Claiming Child Care Expenses in Non-Dependent Year

[sbornsen]

My ex-husband is allowed by divorce decree to claim our daughter as a dependent this year.  I however pay the child care expense.  In TurboTax, it says that I am allowed to claim that expense.  However, when I file my return, the Federal Government is rejecting it because my daughter's social security number is appearing on two returns.  I am not claiming her as a dependent on my return.  Can anyone help me understand is this a tax issue or a software issue?

Thank you!

[Hal_Al · Accepted solution]

It's not a software issue. Your Ex has, most likely, claimed something he is not allowed. You will have to mail in your return. You cannot efile as long as the conflict exists.  In the mean time, ask your ex to review his return, identify the error, and file an amended  return.  You do not need to wait for him to do so. You can file now, but only on paper. 

 There is a special rule in the case of divorced & separated (including never married) parents. When the non-custodial parent is claiming the child as a dependent/exemption/child tax credit; the custodial parent is still allowed to claim the same child for Earned Income Credit, Head of Household filing status, and day care credit. This "splitting of the child" is not available to parents who lived together at any time during the last 6 months of the year; then only one of you can claim the child for any tax reasons. The tax benefits may not be split in any other manner.

Note in particular that the non-custodial parent can never claim the Earned Income Credit, Head of Household filing status or the day care credit, based on that child, even when the custodial parent has released the dependency to him.

 So, it's good idea to let the other parent know that you will be claiming those items, as many first time divorced parents are not aware of this rule and may try to claim those items, which will cause the IRS to send out letters.

Ref: https://www.irs.gov/publications/p17#en_US_2017_publink1000170897

Scroll down to "Children of divorced or separated parents (or parents who live apart)"

[sbornsen]

Thank you so much!  Don't suppose you know if I have any recourse if he refuses to amend his return?  This has become a nightmare!

[Hal_Al]

If he doesn't amend, the IRS will notice the conflict.  You'll receive a letter from the IRS, stating that something you claimed was also claimed on another return. It will tell you that if you made a mistake to file an amended return and if you didn't make a mistake to do nothing. The other party will get the same letter you did. If one of you doesn't file an amended return, changing the error(s), the next letter, from the IRS, will require you to provide proof. Be sure to reply in a timely manner.

Winner gets the tax benefits; loser gets to pay the IRS back with penalties and interest.  The custodial parent almost always wins. The IRS goes by physical custody, not legal custody. 

[Opus 17]

If you have custody more than half the year, but it is the other parent’s turn to claim the children under a divorce decree, you are required to give the parent a signed form 8332. Then, the other parent is required to submit that form to the IRS.  If the other parent has a signed form 8332 and enters it in their tax program, then they will get the child tax credit but will not claim other improper benefits and there won’t be a conflict with the e-file.  So possibly you gave this form to the other parent and they ignored it, or possibly you have not given them the proper form. You should do this now (if you did not already) to protect yourself when the IRS investigates.  The custodial parent must give the noncustodial parent a form 8332 for each year that the noncustodial parent is allowed to claim the children as dependents.

you should also gather proof that the children lived with you more than half the year, so that you can send copies to the IRS when they investigate.  The IRS is most easily convinced by information from third parties. Things such as letters from your children’s school or doctors or school bus schedules, or other documents sent by third parties to your address on behalf of the children.  Social media posts showing you and the children doing activities will also help.

[Opus 17]

Basically, to prepare a correct tax return, you would enter the children’s information, answer that they lived with you more than half the year, then answer “yes“ that you will give the other parent a form 8332. This will create a proper tax return for you that does not claim the child tax credit but does claim other benefits you are allowed.  

The other parent, to prepare a correct tax return, should answer that the children do not live with them more than half the year, and that they will receive a form 8332. Their tax program will then create a proper tax return that will claim the tax credit but not any other benefits.  After that parent files their return, they have three days to mail the original signed form 8332 to the IRS to support their tax return.

If both parents do this properly, then both tax returns will be correct and there will be no e-filing problems.

[Hal_Al]

"My ex-husband is allowed by divorce decree to claim our daughter as a dependent this year."

Even if a divorce decree, dated after 2008, gives the non-custodial parent the right to claim the child, he must still get form 8332 from the custodial parent. A properly worded decree should require her to provide that form. https://www.irs.gov/pub/irs-pdf/f8332.pdf