Who gets to claim the kids on their taxes? The IRS rules may surprise you!

The end of the year is here and that means that tax time is coming up. I always write several articles and I blog about tax implications of child support for those parents in the midst of divorce negotiations and for those in the throes of tax preparation because it’s always nice to discover that you may have been had – especially if it occurs during tax time. Usually it’s not nice when you find that you’ve been hoodwinked but when you can turn the situation around and end up with more money in your pocket thanks to Uncle Sam, then it’s not so bad after all. Here’s the basic skinny on how you may be affected:

Receiving child support will not affect your taxes at all. The parent receiving the payments does not have to claim it as income. Child support is not taxable and is not considered income. What will affect your taxes is whether you or your soon-to-be-ex spouse will declare the children as dependents. This is a rather hot debate. It used to be that the custodial parents were always permitted to declare the kids and then therefore receive a larger refund. With more non-custodial parents seeking the same benefit (irrespective of parenting time) and more parents looking to balance parenting time between both parties, the issue of dependency has tended to crop up more and more with parents who are not parenting on the front line but still getting the benefit of the tax breaks. I am in favor of shared parenting when it makes sense and when the children benefit and since shared parenting means shared dependency, then that would mean that I am in favor of that.

The best way to handle this sharing is to alternate years and with two or more dependent children it can be easier to divide them between parents so that the tax consequence and benefit remains equal. It is important to note that in order to claim someone as an exemption the IRS says that you must provide MORE THAN HALF of that persons support within a calendar year. This special rule was created to resolve the questions of dependency, who gets the exemption and most importantly who is qualified to get the exemption.

Additionally, the rule states that the parent who has custody for the GREATER PART OF THE YEAR is considered to be the custodial parent as far as tax implications are concerned – having nothing to do with legal custody agreements because it is assumed that that parent has provided more than half of the child’s support. If your ex spouse has paid more towards your child’s expenses (say because of child support and his/her income being greater) than you do but you spend more time with your child and are responsible for the majority of child care, you still get the child dependency exemption. The parent that spends the most time with the child can claim the child as a dependent. These are the IRS rules.

There are always exceptions to rules and parents sometimes willingly give up their power even when they feel that they shouldn’t because they feel pressured or because they don’[t know their rights and they don’t know the rules. When you choose to break the IRS child dependency rules or if you are wondering if you consented to rules which were incorrectly administered in your case, note that the following criteria must be met for a non-custodial parent to claim the exemption:

• A written agreement must be signed by the custodial parent stating that he/she will not claim the child as a dependent and the non-custodial parent attaches the appropriate documentation to his/her tax return.

• If divorced, the divorce decree must state that the custodial parent will not claim the exemption for the tax year or the following tax years and the years must be listed. The non-custodial parent must attach the appropriate documentation to his/her tax return.

• A statement or divorce decree must be attached which states that at least $600 was in fact given to the custodial parent for support of the child.

• The non-custodial parent must complete form 8332 from the IRS. The custodial parent and the non-custodial parent must both sign the form and then it must be attached to the non-custodial parent’s tax return.

The exemption cannot be split between the parents so it is important to negotiate an arrangement which will work on a clearly defined yearly or long term basis. Your final arrangement whether it is a decree of divorce or child support award should require both parties to complete all necessary forms needed by the IRS and the final wording should be literal, exact and cover any and all issues which might arise after the ink has dried.

If you’ve been bamboozled into inadvertently violating the IRS rules for tax dependency, well then now would be a good time to become compliant, don’t you think?

Good Luck!

Simone Spence owns Child Support Solutions, LLC, an organization that teaches parents to collect child support arrears without an attorney.  The author of “1-800-Deadbeat” and “Deadbeats, What Responsible Parents Need to know about Collecting Child Support”. Simone can be reached at 888-390-1950 or simone@DontGetMadGetPaid.com  Connect:  Facebook or Twitter.

2 comments

  1. Well written so far I have not have any problems with my taxes I go to HR Block I pay. But I feel confident when u leave the office.

  2. Ed says:

    What happens if the non-custodial parent who does NOT pay any child support claims the child without consent of the custodial parent by submitting their taxes first?

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