Imagine this: Your ex-spouse insists on claiming your child as a dependent without your consent. What do you do? A Princeville, Illinois, mom responded to this tax “emergency” by calling the police.
According to the Journal Star, on February 6, the woman called the Peoria County Sheriff’s Office to report “possible tax fraud.” The woman claimed that she had the right to claim her teenaged son who lives with her as a dependent on her federal income tax return. However, when her return was bounced by the Internal Revenue Service (IRS) because the son had been claimed on another tax return, she assumed that her ex-husband must have claimed her son on his return. The ex-husband “had no right” to claim the child, she told the police.
The deputy tried to reach the woman’s ex-husband but was not able to do so. The deputy advised the woman to report the matter to the IRS.
While the deputy was clearly trying to smooth things over, calling the police to report a tax problem isn’t appropriate even if you think that you have an actual “tax emergency.” It’s a civil issue – not a criminal one – and the best way to resolve a tax issue is through the IRS, potentially using the services of a tax professional. When it comes to divorce and support-related tax issues, you may also want to call your divorce attorney since tax and dependent issues are generally included in divorce and custody settlements.
For federal income tax purposes, a dependent is either a qualifying child or a qualifying relative. Generally, a dependent must be a U.S. citizen, U.S. resident alien, U.S. national, or a resident of Canada or Mexico; have a valid tax ID number; and be either your qualifying child or your qualifying relative.
Your child isn’t necessarily a qualifying child. A person is your qualifying child if that person meets all of these tests:
- Relationship test. The child must be your child, stepchild, adopted child, foster child, brother or sister, or a descendant of one of these.
- Residence test. The child must have the same residence as you for at least half of the tax year.
- Age test. The child must be under age 19 at the end of the tax year; under age 24 and a full-time student for at least five months out of the year; or totally and permanently disabled.
- Support test. The child must not have provided more than half of his or her own support during the tax year.
- Return test. The child, if married, must not have filed a joint return with his or her spouse.
(If you take care of someone who is not your qualifying child, you still may be able to claim that person as a dependent if he or she is a qualifying relative. You can read more about who is a qualifying relative for the new $500 credit for dependents here.)
So why does dependency matter for federal income tax purposes? Before 2018, you could deduct a personal exemption amount of about $4,000 for each dependent on your federal income tax return. That exemption amount reduced taxable income: the more dependents, the larger the potential deduction (it was really an exemption, but it acted like a deduction).
The Tax Cuts and Jobs Act (TCJA) reduced the personal exemption amount to zero. Claiming a dependent may still carry tax benefits on your tax return, however, including the ability to claim the child tax credit. You can read more about the expanded child tax credit for 2018 here.
For child tax credit purposes, a child of divorced or separated parents will typically be a qualifying child of the custodial parent. However, you can alter that rule by agreement. Specifically, if you sign a form 8332, Release/Revocation of Release of Claim to Exemption for Child by Custodial Parent (downloads as a pdf), you can agree to allow the noncustodial parent to claim the dependency exemption. That means that you won’t be entitled to the child tax credit; the noncustodial ex-spouse will get to claim the credit. To get the credit back, you’ll need to revoke the form (you can do this for future years directly on the form at Part III).
(Some additional caveats and exceptions apply. Since divorce and custody situations can be tricky and very family specific, I recommend checking with your divorce attorney if you have questions.)
Parents may also want to claim a child as a dependent for purposes of the Earned Income Tax Credit (EITC). The EITC can result in a hefty tax refund, even if you have no tax liability, but only one person can claim the same child. If more than one person claims the same child, the IRS will apply the so-called tiebreaker rules (you can read them here).
Confused? You’re not alone. The rules for dependents are not always easy to understand, especially in divorce and custody situations. Even parents with the best of intentions can get them mixed up. And parents who don’t have the best of intentions? The result can be frustrating enough to make you want to call 911. But don’t. If you’re tempted to reach for the phone to resolve a tax problem, try 1.800.829.1040 (that’s the IRS).