@bk1231 wrote:
I understand who is custodial and who is non-custodial, only now after the form has been filed. I'm trying to understand what harm or incorrect information would be at stake when we have been claiming the child every other year per a court order. I didn't realize until this year, after filing, that I should not be listing myself as non-custodial. If the non-custodial parent has been listed as custodial on form 8332, what would the issue be for me since it basically states that I am able to claim him for 2020. Does the IRS use custodial information for the stimulus checks or does it use the claim for dependency?
In turbotax, this is how you should be filing when it is not your turn to claim the child:
- You state the child lived with you 9 months
- And you state you will release the dependent claim to the other parent via form 8332
- Turbotax will offer to print a form 8332 for you when you file to give to the other parent
In this situation, you still can use the child to qualify for head of household status, earned income credit and the dependent care expense credit, because those benefits always stay with the custodial parent and can't be waived, transferred or shared. For any year when you are the custodial parent, you never attach a form 8332 to your tax return, it is not needed. And for any year when you are the non-custodial parent, you can't sign a valid form 8332. Form 8332 is only used when the custodial parent is releasing the dependent claim to the non-custodial parent.
This is how the other parent should be filing
- They indicate the child lived with them for 3 months
- They indicate that they do have a signed form 8332 allowing them to claim the child as a dependent
- They must mail the original signed 8332 to the IRS after e-filing, using a cover page that Turbotax will tell them to print out.
The other parent will qualify for the $2000 child tax credit, but not head of household status, earned income credit and the dependent care expense credit, because those benefits always stay with the custodial parent and can't be waived, transferred or shared.
If you have been been indicating 6 months or less for the time you had custody, you may have been denying yourself the tax benefit of household status, earned income credit and the dependent care credit, depending on whether you would have qualified for those things otherwise. If the other parent has been claiming the child by saying they had custody more than half the year, they may have been improperly benefiting from HOH, EIC and the dependent care credit.
If you filed incorrectly in the past, you may want to file amended returns, if the mistake cost you money. However, the IRS will not be troubled if you file differently now, because sometimes situations change naturally, so a change by itself is not a red flag. It would be a red flag if you and the other parent both claimed to have custody more than half the year.
For 2020, the recovery rebate is based on the dependent claim (which belongs to the custodial parent and can be waived with form 8332 to the non-custodial parent), and not the child's actual residency.
[Edited to add]
If you are the custodial parent and it is your turn to claim the child, you don't use form 8332 at all. Simply indicate the child lived with you 9 months, and you are not releasing the dependent to the other child. You will qualify for the complete package; the tax credit, EIC, HOH and dependent care credit.
