If you're using TaxWise and attempting to file as Head of Household (HOH), you may encounter the following error:
"To qualify as head of household, a relative must live with you. (234)"
This error typically occurs when the relationship you've indicated between yourself and the qualifying dependent doesn't meet the IRS requirements for Head of Household status, specifically when "OTHER" is selected as the relationship.
Understanding the Error
To claim Head of Household filing status, you must meet specific criteria, including:
Unmarried Status: You must be unmarried or considered unmarried.
Qualifying Child or Dependent: You must have a qualifying child or qualifying dependent living with you for more than half the year.
Paying More Than Half the Household Expenses: You must have paid more than half the costs of keeping up a home for the qualifying child or dependent.
The error "234" signifies that the dependent's relationship, as entered in TaxWise, doesn't automatically qualify for HOH status. The "OTHER" relationship often triggers this error because it lacks the clear family tie the IRS requires.
Solution: Correcting the Dependent's Relationship
Here's how to resolve the error:
Review Dependent Information: Access the dependent information section within TaxWise. Locate the dependent causing the error.
Examine the Relationship Field: Check the relationship selected between the taxpayer and the dependent. If "OTHER" is selected, this is likely the cause of the error.
Determine the Correct Relationship: Identify the dependent's actual relationship to the taxpayer. Common relationships include:
Child
Stepchild
Grandchild
Brother
Sister
Parent
Etc.
Update the Relationship in TaxWise: Change the relationship in TaxWise to the correct relationship (if it qualifies). Ensure the relationship accurately reflects the dependent's connection to the taxpayer.
Verify Residency: Confirm that the qualifying person lived with the taxpayer in the home for more than half the year. Exceptions may apply for temporary absences.
Validate and Re-transmit: After correcting the relationship, run the TaxWise error check again to ensure the "234" error is resolved. Then, re-transmit the return.
Why This Works
The IRS requires a qualifying relationship between the taxpayer and the dependent for Head of Household status. Selecting an appropriate relationship will often resolve the issue, provided all other HOH requirements are met.
Important Considerations
"Qualifying Child" vs. "Qualifying Relative": Be sure to distinguish between a "qualifying child" and a "qualifying relative." Different rules apply to each.
Dependency Tests: Even if the relationship is correct, the dependent must still meet all other dependency tests (e.g., gross income test, support test) to qualify the taxpayer for Head of Household status.
Special Circumstances: There are exceptions to the residency requirement for parents. If the taxpayer is claiming Head of Household based on a dependent parent, ensure the requirements for that exception are met.
Additional Tips for Avoiding This Error
Carefully Interview Taxpayers: Thoroughly question taxpayers about their household situation and relationships to dependents to ensure accurate information is entered.
Understand Head of Household Rules: Familiarize yourself with the specific requirements for Head of Household filing status. IRS Publication 501 (Dependents, Standard Deduction, and Filing Information) is a valuable resource.
Use TaxWise Diagnostics: Utilize TaxWise's built-in diagnostic tools to identify potential issues and ensure compliance with tax laws.