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Everyone loves seeing that wonderful notification from our tax prep company saying that our taxes have been accepted by the IRS.  For some, however, the notification will be of rejection.  A common problem among divorced parents is the other parent claiming the child(ren) as a dependent(s) when they haven’t been given the authority via court order.  This conflict will result in one parent’s claim being rejected via e-filing and require it to be mailed in.

In Washington state it is a Child Support Order outlining the specific terms of if and when a non-custodial parent can claim the federal tax exemption.

Who Claims a Child on Taxes With Joint Custody?

However, the Internal Revenue Service (IRS) looks at the this situation in very simple terms, the court-designated custodial parent (probably the parent who the child resided with the greater number of nights that year) is awarded the right to claim a “qualifying child” as a dependent on their taxes.  However, the noncustodial parent can claim the child if four conditions are met.

“1. The parents: 

1. are divorced or legally separated under a decree of divorce or separate maintenance,
2. are separated under a written separation agreement, or
3. lived apart at all times during the last 6 months of the year, whether or not they are or were married.
4. The child received over half of his or her support for the year from the parents.
5. The child is in the custody of one or both parents for more than half of the year.
6. The noncustodial parent attaches a Form 8332, or similar statement containing the same information required by the form, to his or her return. The form must be signed by the custodial parent. (See special rules in Publication 17 for a pre-1985 or post-1984 and pre-2009 divorce decree or separation agreement.)”

What Happens if Both Parents Claim the Same Child on Their Taxes?

If taxes are filed by both parents with both claiming the same child(ren), the IRS will default to whoever they deem to be the custodial parent.  Simply submitting a divorce decree that states one parent has the right to claim the child(ren) is not adequate material for the IRS to decide in one parent’s favor.  The situation can get particularly tricky if the parenting plan is 50/50 and it’s not clear who the child resides with.  Individuals may be required to provide information such as a certified copy of the child support order, school records, medical records, or birth certificates to verify eligibility.

The IRS usually will issue payment for the tax return and then request the information after the fact.  If someone has claimed the child on accident or is deemed ineligible to claim the qualifying child, they can file an amendment to remove the child from the claim.  This obviously can reduce the associated credits or deductions applied to the claim and the resulting adjustment (and possibly penalties) could require a payment of additional taxes the following year.

If you are not confused already, be prepared for changes made under the Tax Cuts and Jobs Act, which was signed into law in late 2017, that may lead to further confusion.  According to H&R Block’s web site:

“The TCJA eliminates the dependent exemption itself, but retains the definition of dependent to claim the new child tax credit and other child- or dependent-related tax benefits. For Child Tax Credit reform purposes, this will usually mean that the child must be related to the taxpayer in one of several ways (son, daughter, grandchild, etc.), must live in the taxpayer’s home more than half the year, and must not provide more than half of his or her own support. Special rules apply if the parents are divorced or legally separated.”

Essentially, the new law eliminates child deductions as we have known and used them in the past.  There is a shift to a ‘tax credit’ for children rather than the former ‘tax deduction.’  We will leave it to the tax specialists to address the distinct differences between the two; however, historically anyone qualified to claim the child deduction would also have qualified to claim the child credit.  But it is important to know that the child tax deduction, that may be written in to your divorce decree, currently does not exist. The tax law change has ignited an ongoing process to sort out how this change will be dealt with in legal proceedings.  Only time and IRS policy making will determine if existing agreements on deductions will be honored when claiming child credits or if existing and future decrees will need to be altered to specifically comply with the law.

If you are finalizing a new divorce, it is a good idea to make sure the language in your Child Support Order is consistent with the terms used in the new tax law, in order to minimize confusion in the future

How to Prevent the Other Parent From Claiming Your Child on Their Taxes.

If you are personally dealing with the problem of an ex who is claiming dependents inappropriately, make sure you comply with whatever requests for information the IRS may make.  Fighting with them or your ex will not solve the problem.  If it is determined that the other parent is considered the “custodial parent” in the eyes of the IRS, despite what your court order says, make sure you have a form 8332 for the following year.  Each form is only good for the year that it is sent in, so you will need to do this every year, and it requires the signature of the custodial parent.

If your co-parent is determined to claim the child in violation of the terms of your divorce, the only effective way to stop them may be to bring a legal action for Contempt (or violation) of the Child Support Order.  This kind of action is best accomplished with the help of a skilled family law attorney.  Involving an attorney obviously means doing an analysis of the cost of pursuing an action versus any benefit you will gain, if successful.  Again, an attorney should be able to help you make a decision on the right action for you to take.

If this is you, and this is the situation you are dealing with, then you can contact us for a free 30 minute consultation!

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