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Dear Tax Talk,
My brother moved in with me when he lost his job two years ago. His unemployment has run out, and in 2012, I have provided all his living expenses. I would claim him as a dependent relative, but I want to make sure that doing so will not obligate me to pay his outstanding bills — including a very steep tax bill that he currently cannot pay. If I claim a dependent tax exemption on my taxes, am I signing on to pay his outstanding tax bills?
While you may be obligated to house your brother, you’re not obligated for his tax debts. An individual who claims someone as his exemption does not become obligated for that person’s debts, tax-wise or not.
There are various ways you can become responsible for someone else’s tax debts. For example:
- A parent of a minor child for taxes on unearned and earned income of the child.
- A spouse filing a joint return can be held responsible for the taxes owed on either spouse’s income.
- Unpaid payroll taxes withheld from employees for a company under your control.
- Unpaid estate taxes.
- Transferee liability from a corporation’s unpaid taxes.
In the previous situations, the person being held responsible may have benefited economically in a nontax way from the relationship. This is not the case with claiming a dependent tax exemption. The exemption only entitles you to a tax break, but not an extra economic benefit as in the previous examples.
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To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. federal tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein. Taxpayers should seek professional advice based on their particular circumstances.