Claiming diabled parents as dependent

My mother who lives with me began receiving social security diability payments in December of 2005. Her income from last year was $2600 in wages and $575 for SSA payment. She also received around $2500 in SSI payements. Can I claim her as my dependent and file as head of the household? Also, does she have to file an income tax return? If she has to file she will be filing as married-filing separately.

Saedar,

If your mother would file Married Filing Separately, and has income of $3,200 or more she should file a tax return.

Why would she file MFS? This is about the worst filing status for anyone.
If she and her husband would file Married Filing Jointly, the income of both is considered. See IRS Pub 17 page 4.

If your mother is claimed as a dependent on her tax return, you can not claim her on yours return.

clyde maybe u can answer this for me..we helped soldiers do their taxes in Korea and
there was a certain ethnic group who if they were married and had one child would
file as married filing separately and then both would claim the earned income credit.
I expected them to get burned but literally hundreds of them did it and had no problems. I think this is illegal, please correct me..

Barrioinga,

You are correct, only one person can claim a dependent for the Earned Income Tax Credit.

This is easy for the IRS to spot, as the dependent's SS# or TIN is needed to claim the EITC.

I have seen cases with separated spouses file at different times and do not communicate who is claiming the dependents. The first one to file completes the EITC claim, and receives the refund. When the second spouse files doing the same, the return is rejected. The fix is to drop the dependent from the second filer's return or file a form (number escapes my memory) that shows the dependent is really yours and not the other tax filer's.

Of course this takes longer to get a refund, and the original filer will have to cough-up the excess refund (EITC) they received. Sometimes this can take years to be worked out.

clyde: what is an employer supposed to do when the IRS informs him that the SSN he submitted on the 1099 is mismatched with the name..is the boss fined if it is wrong?? What if he even fails to issue a 1099 to the worker, what is the penalty???

Barrioinga,

The employer should verify the SSN with the employee.
Ask to see the SS card of the employee.
Maybe it is an honest mistake, that somewhere along the line a mistake was made in copying the SSN from one place or form to another.

I am not up to speed on 1099 penalties.