Can my ex-wife still get the EIC or Dependent Care Credit Only for a child that I am claiming as a dependent? It seems that the "time lived in months" is a huge swing.

[jrh131]

If we both but down 6 months each, we seem to BOTH be penalized on taxes.  Whoever puts down 7 months gets the most benefit.

[AnthonyC]

It depends if she is the custodial parent.  While you can agree to allow the other parent to claim the child as a dependent, only the custodial parent (one the child spends more nights with) can claim the child for Earned Income Credit (EIC), Child and Dependent Care credit (CDC), and Head of Household.  You cannot "shift" those via agreement.  You can, however, shift the dependency exemption and the Child Tax Credit.

So, when you are answering the "how many months" question, the program is trying to determine if you are the custodial parent (and thus who gets the EIC etc and why your refund is much larger if over 7 months).  If the time spent is relatively even and you aren't sure how to count the months, here is a blurb from the TurboTax program that explains this -

"Sometimes this is a bit complicated. If you find yourself saying "a little over 6 months," then you need to count the exact number of days this person lived with you. If it was fewer than 183 days (184 in a leap year), then round down to 6 months. [if more, then round up to 7 months]

Example: Sally's son Jack lived with her for just over 6 months, but it wasn't for more than half of the total number of days in the year, which is 183 days (184 in a leap year). That means Sally should enter 6 months.

Otherwise, you can count a partial month as a full month if they lived with you for less than 6 months or more than 7 months."

Assuming your ex-wife is the custodial parent, then she will enter 7 months and proceed through the questions.  After entering dependent information, there will be a series of questions that asks if she has an agreement with the other parent and will allow them to claim the dependent.  By answering yes to those, you will be able to claim the child as a dependent and for the Child Tax Credit.  But, she will still retain the dependent for EIC/CDC/HOH.

But, there is more.  While perfectly acceptable tax law wise, this scenario can cause problems with the e-file system because the child's SSN remains on both returns.  What will happen is the IRS e-file system is hyper sensitive (due to general ID protection measures) and it will still read the child's SSN on both returns.  And, thus, it will reject either your return or the other return, whichever is filed second.

The solution is for one party to paper file their return.  You can try to e-file both but you will likely receive a rejection when you file, so I want to make you aware of this now, rather than later.

[jrh131]

Do I understand you to say that we each need to answer 7 months in the TT question, but one person mails in their return and the other can e-file - is that correct?  The scenario is actually in reverse - She wants to claim the child as a dependent and for the Child Tax Credit and I will be the EIC/CDC/HOH.  I'm assuming that I cannot get the HOH status without also the EIC/CDC - they cannot be split.

[AnthonyC]

No, you both can't put 7 months.  So, in this scenario, if you are the custodial parent, then you would put 7 months and the program will ask about whether you have an agreement for the dependency.  You would answer Yes that you have an agreement and Yes the other parent will claim the dependent.  This will give you the EIC/CDC/HOH (cant be split) but not the dependency or CTC.

Then, your ex-wife would enter 6 months, and when she gets the questions about the agreement she would answer Yes that you guys have an agreement and NO, the other parent will NOT claim.  This will give her the dependency and CTC.

But, to be clear, you have to be the actual custodial parent to claim the EIC etc, you can't just agree to allow one parent to put 7 months.  Only the dependent and CTC can be agreed to be shifted.  And, yes, one parent will have to paper file (like I said before, you can try to e-file first, but be prepared for a rejection and to have to paper file)

[jrh131]

Thanks - that clears it up a bit.  However - we have Joint Custody.....and the courts don't say which is the custodial parent for tax purposes.

[Miracle2012_0813]

@jrh131 you would Think that for people like us even having to give a lie just because there button for the truth isn’t there… good thing we’ve been establishing some thing over the years

[DMarkM1]

Yes you are correct. The IRS has published rules for determining the custodial parent and they are found here in IRS Publication 501.  The basic rule is the parent with whom the child spent the most nights with is the custodial parent.  In case of an equal number of nights with each parent the parent with the highest adjusted gross income is the custodial parent.  There are even rules on who gets to count nights spent in other places.  

The custodial parent then is able to sign a form 8332 to relinquish the claim of the child tax credit for specific years as directed by the courts.  The custodial parent should enter at least 7 months for the time spent with them.  That selection will be followed by questions on whether there is an agreement/order to allow the other parent to claim the child tax credit.  This also allows the custodial parent (if otherwise qualified) to claim the earned income credit, and the childcare credit and file head of household. 

The non-custodial parent should enter 6 months or less which is then followed by questions about the agreement/order and who is claiming the child tax credit for the current tax year.  

[jred81]

What I still struggle with is the split of daycare costs. We both spend roughly 5k above our Child Care Spending account of 2500. 

I am claiming my son as HOH and dependent and she is claiming the child with the daycare expense.

When I select 12 months for both I get the 700.00 credit but when I follow the turbo tax suggestion of 12 and 0 since were were divorced in last year in aug, i lose the credit. 

What am I doing wrong?

[DaveF1006]

To clarify, where did the child spend most nights in 2022?

@jred81 

[jred81]

She moved into her new home mid Aug

so for 8.5/12 we both had them 100%, then for the balance of the year she probably had 60%.

We are both claiming one kid as HoH and a dependent.

It just seems since the child she is claiming was the one in daycare I cannot use that expense anymore. Which makes no sense to me since I did pay 50%.

What am I missing here?

[Hal_Al]

You are simply not allowed to do what you are trying to do, because you did not live apart for the whole 2nd half of the year.  That is, you may not split the tax benefits.  Only one of you can claim the child on his/her tax return for 2022.  If you can't agree on who that will be, then the rules say the  parent who had the child the most time gets to do it. Even for next year, you can not split the benefits, in the manner you proposed ("I am claiming my son as HOH and dependent and she is claiming the child with the daycare expense").

 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.

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)"

For the IRS rules, Custodial parent is the one who has physical custody, not legal custody, and there is no such thing as joint custody. 

[RobertB4444]

You are missing that this deduction is only available to someone who is claiming the child as a dependent.  You can't take this deduction even though you spent the money.  Your spouse can only take the deduction for the money that she spent.  

Sorry.

Here are more details on the Child and Dependent Care Deduction.

@jred81 

[jred81]

In this case would it be easier for me to completely leave the child off my return that receives the credit. Doesnt seem to provide any benefit to me to leave her on my return.

[Hal_Al]

Q. In this case would it be easier for me to completely leave the child off my return that receives the credit?

A. Yes, if it's been decided that the other parent will be the one claiming the child for 2022.  Leaving her on, just invites mistakes being made.  You are correct, there is no benefit to entering her. 

As to your ex claiming the child care credit. The general rule is that a taxpayer must actually make the payment (as well as be legally liable to pay it) to get the deduction. However, there is a  tax court ruling that seems to say that she can take the deduction even if she was the one that actually paid it under the theory that your paying the expense is just another form of child support and it was her money that paid for it.

[jred81]

Thank you this helps.

In this instance where we are both claiming a child as dependent HOH, would we say they leaved with us for the entire year?