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In a divorce where children are involved, one of the greatest sources of focus can be around where the children will live and who will support them. Unfortunately, too often, the tax issues are either left out of the divorce agreement completely or are not properly defined.
I often hear of different scenarios in which one parent may have inadvertently or deliberately taken advantage of the other parent by filing taxes early in the year and claiming one or all of the children—even in situations where he or she had no legal right to do so.
Here are some common issues that come into play when claiming a dependent on your taxes following a divorce.
Which parent has the right to claim a child when filing taxes?
The IRS has rules for children who can be claimed by more than one parent:
One of the ways to avoid potential inequities in a situation like this is by negotiating. A good way to do this is by putting things in writing using Form 8332. This form overrides all other verbal agreements. A parent may give up his or her rights to claim a child (or children) for just one year or for several years at a time.
If the non-custodial parent does not have this form, signed by the custodial parent, attached to his or her tax return, the non-custodial parent likely won’t be able to claim the child as a dependent.
What if one parent claims the child without permission?
As I mentioned, all too often someone files a tax return early and claims the child without permission. When you file your tax return with a legitimate claim, your e-filed return may be rejected. In this situation, there are a few options.
You can file choose to file your tax return on paper vs. filing online. Include an explanation about your right to claim the child. If you have a signed Form 8332 releasing your ex’s right to claim the child for the year, typically, no further action is necessary. If you don’t have the form, you’ll need to include details to explain or prove your custodianship for more than half the year.
Your refund will be held up, especially if it includes an earned income credit (EIC) and/or child tax credits. Please note that there are no guarantees, and you may find yourself responding to several IRS communications.
As for your ex, who may have fraudulently claimed those credits? He or she could be forced to pay that money back, perhaps with penalties and interest, but may also lose the right to claim an EIC for as many as 10 years.
Eva Rosenberg, EA, is the publisher of TaxMama.com®, where your tax questions are answered. She teaches tax professionals how to represent you when you have tax problems. She is the author of several books and e-books, including Small Business Taxes Made Easy. Follow her on Twitter: @TaxMama
The information contained in this blog post is designed to generally educate and inform visitors to the Equifax Finance Blog. The blog posts do not give, and should not be assumed to provide, personalized tax, investment, real estate, legal, retirement, credit, personal financial, or other professional advice. Before making any financial decision, you should always consult with the appropriate professionals who can explain your options, rights, and legal responsibilities, and advise you on any tax, legal, credit, or business implications that may result from those decisions. The views and opinions expressed by the authors of blog posts are their own views and may not be the views or opinions of Equifax, Inc. and/or its affiliates.
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