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George Saenz, the Bankrate.com Tax Talk columnistProof to IRS of dependent claim

Dear Tax Talk,
I have been audited by the IRS due to claiming my nephew on my taxes. I was allowed to claim him because my sister was traveling back and forth out of town, looking for a new house with her fiance. Now the problem that the IRS is having is showing direct proof that my nephew and I lived in the house together for more than six months. I don't have my own house, but I've been living with my sister for about the last two to three years for the most part. All of my mail has always gone to my parents' house, even while I was off at college. I never changed my mailing address. Therefore I don't have documents that state that I lived with my sister.

If I get a petition started from the neighbors on the street, will that be enough proof to show that I lived with my sister? I also have letters that came to my parents' house from when I had to take my nephew to the hospital when my sister was out of town. They said that I needed documents in the form of a hospital bill/doctor, or school documents to show that we lived together. I don't know what to do. One person that I dealt with at first said to get a letter from my sister stating the situation and get it notarized. The new lady that is over my file said that this is not enough proof because of our relationship. What should I do? (His teacher would call me if there was a problem at school. Should I try to get a letter from the principal or the teacher?) I took care of my nephew and was allowed to claim him on my taxes and am now being audited and may have to pay back taxes.
-- Iris

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Dear Iris,
That is a tough one, but I'm surprised that the Internal Revenue Service is only asking for proof of cohabitation and not support. Seeing that you're living in your sister's house and claiming her son as your dependent, I would think the IRS would be more apt to ask you to show that you provided more than half of the nephew's support.

I think you're on the right track in corroborating your cohabitation. A notarized affidavit from your sister and a few neighbors stating that you resided in the house during the period in question, together with a statement from the school, should be more than adequate corroboration. After all, your sister and her fiance are not claiming him as a dependent.

Although it is unlikely that you would have to go to court over the issue, it may be important to point out to them that the burden of disproving your claim lies with them. Publication 556 states: For court proceedings resulting from examinations started after July 22, 1998, the IRS generally has the burden of proof for any factual issue if you have met the requirements.

The IRS generally has the burden of proof if:

To ask a question on Tax Talk, go to the "Ask the Experts" page, and select "taxes" as the topic.

Bankrate.com's corrections policy -- Posted: Aug. 18, 2006
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