The majority of Texas residents who claim dependents on their tax returns will not experience any complications with having their returns accepted. However, complications can arise in situations in which multiple taxpayers claim the same dependents and related tax credits, such as when separated or divorced parents both decide to report their children as dependents. When this occurs, the Internal Revenue Service will have to review the returns in question and determine which claim should be honored.
There are incentives for being able to claim dependents. If they qualify, the parents may be able to file as the head of their household, which can provide a sizable standard deduction. They may also be eligible to claim certain tax credits, such as the Earned Income Tax Credit, the Child Tax Credit and the Child and Dependent Care Tax Credit.
In cases in which multiple parties are claiming the same dependents, if there are no legal agreements in place stating which party should be claiming the dependents (such as a separation, custody or divorce agreement), the IRS will use a certain set of tie-breaker rules to decide which claim should be allowed and which claim should be denied. These rules examine specific factors, including:
- the relationship between the taxpayers and the dependents,
- with whom the dependents resided for the majority of the tax year,
- the adjusted gross incomes of the taxpayers and
- whether there are any parental claims.
It is best for you to address this issue, rather than leave it to the IRS. A family law attorney can work with you to protect the interests and rights of a divorcing parent. The right to claim children as dependents on tax returns, and to claim any related tax credits, can be a bargaining tool in negotiations in a divorce or custody suit. It should also be included in any final Decree so it is very clear which party has the right.
If you would need guidance in addressing this issue, Hargrave Family Law is here to help.