Claiming a deduction for a dependant who has died

Question

I have a situation that thankfully is unusual, but I think pretty clear-cut with respect to the spirit of the law. I am having problems getting the situation resolved.

Some background. I am a natural-born U.S. citizen who emigrated to another country in 2003, established residency there, and filed taxes there. I have not been resident in the U.S. since I emigrated. I did not file a U.S. tax return for several years (I know, I should have, FATCA etc), and am now trying to get back into compliance by filing overdue returns for 2012-present. I fully expect to pay penalties.

While living overseas, I married and had two children. My daughter was born in 2005; my son was born in 2008.

My daughter died suddenly in 2015, age nine. I had not gotten around to getting her birth overseas recognized, and she therefore did not have U.S. citizenship or a Social Security Number. Shame on me, I know. I meant to do it, but just never got around to it.

So, in filing U.S. tax returns for 2012-2015 (all at once, to catch up), I claimed both her and her brother (the brother has an SSN) as dependents. I believe this is a valid thing to do, as she was my daughter and was in my care. They disallowed her as a dependent because of the lack of SSN.

I spoke to the U.S. consulate in my country of residency, which has said it will give me a posthumous Consular Recognition of Birth Abroad document, as well as a Consular Recognition of Death Abroad document. These will establish that she was the daughter of me (a U.S. citizen) and will effectively grant her U.S. citizenship posthumously. The Consular Recognition of Birth Abroad document was all her brother needed to apply for a SSN and U.S. passport.

I have tried mightily to get straight information from the Social Security Administration and IRS. One person at SSA said to talk to the consulate. Another person at SSA said that there is absolutely no way to get an SSN posthumously. The IRS people on the 1-800 number, including the tax law specialists, have been generally unhelpful, sometimes rude. The only vaguely relevant IRS document I have found is this, but it's not really helpful.

The tax return I have to file asks for the SSNs of my dependents. If it is true that I can't get an SSN for her (and I understand about fraud, of course), can I get her an ITIN or another identifying number? How? Will that, and/or the consular documents, be satisfactory in proving that she existed?

I am not a lawyer, but it would seem to me that the consular documents are legal U.S. proof that she was born, lived for a time, and was my daughter. SSN or not, I think I am within the spirit of the law by claiming her as a dependent.

The amount of money at stake here is significant but not huge. It's about a week's after-tax pay for me. Therefore, I'm willing to put some effort into getting her counted as a dependent, but I can't afford a legal fight. On principle, I don't think I should have to do that.

Obviously, this whole situation is painful beyond my ability to express.

Can anyone advise me as to how I can resolve this problem?

Answer 1

ITIN's can be granted for deceased minors via Form W-7:

Choose "Dependent of U.S. citizen/resident alien" as the reason for applying. You are required to write "DECEASED" across the top of the form, and you will have to provide a birth certificate and potentially other supporting documentation.

The directions are not super clear for this use-case, but I've found that IRS support for ITIN is pretty easy to work with. The directions also have offices/numbers for overseas help, which I'd wager will be better able to assist with your scenario.

Edit: I made a poor assumption on answering that the original returns filed were rejected but had been filled out properly, when filing with a deceased dependent without an SSN you typically write 'DIED' in the spot for the dependent's SSN. If the original returns were not filed this way, and accompanied by supporting documentation (record of live birth and record of death), then it may be best to start there, but it sounds like you already got bounced around and had it suggested that the lack of a number was an issue.

Answer 2

For the record, I am the original question-asker and I'm reporting back to say that the approach described in the accepted answer did not work. I am adding a new answer, rather than commenting on the accepted answer, because of the length of explanation required.

I applied for an ITIN by filing a W-7 with all appropriate documentation, including a birth certificate, death certificate, and consular recognition of birth abroad (i.e., proof of U.S. citizenship). The IRS rejected the application, saying that people who are eligible for SSNs can't have ITINs. That placed me in an untenable situation, because even though the IRS said she was eligible for an SSN, the Social Security Administration said they never issue SSNs to dead people as a matter of policy.

So: Insult was added to injury. It is true that I should have applied for an SSN while she was alive, in which case it would have been a simple matter. I just paid the extra tax that was due because of her not counting as a dependent during the years for which I was filing. The amount was not worth fighting over further, or renouncing my U.S. citizenship.

Moral of story: Live, in all ways, as if there is no guarantee your children will be alive tomorrow. Because there is no such guarantee.