Yes
DISCLAIMER: This is not a legal advice. It is some information that I gathered, analyzed and used (successfully) in my case. Whether it applies to you, depends on your specific case. I am providing the required information below which you (and others in similar situations) can use to base your own judgment:
To claim a person as a dependent that person has to pass the Dependency Test (explained in Publication 501 in the IRS web site)
Direct Link to the Publication:
http://www.irs.gov/publications/p501/
Specifically the Publication 501 states, “You are allowed one exemption for each person you can claim as a dependent”. It further goes on to define a “dependent” as either “A qualifying child”, or “A qualifying relative”
“You can claim an exemption for a qualifying child or qualifying relative only if these three tests are met.”
1. Dependent taxpayer test.
2. Joint return test.
3. Citizen or resident test.
These “tests” are self explanatory if you read them in the publication. I am assuming for those of us who have parents/in-laws visiting us, the person in question will meet “tests” 1 and 2. Please check for your individual case. I will address Test #3 (Citizen or resident test) slightly later.
Specifically for “Qualifying Relative”, there are “four tests that must be met for a person to be your qualifying relative”. The four tests are (I have used roman numerals to differentiate from the tests listed above):
i. Not a qualifying child test,
ii. Member of household or relationship test,
iii. Gross income test, and
iv. Support test.
Again, I am assuming for those of us who have parents/in-laws visiting us, the person in question will meet all four “tests”: i, ii, iii and iv. Please check for your individual case. A word of caution – test (iii) states that “a person's gross income for the year must be less than $3,300”. According to a CPA I consulted it means income from global sources. This means if your mother and/or father are working in your home country and earning the equivalent of $3,300 or more then he/she does not meet the gross income test. Income includes salary or pension, interest income (from investments), rental income etc. (in the home country and wherever else he/she may have investments). By this logic, if your mother meets the gross income test, but not your father, you can still consider taking an exemption only for your mother (provided she meets the other tests above).
Coming back to the MOST crucial question is whether the individual in question (parents/in-laws) will “pass” the 3rd test listed in the initial set of “tests” (viz., Citizen or Resident Test).
If the person is visiting you on a Visitor Visa (B2) then they will need to check if they qualify as a “resident alien”. This happens IF and WHEN the person in question has stayed in the US for a specific period of time in specific years. To explain further:
The person has to determine if he/she is a Resident Alien or a Non-Resident Alien using the chart in Publication 519 in the IRS web site:
http://www.irs.gov/publications/p519/15023t02.html
Please note that this chart is for Tax Year 2006. If you want to check for Tax Year 2007, in the chart please change the reference of year 2006 to 2007; year 2005 to 2006 and Year 2004 to 2005, to determine “your status for year 2007” (the word “you”/“your” in the chart refers to the person – father/mother/mother-in-law/father-in-law)
The most important question in the chart is “Were you physically present in the United States on at least 183 days during 2007”:
• If the answer is “Yes” then he/she is a “Resident Alien for US Tax Purposes” – meaning YOU can claim that person as a dependent and take an exemption while filing your tax returns.
This will obviously happen only if that individual has sought and received approval to extend their stay beyond 6 months – meaning that person is LEGALLY in the US for 183 days or beyond. This is because in most cases immigration officers at the airport will issue a maximum of 6 months stay on the I-94, when the person first enters. In some cases, it might be possible that it adds up to 183 days but in most other cases it might be less than 183.
• If the answer is “No” then the next question is “Can you show that for 2007 you have a tax home in a foreign country and have a closer connection to that country than to the United States”.
In MOST (almost all) cases the answer will be “Yes” and hence that person is a “Nonresident alien for US Tax purposes” – meaning YOU CANNOT claim that person as a dependent.
The question then remains is obtaining the TIN for that person. For that the person in question (parents/in-laws) will need to apply on Form W-7 with required documentation (copy of passport etc). Link for Form W-7:
http://www.irs.gov/pub/irs-pdf/fw7.pdf
Please note that IRS will not accept Form W-7 prior to filing a tax return (again check with your local IRS service center). What this means is that you have to do the following:
• Get the person to fill and sign Form W-7 while he/she is still here in the United States.
• Gather supporting documents for W-7, which in most cases will be a copy of all pages of the person’s passport. Make sure the biographical information pages and the page on which the US Visa is stamped is notarized.
• As an extra precaution, attach a copy of the I-94 (Arrival/Departure record) and the copy of the approval notice extending the stay beyond the initial period granted on arrival. Preferably get them notarized too.
• You then need to attach the W-7 and supporting documents below your Federal Income Tax Return and send the whole package (including the return) to the ITIN Operations unit of IRS, address mentioned in the Form W-7. Please note that e-file will not be possible in this case.
• The ITIN Operations unit will first process the W-7 and then assign a TIN number to the person(s) in question (father, mother, mother-in-law or father-in-law). This could take 6-8 weeks.
• After the TIN is assigned, your tax return gets forwarded to the refund processing unit within IRS and your return will be processed – this could take another 2-4 weeks.
Hope this has helped.