Discussion:EIC/ Dependent question - couple lives together

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Discussion Forum Index --> Basic Tax Questions --> EIC/ Dependent question - couple lives together


Discussion Forum Index --> Tax Questions --> EIC/ Dependent question - couple lives together

Gwh33 (talk|edits) said:

30 January 2012
Two clients live together all year; they are unmarried. They have a son together. One client (mom) makes $40,000 per year; and the other client (dad) makes 18,000 per year. Naturally the dad wants to claim the son to maximize the EIC and the overall tax return.

Now as I understand it, if both can claim their son as a qualifying child, the child would go to the mom (with higher income) per the Tie-Breaker rules, thereby disqualifying the dad from the dependency exemption and the EIC. This understanding also appears to match Form 8867 Paid Preparer's Earned Income Credit Checklist I fill out in Proseries.

But I also read in this Forum that if both parties agreed as to who would claim the child, tie-breaker rules would be ineffectual. In that case, would a Form 8332 have to be attached to the dad's return? I see that Form 8332 can be used even if the parents were never married, which is the case here.

Can anyone clarify this issue for me? Thanks so much!

MilTaxEA (talk|edits) said:

31 January 2012
They can agree for the father to claim the child. They do not need to file a Form 8332 since both of them are custodial parents entitled to take claim the child.

Rupert (talk|edits) said:

31 January 2012
No need for Form 8332 as MilTaxEA already pointed out. The tie-breaker rules only come into play if both parents actually claimed the child.

See this prior discussion (ignore my first few responses where I'm talking to myself trying figure this out too) http://www.taxalmanac.org/index.php/Discussion:Strange_EIC_Situation

Also, here is an example from 2011 Pub 596 at the bottom of page 18:

Example 11. You, your 5-year-old son, and your son’s father lived together all year. You and your son’s father are not married. Your son is a qualifying child of both you and his father because he meets the relationship, age, residency, and joint return tests for both you and his father. Your earned income and AGI are $12,000, and your son’s father’s earned income and AGI are $14,000. Neither of you had any other income. Your son’s father agrees to let you treat the child as a qualifying child. This means, if your son’s father does not claim your son as a qualifying child for the EIC or any of the other tax benefits listed earlier, you can claim him as a qualifying child for the EIC and any of the other tax benefits listed earlier for which you qualify.

Gwh33 (talk|edits) said:

31 January 2012
Thank you for the clarification!

Tax Writer (talk|edits) said:

31 January 2012
I agree with Rupert. The tie-breaker rules only come into play when the parents cannot agree. If both parents are custodial, and unmarried, then the father can claim the child.

Gwh33 (talk|edits) said:

31 January 2012
Not to be a pain, but my software (Proseries Pro) says the following on Form 8867 Paid Preparer's Earned Income Credit Checklist Line 13a. Could any other person check yes on lines 9,10, 11 and 12 (basically, is the child the taxpayer's son, unmarried, live with the taxpayer, under age 19). I checked "yes", because the mom meets all of those qualifications, as well. Then on line 13c it reads, "Under the tiebreaker rules, is the child treated as the taxpayer's qualifying child". Under the tie breaker rules the dad would not be able to claim a qualifying child because mom's income is higher. It goes on to read, "If you checked "No", the taxpayer cannot take the EIC based on this child.

Any idea why the softward is structured/worded this way? If I check "yes" on the tiebreaker question as regards the dad, it would be innacurate. Any ideas here?

Thanks!

Fourforces (talk|edits) said:

31 January 2012
run it through the IRS EITC tax assistant and see how it comes out in their system.

Tax Writer (talk|edits) said:

31 January 2012
It's right on the IRS' EITC website: [1]


Here is the quote: "The other person(s) cannot take any of the six tax benefits listed above unless he or she has a different qualifying child.* If they cannot agree on who claims the child as a qualifying child, and more than one person claims tax benefits using the same child, the tiebreaker rule explained below apply "

The important part of this section is the "IF THEY CANNOT AGREE" part. If you want to be extra-careful, then have both clients sign something that states that they agree. Problem solved.

Ddoshan (talk|edits) said:

31 January 2012
Gwh33 ... it may ask if the child is a qualifying child of any other person but it also would or should allow you to proceed and show that the other person or persons is not claiming the child.

Nightsnorkeler (talk|edits) said:

31 January 2012
Under the tie breaker rules the dad would not be able to claim a qualifying child because mom's income is higher.


As noted before, and in many other discussions, this tie-breaker rule only comes into play if both parents claim the qualifying child.

MilTaxEA (talk|edits) said:

1 February 2012
That is an interesting question. In Drake, it asks "If the tiebreaker rules apply, would the child be treated as the taxpayer's qualifying child"

The actual 8867 states: "Under the tiebreaker rules, is the child treated as the taxpayer’s qualifying child?"

Since the tiebreaker rules do not apply in this case, since they are not both claiming the child, you should check "yes". (At least that is what I do.)

MilTaxEA (talk|edits) said:

1 February 2012
It always makes me wonder though it the form is asking "if the other person claims this child, would you win the tie-breaker test, ..." versus "can you ignore the tie breaker rules since you both are not claiming the child". I think it is saying the latter and therefore answer "yes". The reason being since the form says you cannot claim the child if you answer "no", which you would have to if it were asking the first question. Frustrating the way they worded it.

The only other option is to check "don't know" and add documentation to explain the situation...but that seems silly.

Gwh33 (talk|edits) said:

1 February 2012
Thank you MilTaxEA. I will just check I don't know. I appreciate your input!

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