Discussion Archives:HOH, dependent, child tax credit, EIC, 2 unmarried parents of one child

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Discussion Forum Index --> Advanced Tax Questions --> HOH, dependent, child tax credit, EIC, 2 unmarried parents of one child


Discussion Forum Index --> Tax Questions --> HOH, dependent, child tax credit, EIC, 2 unmarried parents of one child

BarbJN (talk|edits) said:

19 February 2011
Unmarried father and mother of one child (now under 5 years old) lived together, moved apart, and moved back together 5/1/10. For 2010 returns, does one of them claim all 6 QC benefits and the other none, or can Mom claim EITC and Dad claim everything else (HOH, child tax credit, dependency exemption - no one paid child care). Dad has $50,000 AGI, Mom has $8,000 AGI. Dad furnished more than 1/2 upkeep of home. Child resided with Mom more nights. Dad and Mom will agree to whatever gives them the highest combined refund.

Pub 501 and Pub 596 seem to give different rules:

Pub 501, pg 15 (under the EXEMPTIONS FOR DEPENDENTS section, Qualifying Child definition, Special Rule for Qualifying Child of More Than One Person, Applying this special rule to divorced or separated parents or parents who live apart, Examples 1, 2, and 3) gives an example where a child lives with his mother and grandmother, and does not live with his father. Grandmother’s AGI is higher than mother’s AGI, and grandmother paid the entire cost of keeping up the home. CHILD IS QUALIFYING CHILD OF HIS FATHER, WHO CAN CLAIM AN EXEMPTION AND CHILD TAX CREDIT. SON IS QUALIFYING CHILD OF BOTH MOTHER AND GRANDMOTHER FOR HOH STATUS AND EITC, AND ULTIMATELY, GRANDMOTHER CLAIMS CHILD FOR HOH STATUS AND MOTHER CLAIMS CHILD FOR EITC. My observation: In this example, a father claimed exemption and child tax credit, grandmother claimed HOH, and mother claimed EITC. The unmarried parents lived apart, but mother and grandmother lived together, and split the HOH and EITC benefits.

Pub 596: Sometimes a child meets the tests to be a qualifying child of more than one person. Although the child meets the tests to be a qualifying child of each of these persons, only one person can actually treat the child as a qualifying child. Only that person can use the child as a qualifying child to take all of the following tax benefits (provided the person is eligible for each benefit). 1. The exemption for the child. 2. The child tax credit. 3. Head of household filing status. 4. The credit for child and dependent care expenses. 5. The exclusion for dependent care benefits. 6. The EIC. The other person cannot take any of these benefits based on this qualifying child. IN OTHER WORDS, YOU AND THE OTHER PERSON CANNOT AGREE TO DIVIDE THESE TAX BENEFITS BETWEEN YOU. The other person cannot take any of these tax benefits unless he or she has a different qualifying child.

Okie1tax (talk|edits) said:

19 February 2011
BarbJN, I think you need to get a copy of the 2010 Pub 501 and read it again. I don't think it suggests that you can split the qualifying child except between divorced or seperated parents.

BarbJN (talk|edits) said:

19 February 2011
So, I guess your answer is that either one or the other of the parents claims all QC benefits, and that the benefits cannot be split between them. That was the conclusion I was coming to. Thank you for your reply.

Tax Writer (talk|edits) said:

19 February 2011
If the parents split, then moved back together, then there is going to be one parent that is the obvious custodial parent. Whoever the child lived with for the majority of the year is the custodial.

Normally when two unmarried parents live together, then the parent with the highest AGI claims the child, but in this case, if you had the child living with mom for more months while the father was absent, then the mother gets the EIC and the dependency exemption. A custodial parent can also opt to relinquish a dependency exemption to a non-custodial parent.

Of course there are a million variations of these rules, and I agree with Okie that you probably need to read up on all the twists and turns of dependency exemptions.

Tax Writer (talk|edits) said:

19 February 2011
and that the benefits cannot be split between them.

There are instances where HOH and the dependency exemption can be split, yes. You need to research it more to see if that applies to your fact pattern.

BarbJN (talk|edits) said:

19 February 2011
Tax Writer: I believe the custodial parent was mom, under the "more nights" rule. While the parents lived apart Jan through April, child was with mom during the day. Dad took the child to his house in the late afternoon when he got off work, and mom went to her job. When it was the child's bedtime, dad took the child to mom's house, put the child to bed, then left when mom came home from work. They alternated keeping the child on the weekends.

I believe the HOH goes to Dad: Parents bought a home, both signed mortgage, just before the child was born. Lived together for awhile, mom moved out to an apartment in 2009. Dad stayed in the home. Mom moved back to Dad's/their home 5/1/10. Dad paid all the mortgage payments, utilities, groceries, etc all year.

I have read and read and read - instructions, pubs, tax school manual, master tax guide...............

for type of child, my tax software choices are: child living with taxpayer, child not living with taxpayer, dependent other than child, HOH only-not a dependent, and EIC only-not a dependent. that is why i wondered if benefits could be split

BarbJN (talk|edits) said:

19 February 2011
can dad file as HOH, and mom get all the other tax benefits, if they agree?

do you think if I call the IRS someone will know?

Tax Writer (talk|edits) said:

19 February 2011
I believe the custodial parent was mom, under the "more nights" rule.

Make sure that you have documented everything and write it all down, because the IRS looks at cases like this when they are doing their EITC preparer audits. -- these returns could be a flag for the IRS, especially if they are now using the same address.

Now, the father isn't going to get EITC anyway because his income is too high, but if the facts are correct, then if the mother is the one who can claim the EITC, but she must not claim HOH because she was not the one who provided over 1/2 of the household support. Makes sense?

Confirm that the child lived with the mother (while the father slept at a different house-- this is an important distinction), then the mother is the custodial parent and she can claim the EITC. The fact that the father saw the child during the day does not negate the fact that the mother is the custodial, because non-custodial parents can still see their children all the time and not be considered custodial parents for tax purposes.

The noncustodial parent (father) cannot claim the earned income credit on the basis that the child did not live with him for more than half of the tax year, (or more than the mother in this case).

Make sure your records for these two are extra-clean.

Tax Writer (talk|edits) said:

19 February 2011
do you think if I call the IRS someone will know?

Calling the IRS is a waste of time. You cannot rely on their advice, anyway. The Treasury Inspector General for Tax Administration has confirmed that the IRS provided incorrect answers 20% of the time for taxpayer questions. That's a pretty awful rate.

As for Head of Household going to the Dad, these facts would have to be true: You can file as head of household even though you do not claim an exemption for your child if you meet all of the following requirements:

1. You are unmarried or considered unmarried on the last day of the year. 2. You paid more than half of the cost for the year of keeping up a home for you and your child. 3. Your child is your qualifying child for purposes other than the dependency exemption and the child tax credit.


Did the dad live with the child at least 1/2 the year, while paying all the costs of the upkeep of the home? Then he can claim HOH without claiming the dependency exemption. They cannot both claim HOH for the same child, regardless of any other circumstancea.

BarbJN (talk|edits) said:

19 February 2011
I believe i have all of the facts and that they are correct - one of the parents is a relative, and the facts are from the parents and my own personal knowledge, but I will document it for the file.

If the parents had lived together all year, then I think it would be simply that only one parent gets all benefits per their choice/facts.

The kicker is that their living apart Jan-Apr 2010 qualified Dad as HOH for the year, and qualified mom as the custodial parent for the year, but they didn't live apart for more than the last six months.

I believe the facts warrant that Dad files HOH, and Mom gets dependent exemption, child tax credit, and EIC.

If Mom used all benefits of QC, and Dad used none (status=single), then Mom's refund stays the same and Dad only loses $10. Even though not correct, maybe we should file this way to.................

Okie1tax (talk|edits) said:

19 February 2011
Tax Writer and BarbJN, I think Example 9 - Unmarried Parents. Mom could qualify for all the benefits, including HOH.....(if your son's father does no, in fact, claim you son as a qualifying child for any of those tax benefits). I think this still says that the ONLY way for a qualifying child to be used by two persons is if they are divorced or seperated and the custodial parent gives up the exemption and child tax credit. HOH is not something that can be given up. If Mom gets the exemption, she is the ONLY one who could be HOH.

BarbJN (talk|edits) said:

20 February 2011
Okie1tax - where to find or link for Example 9 - unmarried parents? Pub 596 has example 9, but that is for married parents living apart at the end of the year. examples 11 & 12 are for unmarried parents. My clients/the parents were living together at the end of the year.

do i understand you to say that if parents are divorced/separated, then the custodial parent can give up exemption and child tax credit, but if the parents were never divorced/separated and lived together, then the custodial parent cannot give up the exemption and child tax credit?

"If Mom gets the exemption, she is the ONLY one who could be HOH." The minimal rent that mom paid for 4 months was way less than the mortgage payment dad paid all year, for the house where he lived 4 months and they all lived 8 months. Same with utilities, groceries, insurance, etc - so dad meets test #2 for keeping up the home. Both parents meet tests #1 unmarried on 12/31/10 and #3 child lived w/taxpayer in the home more than 1/2 year. So I think dad's status is HOH.

"If mom gets the exemption, she is the ONLY one who could be HOH." Are you saying that if mom gets the exemption, both file single, and neither get HOH?

Okie1tax (talk|edits) said:

20 February 2011
BarbJN, go to Research Resources, above left, to IRS Publications on right, scroll down to Pub 501. It was the 2010 version.

Okie1tax (talk|edits) said:

20 February 2011
Don't know how to edit the above, Example 9 is on page 15, center column. The way I am reading this, is that, in the same household, a qualifying child can be used by only one person, no matter how many they may be a qualifying child for.

BarbJN (talk|edits) said:

20 February 2011
I had read that, but noted that it said "lived together all year." Even tho my clients lived together for the last 8 months of the year, this example is probably the closest.

I think I'm still down to having mom claim all benefits, except HOH - I'm not sure which parent gets that.

Dad meets tests #1 and #2, mom meets #1, and I'm not sure about TaxWriter's test #3 to file HOH - I read those rules and looked at Table 4 in Pub 501, but am not sure what "purposes other than the dependency exemption and the child tax credit" means.

BarbJN (talk|edits) said:

20 February 2011
Tax Writer and Okie1tax - thanks for your time and your input - I really appreciate it. I don't discuss much on this site, and it has been interesting.

We have discussed and discussed, and I guess its up to me, except........ if you would like to give me your FINAL ANSWER as to how you would file these two returns, I would be very interested in your decision, especially if both of you have the same one.  :-)))

And now, time to get back to other returns - March 1 is approaching fast!

Barb

Tax Writer (talk|edits) said:

20 February 2011
Honestly, if it was my client, (considering that the difference is negligible with respect to tax), I would file the mother as Single and claim all the benefits for the child. Then I would also file the father as single and just leave it at that. That's conservative and since there's only 10.00 difference, you can avoid these taxpayers being possibly flagged for an EITC audit. Even though everything is above board-- the fact that they are filing with the same address (currently) might look fishy and giving the Dad HOH provides no real tax benefit. This will prevent you from potentially having to jump through hoops trying to fight the "Unmarried Parent/Higher AGI Rule." The mom can't claim HOH because she did not provide the cost of keeping up the home.

That's honestly what I would do if it was a family member and a client.

BarbJN (talk|edits) said:

20 February 2011
Tax Writer - Thank you very much. -Barb

Okie1tax (talk|edits) said:

20 February 2011
Vote with Tax Writer

BarbJN (talk|edits) said:

20 February 2011
Okie1tax - Thank you very much, too. -Barb

Brain is on overload, time to go home. G'night

Ddoshan (talk|edits) said:

20 February 2011
I apologize if I am duplicating advice here but quickly perusing the posts I can't help but notice there is a lot of misunderstanding about the rules.

In the case of a qualifying child the tax benefits cannot be split period with only one exception. Only one taxpayer may claim (if they qualify for) all the tax benefits associted with. The only time there is an exception is in the case of divorced / separated parents including parents who were never married. Then the custodial parent may, if certain conditions are met, release the exemption to the non custodial parent who may then claim the exemption and related child tax credit, but no other tax benefits such as EIC, HH etc. The custodial parent then may still qualify to claim HH filing status, the EIC, and dependent care credit. In the original post, the child appears to be a qualifying child of each parent. And because they did live together at the end of the year only one of the parents may claim any of the associated tax benefits available. They can chose which parent to be the one to claim the child. If they do not agree then the tie breaker rules would apply and in this case it would be the mom that would win because she had the child for the greater number of nites.

I often see folks mention that they normally allow the parent with the highest AGI to claim the child. Maybe this is the best and maybe not. You have to check both ways. Because of the EIC it is often more beneficial to allow the parent with a lesser AGI to claim the child. You will or may also have to keep the State return in mind. Some states also allow an EIC including my state MN. So that is also a major factor.

BarbJN ... to repeat, except in the case of divorced or separated parents you cannot under any circumstances split any of the tax benefits allowed for a qualifying child. So don't even think about it.

Ddoshan (talk|edits) said:

20 February 2011
To add: If there are two children then joy to the world and each could claim one of the children if best.

Tax Writer (talk|edits) said:

20 February 2011
BarbJN ... to repeat, except in the case of divorced or separated parents you cannot under any circumstances split any of the tax benefits allowed for a qualifying child.

These parents were separated. The mother was the custodial. Please see my final comment. I understand the rules regarding dependency exemptions, and I stand by my advice.

Fsteincpa (talk|edits) said:

20 February 2011
I don't see where they were ever married, but I was skimming thru. I agree 100% with Ddoshan. Tie-breaking rules only apply when there is a disagreement. If parents are in agreement and living together, they can split the kids any which way they choose.

Fsteincpa (talk|edits) said:

20 February 2011
Tax writer, are you trying to state that two people who never married, had a child and now live apart do not have the right to choose who claims the child tax credit and dependency exemption?

BarbJN (talk|edits) said:

22 February 2011
DDoshan: there's only one child. If I read your post correctly, you would file the returns giving one parent all of the associated tax benefits, and none to the other parent. Since they agree to file whichever way produces the greatest combined refund, that would be single status for both, mom gets dep exempt, child tax credit and EIC (they didn't pay for child care, so there is no child care credit). Correct?

Fsteincpa: they were never married, lived apart Jan thru April, mom and child moved out of dad's house early in 2009, and moved back to dad's house 5/1/10. Taking the living arrangements into consideration, dad qualifies for HOH and mom qualifies as custodial parent. They were living together on the last day of the year and more than 6 months. However, I believe rules in Pub 596 do not allow tax benefits to be split.

More facts:

  1. -Highest refund (US plus state) would be if dad claims HOH, dep exempt & child tax credit ($4400) and mom claims EIC ($3400) - I believe the returns cannot be filed this way (having you cake and eating it, too).
  2. -Next best refund would be if dad files HOH and no other QC benefits ($2800) and mom files single and claims dep exempt, child tax credit, & EIC ($4100). I'm not sure about this one.
  3. -Next best refund is if dad files single and no QC benefits ($2300), and mom files single and claims dep exempt, child tax credit, & EIC ($4100). Mom cannot file HOH because dad qualifies for this.
  4. -Least refund would be if dad claims all QC tax benefits ($4400) and mom claims none ($1000).

TaxWriter: I checked my return examples one more time: I had originally thought that dad would only lose $10 filing single instead of HOH, but now find its $300. And yes, they were separated the first part of the year, but lived together more than six months and on 12/31/10.

I sent the facts to KSM, our IRS senior stakeholder liaison, with this last comment: "I'm thinking Pub 596 applies to my clients, because it says when two UNMARRIED PARENTS OF ONE CHILD LIVE TOGETHER more than half the year, one of them can claim ALL tax benefits (HOH, dependent, child tax credit, EIC, etc) and the other parent CANNOT CLAIM ANY, and that, if the parents agree, they can choose which parent gets them all. Also, that the instructions I quoted from Pub 501 (where 3 different people each got a different benefit) only applies when the PARENTS LIVE APART more than the last 6 months of the year. In effect, this treats unmarried parents living together the same as married parents living together. I will use this conclusion when filing the return, unless you let me know I should do more research." And her reply was that "This is correct."

I also sent the question to one more source, from whom I have not yet heard.

As of now, I'm planning on filing as in #3 (above), unless someone has more to post for consideration.

Thank you all for your opinions, help, and comments.

Only one week til March 1, and I haven't had time to count the days til 4/18.  :-))

Ddoshan (talk|edits) said:

22 February 2011
3 looks good. Simply the child is the qualifying child of both parents and they may chose who claims the child for the various tax benefits. If mom claims the child than it is correct that dad cannot claim the child for HH filing status purposes. Or any other tax benefits.

You can't split benefits period... so don't wear yourself out trying.

Tax Writer (talk|edits) said:

22 February 2011
You can't split benefits period...

From Pub 501: If a child is treated as the qualifying child of the noncustodial parent under the special rules for children of divorced or separated parents,"* the noncustodial parent can claim an exemption and the child tax credit for the child. However, the custodial parent, if eligible, or other eligible person can claim the child as a qualifying child for head of household filing status, the credit for child and dependent care expenses, the exclusion for dependent care benefits, and the earned income credit. If the child is the qualifying child of more than one person for these benefits, then the tiebreaker rules determine which person can treat the child as a qualifying child.

Example:(Pub 501) You and your 5-year-old son lived all year with your mother, who paid the entire cost of keeping up the home. Your AGI is $10,000. Your mother's AGI is $25,000. Your son's father did not live with you or your son. Under the rules for children for separated parents, your son is treated as the qualifying child of his father, who can claim an exemption and the child tax credit for him. Because of this, you cannot claim an exemption or the child tax credit for your son. However, your son's father cannot claim your son as a qualifying child for head of household filing status, the credit for child and dependent care expenses, the exclusion for dependent care benefits, or the earned income credit. The boy is a qualifying child of both you and your mother for head of household filing status and the earned income credit because he meets the relationship, age, residency, support, and joint return tests for both you and your mother. (The support test does not apply for the earned income credit.) You agree to let your mother claim your son (for EITC and HOH purpose). This means she can claim him for head of household filing status and the earned income credit if she qualifies for each and if you do not claim him as a qualifying child for the earned income credit.

Please, someone explain to me how this is NOT splitting up the benefits?

Ddoshan (talk|edits) said:

22 February 2011
TaxWriter ... I am referring to the posters situation. It has been noted that the benefits may be split in the case of divorced, separated or parents that were never married and you lived apart from your spouse for the last 6 months of the year.

In the posters case the child is a qualifying child of both Mom and Dad and they did not live apart the last 6 months of the year. They lived together from May thru Dec as I recall the post. The parents cannot split the tax benefits.

No one has said that the benefits can't be split if Mom and Dad live apart and they meet certain conditions. In the posters situation that is not the case.

BarbJN (talk|edits) said:

23 February 2011
What's amazing is that Dad and Mom can't split the benefits if they lived together more than 6 months, BUT if Child lives with Mom AND Grandma, and Dad lives separately all year, then the three adults can split, and each get one, benefit. If I understand it correctly.

Ddoshan (talk|edits) said:

23 February 2011
BarbJN... No they could not split among the 3 of them and each get some tax benefit. If certain conditions are met Mom could release the exemption to the Dad to claim the dependency exemption and child tax credit. But Mom and Grandma could not then split any of the remaining benefits. Mom would have first crack, if she declined and if Grandma's AGI was higher than Mom's then Grandma (if she qualifies for) would be eligible to claim other tax benefits such as the EIC, HH filing status, Dependent Care Credit, etc. Mom would then not be able to claim anything in regards to the child.

BarbJN (talk|edits) said:

23 February 2011
Ddoshan - Oops! I re-read pg 15 of Pub 501 - You're right - they split between two and not three persons.
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