 Internal Revenue Service IRS tax news, claiming a child as a dependent when parents are divorced, separated or live apart. Okay, here's what you do. Make sure you file first, locking down the kid's social security number on your tax return, resulting in an inability for the other parent to file using the same one. It's the old adage, a critical part of a common law tradition. The early bird gets the worm and the early tax filer gets the child tax credit. It may also fall under one of the oldest, most famous and highly distinguished concepts in the grand history of our common law tradition, commonly referred to as Finder's Keepers. I discovered this child tax credit first and hereby lay claim to it as is my right under the ancient article of Finder's Keepers. Okay, that was just a joke, probably not what you want to actually do here. Now we're down to the IRS Tax Tip 2022-98, June 28, 2022. Parents who are divorced, separated, never married or live apart and who share custody of a child with an ex-spouse or ex-partner need to understand the specific rules about who may be eligible to claim the child for tax purposes. Now this can actually be quite confusing. Obviously if you're in a married type of situation and there was one child, the two people now file one return and therefore it's fairly straightforward, but if you now have two parents in some way and then the one child, then it can be kind of confusing in terms of which tax return should the child be claimed on and it could be a significant factor because of things like the child tax credit and the possibility, for example, to be changing from a single filer to say a head of household filer. So these are things that if you're in like a separation kind of situation that you would like to make as clear as possible in the agreement so that there's not any confusion on it going forward. You like to be as clear as possible on these kind of things and you have to take into consideration the tax consequences around them because they are, can be significant in terms of dollar amounts. So this can make filing taxes easier for both parents and avoid errors that may lead to processing delays or custody tax mistakes. So only one person may be eligible to claim the qualifying child as a dependent. So here's the big kind of issue or the problem. If two people file the tax return with the same social security number, most likely the second one to file if filing electronically may not even go through because the tax software is going to say, hey, we've already seen this social security number and name being claimed by someone else and therefore you're going to have an issue if two people try to claim the same child. So the IRS is saying we're not going to give two child tax credits and so on and give two filing from single to head of household benefits to two people for the same child. We've got to somehow determine who's going to get the tax benefits from the child. So only one person can claim the child benefits related to a dependent child who meets the qualifying child rules. There's a link to that here. Parents can't share or split up the tax benefits for their child on their respective tax returns. So you might say, well, look, why can't I just take the one child? We're splitting the custody straight down the middle. Everything straight down the middle. That's what the agreement has been. Why not just take the benefits down the middle? But you can't really do that necessarily because one reason is that it would just get really confusing if you did that because as income goes up, for example, there's phase outs to the child tax credit possibly. And if one parent has another child, then they may already be claiming a head of household status and so on, whereas the other parent might be single. And if they were to claim the child, they'd have a head of household status. So it's already quite complicated. And if they were to do that, it would probably increase the level of complexity. But in any case, for whatever reason, you can't generally do that. So you might want to take into consider it. You could try to, if you're still working together on this, you could try to determine what would be the best benefit possibly and then work that into the arrangement or agreement that you have. But in any case, it's important that each parent understands who will claim their child on their tax return. So again, you want to be as clear as possible on these kind of things to avoid the confusion. So if two people claim the same child on different tax return, it will slow down processing time. Well, the IRS determines which parents claim takes priority. So oftentimes it might just kick back if you try to file electronically, because again, you're trying to file with the same social security number for the dependent. But if you were actually to send in two returns, possibly sending them in with a paper return, then the IRS is going to get confused and they're probably going to send out letters and trying to determine who has the custody rights. So that's going to slow down the IRS and if you're waiting for tax refunds, that'll be a problem. Custodial parents generally claim the qualifying child as a dependent on their return. The custodial parent is the parent with whom the child lived for the greater number of nights during the year. So if you're trying to determine which parent should be the one that claims the child, typically the custodial parent, the one that the child lives with. The other parent is the non-custodial parent. In most cases, because of the residency test, the custodial parent claims the child on their tax return. If the child lived with each parent for an equal number of nights during the year, this is that split custody situation, which is a common kind of agreement oftentimes. The custodial parent is the parent with the higher adjusted gross income. And that's because they would assume that the one with the higher adjusted gross income is now splitting custody and it's probably the one then that is paying more for the child's support and so on. And so that's why it would go there. So notice that the custody situation often in traditional settings, this may be changing as time passes, but traditional settings you would think that the custodial claim would typically favor possibly the mother who might be more likely to have higher more of the time spent with the mother possibly and therefore more likely to claim. But if there's an even split, then the AGI component could lean towards the higher income individual, you know, whoever that is. So tiebreaker rules may apply if the child is a qualifying child or more than one person. So although the child may be the conditions to be a qualifying child on either parent, only one person can actually claim the child as a qualifying child provided the taxpayer is eligible. People should carefully read publication 504, divorce or separated individuals. There's a link to that here to understand who is eligible to claim a qualifying child. So again, usually this stuff is fairly straightforward. But when you have these kind of situations where possibly you're not sure if someone is divorced, for example, or there's a separation but there's joint custody to it, or you have a situation where multiple people actually qualify to be able to claim the child, then what's the tiebreaker rule? Those can get kind of confusing. So you want to dive into that if you're in that situation. So non-custodial parents may be eligible to claim a qualifying child. Special rules apply for a child to be treated as a qualifying child for a non-custodial parent. So the one where the child isn't, you know, mainly living with for the majority of the year. The custodial parent can release the dependency exemption and sign a written declaration or form 8332, release a revocation of release of claim to exemption for child by custodial parent. So in other words, the custodial parent would typically be the one that the child lives with more, would typically be the one that gets the credit. But they might for some reason say, I'd rather have the other parent take the credit, possibly because it would be more beneficial from a tax standpoint. And if you're still kind of working together, then you might say, maybe if it was more tax beneficial for the other person to claim the credit, then we could work, you know, maybe that may be for whatever reason that would be a better way to go. Again, there's a lot of factors to kind of fit, to kind of look into, to whether that would be the case or not, but in case that option might be there. So for the non-custodial parent to submit with their tax return. So this also applies to some tax benefits, including the child tax credit, additional child tax credit, and credit for other dependents. So it doesn't apply to other tax benefits such as the earned income credit, dependent care credit, or head of household status. So notice again, if you were in that kind of situation, it doesn't apply kind of to everything. So once again, this also applies to some tax benefits, including the child tax credit, which is kind of the big one, at least in the current situation, the additional child tax credit, and the credit for other dependents. It doesn't apply to other benefits such as the earned income credit, which is that other refundable credit, dependent care, or head of household filing status. So that filing status could also be a significant kind of component. So you want to make sure you understand the significance there from going from single, if you don't have any children to the head of household, possibly requiring typically a dependent child to move to that filing status, which typically has better tax rates and so on, than single, which is typically the worst filing status for tax purposes. So more information can be found below at the publication 501, dependent standard deduction, and filing information, whom may I claim as a dependent. I'll tell you whom may be claimed. And so there's links to that stuff here, and there'll be a link to this in the description.