Forget the Deductions, Take the Kids

The government launched a massive effort to crack down on bogus dependent deductions in the last several years and now requires Social Security numbers for every dependent listed on a tax return. (The only exception this year is for a child born in December 1996 for whom you haven’t yet received a Social Security card.)

This effort has seen more than its share of snafus.

Thousands of taxpayers complained last year about the Internal Revenue Service denying deductions for valid dependents, either because the parent used the child’s nickname on the tax return or because either the parent--or the IRS--transposed a number.

What do you do if it happens to you? Challenge it, says Kathy Burlison of H&R; Block in Kansas City, Mo.

If the IRS denies a dependent this year, it will automatically adjust your return to wipe out any deductions you may have claimed for the child. Then it will either reduce your refund or bill you for additional tax.

To get a dependent reinstated--and your return adjusted--you’ll need to object in writing. You may even need to provide proof--such as a copy of your child’s Social Security card or school records.

Or you could use Bob Mullen’s approach. The Northern California father of three found that two of the three personal exemption credits he took for his children were denied one year. Instead of objecting, Mullen offered to send in the children that the IRS, in its great wisdom, rejected as deductions.

He wryly concedes that he never sent the children. The IRS chose to reinstate the deductions, he says.

The abbreviated text of his letter to the IRS is shown at left.

(BEGIN TEXT OF INFOBOX / INFOGRAPHIC)

Dear IRS

Here is the gist of a letter submitted to the Internal Revenue Service in 1996:

Dear Sirs:

I am responding to your letter denying the deduction for two of the three dependents listed on my 1994 federal tax return. Thank you.

I have questioned whether these are really my children for years. They are evil and expensive. It’s only fair that since they are minors, and not my responsibility, that the government know something about them and what to expect over the next year. You may apply next year to reassign them to me and reinstate the deduction. This year they are yours!

The oldest, Kristen, is now 17. She is brilliant. Ask her. I suggest you put her to work in your office where she can answer tax questions. While she has no formal training, that has not seemed to hamper her with any other subject. Taxes should be a breeze.

Next year, she is going to college. I think it’s wonderful that you will now be responsible for that little expense. While you mull that over, keep in mind that she has a truck. It doesn’t run at the moment, so you will have the immediate decision of appropriating some Department of Defense funds to fix the vehicle or getting up early to drive her to school.

Patrick is 14. I’ve had my suspicions about this one. His eyes are a little close together for normal people. He may be a tax examiner himself one day, if you do not incarcerate him first.

In February, I was awakened at 3 in the morning by a police officer who was bringing Pat home. He and his friends were TP’ing houses. Would you like him delivered to the local IRS office or to Ogden, Utah?

Kids at 14 will do almost anything on a dare. His hair is purple. Permanent dye, temporary dye, what’s the big deal? Learn to deal with it. You’ll have plenty of time as he is sitting out a few days of school after instigating a food fight. I’ll take care of filing your phone number with the vice principal.

Heather is an alien. She slid through a time warp and appeared quite by magic one year. I’m sure this one is yours. She is 10 going on 21. She came from a bad trip from the 60s. She wears tie-dyed clothes, beads, sandals, and hair that looks like Tiny Tim’s. It’s quite obvious that we were terrible parents--ask the other two--so they have helped raise this one to a new level of terror.

She cannot speak English. Most people under 20 understand the curious patois she fashioned out of valley girls/boys-in-the-hood/reggae/yuppie/political doublespeak. I don’t. She wears hats backward, pants baggy and wants one of her ears pierced four more times. There is a fascination with tattoos that worries me, but I am sure that you can handle it.

You denied only two of the three exemptions, so it is only fair that you get to pick which two you will take. Please let me know of your decision as soon as possible as I have already increased the withholding on my W-4 to cover the $395 in additional tax and to make a down payment on an airplane.

Yours truly,

Robert Mullen

Editor’s note: Mullen later notified us: “Rats, they allowed the deductions instead of taking the kids.”