Posted By Tejal Patel on Jan 27, 2011 8:30am PST
Being able to claim a dependent on a tax return is tied to a number of related tax benefits. Taxpayers who claim dependents can claim an additional personal exemption for each dependent. Also, they may be eligible to claim the child tax credit, the child and dependent care tax credit, and the earned income tax credit.
With all these tax benefits tied to claiming a dependent, it is important for divorcing couples to discuss which parent will be claiming the dependent way before taxes are filed.
Basically, you can claim a dependent under two categories
- Qualifying Children or
- Qualifying Dependent.
General Rules enabling you to claim a child as a Dependent:
To be claimed as a qualifying child, the person must meet four criteria:
Residence — for more than half the year, the person must have the same residence as you do.
Age — the person must be
Support — the person did not provide more than half of his or her own support during the year.
- under age 19 at the end of the year, or
- under age 24 and a be a full-time student for at least five months out of the year, or
- any age and totally and permanently disabled.
- Qualifying child rules always take precedence over the qualifying relative if someone can claim a dependent using the qualifying child rules, then no one else can claim the same dependent using the qualifying relative rules.
- Both set of rules are designed to aware the dependent to one taxpayer only.
- IRS will always audit tax returns where two or more taxpayers attempt to claim the same dependent. Gather all proof and documents. Divorcing couples should get a written agreement as to who can claim the child. Each taxpayer will have to show proof they are eligible to claim the dependent. It is up to IRS discretion who will get the tax benefit. The other taxpayer may lose the other tax breaks (Head of Household, child tax credit, earned income credit). They will have to pay additional taxes, plus penalties.
Generally, the parent who has physical custody of a child, pursuant to a divorce proceeding can claim the child as a dependent and receive the appropriate tax credit.
In the event a divorce agreement fails to indicate which parent has custody of the child, then the IRS special rule will determine custody.
IRS RULE REGARDING CUSTODY
IRS has a special custody rule which states that a divorced parent is considered the custodial parent, and can claim the child as his or her dependent, if they had physical custody of the child for most of the year. The custodial parent is assumed to have provided with most of the support of the child during that year, and, therefore, is entitled to the tax credit.
The other parent is considered the noncustodial parent because they did not have custody of the child for most of the year. The noncustodial parent can't claim the child as a dependent, but they can be entitled to the tax credit if one of the following conditions are met:
1. Custodial parent relinquished right to the credit for the tax year by signing an agreement executed after 1984.
2. Custodial parent relinquished right to the credit by signing an agreement executed prior to 1985, but not modified after 1984, and the noncustodial parent provided at least $600 of support to the child during the year.
3. Noncustodial parent gets a written statement from the custodial parent indicating that the custodial parent will not claim the credit. An IRS form 8332, Release of Claim to Exemption for Child of Divorced or Separated Parents MUST also be filled out.
If you have any further questions, call The Law Offices of Tejal V. Patel, LLC. and schedule a FREE Initial Consultation to create an estate plan that fits the needs of your family.
Tejal V. Patel, Esq.
The Law Offices of Tejal V. Patel, LLC.
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