncle’s kid is a cousin, right?)

I married into a family that is “we’re all one big happy”.  We don’t have steps, or in-laws, or halfs, we’re all brother, sister, mom, cousin, etc.  I think most people are somewhere in between.  But what we’re dealing with today is the IRS version of family and the IRS version of family  goes like this:

Let’s start with you.  You are the center of the universe and all family members revolve around you.  What we’re trying to figure out here is what counts as a Qualifying Child for you—this eliminates all parents and grandparents and members of their generation.

You may count your brothers and sisters.  You must be older than your brother or sister to claim them (unless they are physically or mentally disabled.)   You can also include step brothers and
sisters, and half brothers and sisters, and adopted brothers and sisters.

A step sibling means that your parent married somebody else who had kids.  There is no blood relation, but there is a marriage license.  If your parent did not marry the other person, even though you all live together and think of yourself as one family unit, there is no IRS relationship.

A half sibling means that one of your parents had a child with someone other than your birth mother or father.  Let’s say your mom had you and then left your dad for someone else and had a child—that child is your half sibling—you two share half of a gene pool.  The counts with the IRS.

Adopted siblings are just that—they’re adopted.  There will be court records showing that they were adopted and part of your family.  Adopted children are always treated like natural born children for IRS purposes.

These people are all on your even level of the family tree.  Imagine you’re standing there with your arms straight out with your brothers and sisters side by side—this is your generation.

Down below your generation is your son, daughter, step child, foster child or a descendent of any of them, for example grandchildren or great grandchildren.  Additionally, any descendents of your  generation—those are your nieces and nephews (or great nieces and nephews.)    So let’s say your half brother adopts a child and he dies and you’re raising that child—that counts as your qualifying child for EIC purposes because he is your nephew.

A foster child is a child who has been placed by an authorized placement agency in your home or by a judgment or decree or court order.  No matter what, a foster child has some legal paperwork involved.  If your neighbor runs off and leaves her kid behind and you wind up raising her, she doesn’t count as a foster child until the courts come in and say she’s a foster child.  This is one of the most common mistakes people make—claiming children they’re taking care of as foster children without the court documents to back it up.  Without that legal piece of paper, the child is not a foster child.

Cousins are never qualifying children for EIC purposes.

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