Hi Albertini1, thank you for joining the "Ask the Experts: New Dependent" special forum today.
Congratulations on your upcoming new baby in October 2021. What a happy life event!
To answer your questions:
1) Yes, you can choose who claims the baby in your Married Filing Separately tax returns.
2) For Federal, there is no fee/penalty for not having health insurance in 2020. If you lives in a state that requires you to have health insurance coverage, and you don't have coverage (or an exemption), you will be charged a fee. Check with your state. In general, It does not matter which parent's health insurance policy covers the baby.
3) The Dependent Care FSA via employer will be on the W-2, Box 10 of the parent who is claiming the baby as the dependent. Box 10 amount is factored into Form 2441 Child and Dependent Care Expenses, Part III Dependent Care Benefits, and overall calculation.
https://www.irs.gov/pub/irs-pdf/f2441.pdf
The other parent has no dependent. Then his/her W-2, Box 10 amount, if any, will become taxable income. TurboTax will take care of all calculations.
4) A baby born during 2021 is considered qualifying child for the whole year. Subject to filing status and income limitation, you would be able to claim full child tax credit. Please use the Eligibility Assistant to see if you qualify for Advanced child tax credit payments, which is an estimated payment.
Later this year, you should be able to use the Child Tax Credit Update Portal to update qualifying child information (not available now.) Below is the link for online tools.
Advance Payments of the Child Tax Credit
Which Online Tool Should I Use?
https://www.irs.gov/pub/irs-pdf/p5534e.pdf
Hope this helps.
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