Credits for claiming kids, or dependents, are worth fighting for.
Okay, maybe not literally…
That’s why the IRS established tiebreaker rules to help clear the air on who can claim each dependent.
Keep reading to see which parent has the right to claim the dependent children.
WHEN THE RULES TAKE EFFECT
The IRS tiebreaker rules only apply when the parents can’t reach an agreement on who’s claiming who.
If parents can reach an agreement, then these tiebreaker rules don’t apply.
When parents disagree, the IRS uses the tiebreaker rules to determine who has the right to claim the dependent child.
So, if you are divorced or have never married the child’s other parent then this is where it usually gets complicated. This is why the IRS implemented these rules.
DEPENDENT RULES
Now, keep in mind only one taxpayer can claim each dependent. The IRS does not allow the parents to “split” a dependent.
However, if you have multiple children, the IRS does allow you to “divide” them when it comes to tax time.
This means that one parent can claim one child and the other parent claims the other child.
Let’s move on to the tiebreaker rules…
TIEBREAKER RULES WHEN CLAIMING KIDS
CUSTODY RATIO
The parent that has custody of the child dependent for the majority of the tax year will typically get to claim the child as a dependent. Even if you have a shared custody arrangement, there is more than likely one parent that has the child for at least one more night than the other.
However, in the situation that custody is split 50/50 then the next rule is used to determine who claims who…
INCOME
A higher adjusted gross income will grant a parent the ability to claim the child as a dependent.
Usually, the custody ratio will be used to determine which parent gets to claim the child. But in rare situations where each parent actually does have the child for an exactly equal amount of time then the AGI is used to determine who gets the credits.
FIRST TO FILE ISSUES
Sometimes parents race to get their taxes filed first to claim the dependent child. If the parent who doesn’t have the right to claim does file first, you need to reach out to your tax professional to get this resolved.
The IRS will not allow two taxpayers to claim the same dependent as we already covered. So, if both parents attempt to claim the same dependent, the IRS will reject the return filed later or both returns.
If neither of the parents amends their return to correct who claims who, the IRS will audit one or both taxpayers. After the IRS investigation, the parent with rights to claim will be awarded the dependent according to the tiebreaker rules above.
WAIVE THE RIGHT
Now, parents who have the right to claim dependent children also have the ability to waive that right.
If you do wish to waive your right and allow the other parent to claim the child, then you need to complete Form 8332. This form needs to be submitted with the parent’s tax return who is claiming the dependent.
These sticky situations can cause headaches during tax time, so make sure you are well informed on your rights as a parent and as a taxpayer! Follow along this tax season for more tax tips!
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