It’s a Dependency Exemption Question

September 29, 2015

Does an affidavit from the supposed dependent supply the IRS with enough evidence to justify a dependency exemption? It depends.

Steven Shimanek lived in the state of Hawaii during 2008. He filed his 2008 Form 1040 late. On the return, he claimed his common-law wife, Aleta Napoleone, as a dependent, which allowed him to file as head of household as well as pick up the additional dependency exemption.

He neglected to get his W-2 wages from the three employers he worked for that year. Because the IRS also receives a copy of each W-2 from the employer, the agency knew that Shimanek had wages for that year.

The IRS issued a notice of deficiency regarding the 2008 tax year and increased Shimanek’s income by the $31,200 he failed to claim from his three employers. In addition, the IRS disallowed the dependency exemption for Napoleone.

Shimanek brought up a tax protestor defense that only federal employees receive taxable wages. The position has been deemed frivolous and was rejected by the court.

Shimanek had Napoleone prepare an affidavit of dependency. The affidavit stated that during 2008 she lived in Shimanek’s home for the entire year, had gross income of less than $3,500 and received over half of her support from Shimanek. The main points of the affidavit were what were needed to claim someone as a dependent who is not a qualifying child.

However, under court rules, affidavits and declarations do not constitute evidence. Surprisingly, the IRS, in making some statements regarding the affidavit, inadvertently waived all objections to introducing the affidavit as evidence. Therefore, the affidavit was admissible evidence.

The burden of proof shifted to the IRS when the taxpayer introduced credible evidence, which the affidavit was considered to be.

The IRS was unable to produce any evidence to refute the affidavit. Therefore, the court allowed the $3,500 dependency exemption (Steven Arthur Shimanek v. Commissioner. T.C. Memo 2015-165, Aug. 19, 2015).

This court case illustrates the importance of knowing the rules for claiming someone as a dependent who is not a qualifying child. The person:

1. Cannot be a qualifying child of the taxpayer

2. Can be a relative of the taxpayer, unrelated (as in this case), or even a complete stranger

3. Has gross income for the year that does not exceed the dependency exemption amount, which in 2008 was $3,500 ($4,000 in 2015)

4. Receives over half of his or her support from the taxpayer