Tax season can cause stress for many of us, but for people going through a divorce or separation there is an added layer of complexity in determining which parent will claim their child as their dependent. If you and your ex are amicable to each other, I encourage clients to discuss who will claim the child and often times an agreement can be reach to alternate the years for claiming that exemption.
For example, in all even numbered years (2016, 2018, 2020), mom can claim the child, in all odd numbered years (2017, 2019, 2021) dad gets to claim the child. If there is more than one child, then maybe the two of you can agree that each of you claims one child until there is only one underage and then you alternate the exemption. The point is that there are possibilities so that each parent can benefit from claiming their child(ren).
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The IRS and the Custodial Parent
No matter whom claims the child(ren) you must remember that the Internal Revenue Service (IRS) doesn’t care if there is an agreement between you and your ex, the IRS focuses on which parent can be deemed the custodial parent. Before a parent can claim a child as a tax dependent, the IRS requires you to determine which parent is the custodial parent. According to the IRS, the custodial parent is the parent who the child spent the most number of nights with over the past tax year. Only the custodial parent may then claim the child as a tax dependent and file as head of household status. If you and your ex equally share custody in a 50/50 split, then the IRS will deem the custodial parent as the parent who has the higher adjusted gross income. Only that parent may file with head of household status.
You might decide that the parent who gets the biggest tax benefit (the one in the higher tax bracket) should claim the exemption. If you can’t agree, however, the exemption goes to the spouse with whom the child lived with more because they are deemed the custodial parent.
However, this doesn’t mean that a parent is always excluded from claiming their child. It is permissible for a non-custodial parent to claim the child on their taxes, but the custodial parent, as defined by the IRS, must complete form 8332 and it must be filed with your taxes. IRS Form 8332 is a release by the custodial parent as defined by the IRS allowing the other parent to claim the child. Therefore, if you and your ex have come to an agreement on when you each can claim your child on your taxes, make sure that you correctly complete and sign IRS Form 8332 so that you don’t trigger an audit.
Click here to learn about tax rules for claiming depenents when you are separated, divorced, or unmarried in Maryland.
What Happens When Both Parents Claim the Child
If you and your ex are not in agreement about whom gets to file the exemption, and both of you claim the child, many people think that the IRS will let the parent who filed their taxes first keep the exemption. This is not true. If both parents claim the child, then it is very likely that both parents will be audited and if a signed agreement is not in place, then typically the IRS looks to see who was the custodial parent and that parent will be allowed to claim the child.
Before triggering an audit, I recommend you seek the assistance of an attorney to help you reach an agreement and discuss other options available to you such as filing for an extension with the IRS, until an agreement can be reached.
If you are going through a divorce or separation, you should check out these helpful tips when filing your taxes.
For Legal Assistance with Custody Agreements in Maryland, Contact Andalman & Flynn
It is a good idea to state within your custody agreement which parent can claim a child tax credit and which parent may file as head of household. These clearly defined arrangements can give a parent with a lesser income the right to claim the child tax credit. Provided the parties abide by the custody agreement, it will also prevent future headaches by assisting both parents in ensuring compliance with Maryland and federal laws. So, be careful parents if you split visitation and custody time equally, 50/50. Make sure you are correct in filing as head of household status, because if not, you can assure an audit is not too far away.
If you have any questions on how to properly navigate custody issues or separation agreements in Maryland, contact Andalman & Flynn, P.C. We are located in the Montgomery County area and can provide consultations by phone for your convenience.