If you are a small business owner or an entrepreneur, you may have heard of the term “Multiple Support Agreement (MSA)” in relation to taxes. An MSA is an agreement between two or more parties to provide support for a single individual. The Internal Revenue Service (IRS) allows taxpayers to claim a dependent as long as they provide more than half of the individual`s support.
However, in certain situations, one person may not be able to provide more than half of the support for a dependent. This is when an MSA can come into play. Under an MSA, two or more people can collectively provide more than half of the support for a dependent, allowing all parties involved to claim the dependent on their tax returns.
MSAs are most commonly used by divorced parents who share custody of a child. If both parents provide support for the child, they can enter into an MSA to determine which parent gets to claim the child as a dependent on their tax return. This can also apply to other situations where multiple parties are providing support for a dependent, such as elderly care or supporting a relative with disabilities.
To be eligible for an MSA, the parties involved must agree in writing to allocate the tax benefits of the dependent among themselves. The agreement must also include the following information:
– Each person`s name, address, and Social Security number.
– The name and Social Security number of the dependent.
– The amount of support provided by each person and the total amount of support provided.
– The tax year for which the agreement applies.
– A statement that all parties agree to the terms of the agreement.
It`s important to note that an MSA can only be used for tax purposes and does not affect any legal obligations or responsibilities for providing support to the dependent.
In conclusion, a Multiple Support Agreement (MSA) is an agreement between two or more parties to provide support for a single individual. It allows multiple parties to collectively provide more than half of the support for a dependent, enabling all parties involved to claim the dependent on their tax returns. If you are considering an MSA, it`s best to consult a tax professional to ensure that the agreement is valid and meets all IRS requirements.