What CP87C means

CP87C says two things happened. You claimed someone as a dependent, and that person's reported gross income was more than the amount allowed for a dependent. Someone else also claimed the same person, using the same Social Security number, on another return.

The IRM title is We Need to Verify Someone Qualifies as Your Dependent. It belongs to the CP87 series, which the IRS calls exam soft notices. The IRS says plainly that it is not auditing you at this time.

The notice lists the last four digits of each Social Security number the IRS is concerned about.

Why you got it

The IRS matches Social Security numbers across returns and against income documents like Forms W-2 and 1099. When a person shows up as a dependent on more than one return, and the income reported for that person is over the dependent limit, CP87C is the result.

A common example is an adult child or a parent who earned more during the year than anyone realized. Another is a relative who received a Form 1099 for income the family forgot about.

The income test

A dependent is either a qualifying child or a qualifying relative under IRC 152. The gross income test applies to a qualifying relative. IRC 152(d)(1)(B) requires that person's gross income for the calendar year be less than the exemption amount defined in IRC 151(d). That amount is adjusted each year, so use Publication 501 for the year on your notice to find the right figure.

Gross income here means income that is not exempt from tax. It is not the same as take-home pay.

Good intentions do not change the income test. If the person earned too much, they are not your dependent for that year.

The disability exception

The IRS page notes an exception. You may still claim someone whose gross income exceeds the limit if that person was permanently and totally disabled at some time during the year and the income came from services performed at a sheltered workshop.

IRC 152(d)(4) sets the conditions. The availability of medical care at the workshop must be the principal reason the person is there, and the income must come solely from workshop activities incident to that care. A sheltered workshop is a school that provides special instruction or training designed to alleviate the disability and that meets the statute's other requirements.

What to do now

  1. Match the numbers. Compare the last four digits on the notice with the Social Security card for each dependent or qualifying child on your return. A typo can create a mismatch by itself.
  2. Check the person's income. Ask for their Forms W-2 and 1099, or review what they reported. Compare it with the limit for that year.
  3. Apply the rules. Decide whether the person was a qualifying child, a qualifying relative, or neither. Publication 501 and the IRS Interactive Tax Assistant topic on whom you may claim as a dependent will help.
  4. If you were entitled to claim them: the IRS says you don't need to write or send anything at this time.
  5. If they did not qualify: the IRS says you must file Form 1040-X and mail it to the service center shown in the instructions.

Who else claimed this person?

The IRS will not say. Its page explains that disclosure laws prohibit revealing who used the same Social Security number. Talk with family members. Often the other return belongs to a sibling or ex-spouse who also helped support the person.

If you did not file a return claiming the dependent at all, and someone used your name and Social Security number, the IRS says to call the number on the notice and review its identity theft resources.

What amending changes

Removing a dependent can affect more than the dependent line. It can change filing status, credits that depend on having a dependent, and your refund or balance. Work through the whole return, not just one line. If the amended return shows a balance due, pay it promptly to limit interest.

A worked way to check the income

Start with every income document issued to the person for that year: Forms W-2, 1099-NEC, 1099-INT, 1099-DIV, 1099-R, and any others. Add up the income that is taxable. Leave out income the tax law excludes. Compare the total with the figure in Publication 501 for that year. If the total is equal to or more than the limit, the person was not your qualifying relative.

If the person might be your qualifying child instead, the gross income test for a qualifying relative does not apply, but the qualifying child tests do. Check relationship, age, residency, and support under the qualifying child rules before you decide.

If the dependent is disabled

Keep records that show the disability, the workshop, the medical care provided there, and the source of the income. Those are the facts that make the sheltered workshop exception work, and they are the facts an examiner would ask about.

What not to do

Do not send records in response to CP87C unless the IRS asks. The IRS says no documents are needed at this time if you are entitled to the claim.

Do not assume support alone is enough. You can provide most of someone's support and still fail the income test.

Do not ignore the notice if the person clearly earned too much. A soft notice is the easiest point to correct the return.

See CP87A for a dependent or qualifying child claimed on more than one return, and CP87B if someone claimed you as their dependent while you claimed yourself.

The law behind CP87C

IRC 152(d)(1)(B) sets the gross income test for a qualifying relative by reference to the exemption amount in IRC 151(d). IRC 152(d)(4) excludes certain sheltered workshop income for disabled individuals. IRM 21.3.1 lists CP87C among the CP87 series exam soft notices.

If you are not sure whether someone qualified, call us at (813) 229-7100.